2010 (8) TMI 849 - HC - VAT and Sales Tax

Whether the additional should be on the basis of the actual profits earned at the rate of 14.3 per cent and not at the rate of 30 per cent which the assessee had admitted in the course of assess ment proceedings? Held that - It is not in dispute that 30 per cent which is the addition is based on the claim of the assessee representing the profit on second dealer sales. It is not an actual profit earned by it. In order to claim exemption as in the case of labour charges under works contract it has estimated the said amount. The liability to tax under a fiscal legislation cannot be based on admissions. The liability has to be worked out under the provisions of the Act. When the material on record discloses the actual profit earned is 14.3 per cent merely because the assessee for the purpose of claiming exemption had put forth a claim of 30 per cent profit that cannot be the basis for addition as done by the assessing authority. Appeal is allowed. The impugned order passed by the revisional authority is hereby set aside. The order passed by the appellate authority is restored.

Summary

Issues:
1. Challenge to revisional authority's order setting aside appellate authority's decision on additional profit rate for tax assessment.

Detailed Analysis:
The judgment pertains to an appeal challenging the revisional authority's order that set aside the appellate authority's decision regarding the additional profit rate for tax assessment. The assessee, engaged in trade and works contracting, faced reassessment due to alleged suppression of sales turnover. The assessing authority proposed a tax liability of Rs. 79,16,911 based on suppressed turnover. The assessee objected, claiming 30% gross profit but failed to provide evidence. The assessing authority adopted 30% profit rate based on the assessee's declaration. The first appellate authority found discrepancies in turnover calculations and determined a consolidated gross profit of 14.3%. The appellate authority set aside the assessing authority's decision on the profit rate.

Subsequently, the revisional authority initiated proceedings and reverted to the assessing authority's decision, setting aside the appellate authority's order. The assessee challenged this in the High Court. The counsel for the assessee argued that the profit rate of 30% was erroneously assumed, as the actual profit was 14.3%. The Revenue's counsel contended that the appellate authority erred in interfering with the assessing authority's decision based on the assessee's admission. The High Court noted that the liability under tax laws cannot solely rely on admissions, and the actual profit earned was 14.3%. The revisional authority's interference with the appellate authority's well-considered decision was deemed unjustified.

Consequently, the High Court allowed the appeal, setting aside the revisional authority's order and restoring the appellate authority's decision. The parties were directed to bear their own costs.

In conclusion, the High Court's judgment upheld the appellate authority's decision, emphasizing that tax liability should be determined based on actual profit earned rather than mere claims or admissions by the assessee. The revisional authority's intervention was deemed unwarranted, and the original assessment order was reinstated.