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2020 (10) TMI 1062 - HC - VAT and Sales TaxCompounding of offences - penalty proceedings - Whether the Assessing Officer was justified in adopting a gross profit higher than that conceded in the returns and books and accounts on the mere ground of compounding having been made of the offence detected by the Intelligence Wing? HELD THAT - The Assessing Officer ought to have looked at the total number of brands sold by the assessee and the ones which are in higher demand. This would have indicated whether the 13 brands, the gross profit of which was adopted by the Intelligence officer, were the most moving brands in the Bar of the dealer. The Assessing Officer ought to have applied his mind and not adopted the findings in the penalty proceedings as conclusive. As to the stock variation having resulted only an equal addition; the Assessing Officer could have made a further addition for the variations undetected, which were probable. Having not done that, the State cannot argue that the enhancement of gross profit is also taking into account the stock variation; which reasoning, in any event, is not available in the order of the Assessing Officer. The question of law has to be answered in favour of the assessee and against the Department - Revision allowed.
Issues:
Whether the Assessing Officer was justified in adopting a higher gross profit rate based on compounding of offenses detected by the Intelligence Wing. Analysis: The judgment discusses three revisions raising a common question of law regarding the adoption of a higher gross profit rate by the Assessing Officer. The court refers to a Division Bench ruling stating that penalty proceedings cannot be conclusive for assessment purposes. The court then examines specific cases where gross profit rates were increased significantly compared to the conceded rates, along with stock differences detected during inspection. The petitioner's counsel relies on previous cases to argue against enhancing gross profit rates solely based on Intelligence Officer findings, emphasizing the need for the Assessing Officer to independently consider the evidence. The government pleader defends the Tribunal's order, highlighting significant stock differences as the basis for estimating suppressed sales and justifying the gross profit adjustments. The court scrutinizes the assessment process, emphasizing the Assessing Officer's duty to evaluate all relevant factors, including the demand for specific brands and the total number of brands sold. It is noted that the gross profit rates conceded by the petitioners were higher than the expected rates based on compounding provisions, indicating that the adopted rates were unjustifiably inflated. Regarding stock variations, the court criticizes the Assessing Officer for not considering potential undetected variations and rejects the State's argument that gross profit adjustments accounted for stock differences. Ultimately, the court rules in favor of the assessee, directing the gross profit to be as per the conceded rates and upholding the addition made for stock variation. In conclusion, the Sales Tax Revisions are allowed, with each party bearing their respective costs. The judgment underscores the importance of a thorough assessment process, independent evaluation of evidence, and adherence to established legal principles in determining gross profit rates for tax purposes.
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