1970 (2) TMI 93 - HC - VAT and Sales Tax

Summary

Issues:
Whether the Sales Tax Tribunal was justified in rejecting the account books based solely on a low percentage of profit without any other defectsRs.

Analysis:
The case involved a reference to the Orissa High Court under section 24(1) of the Orissa Sales Tax Act regarding the justification of the Sales Tax Tribunal's rejection of account books due to a low margin of profit. The Assistant Commissioner of Sales Tax rejected the account books on three grounds, including inconsistency in figures, lack of vouched purchases, and a low profit margin. The Tribunal dismissed the first two grounds but declared the account books as not genuine due to the low profit margin. The dealer contended that such a view was against the law, arguing that low profit alone cannot deem account books as not genuine.

The Court emphasized that the taxing authority must provide valid reasons for declaring account books false or improperly maintained. They highlighted that various factors can influence profit margins, such as market competition or strategic business decisions. Referring to a previous case, the Court noted that low profits should prompt a closer review of accounts rather than immediate rejection. They also cited a Supreme Court case emphasizing that traders are not obliged to maximize profits and can employ legitimate means to manage tax liabilities.

Ultimately, the Court disagreed with the Tribunal's decision, stating that rejecting account books solely based on a low profit rate was incorrect. They answered the reference in the negative, indicating that low profits alone cannot justify deeming account books as improperly maintained. The Court also ordered the refund of the reference fee to the petitioner, with no costs imposed. Judge Acharya concurred with the decision, and the reference was resolved in the negative.