2014 (1) TMI 1748 - HC - VAT and Sales Tax

Estimation of turnover in Escaped assessment proceedings u/s 25(1) of the KVAT - rejection of return - running a restaurant along with the bar where alcoholic drinks were supplied - Deputy Commissioner (Appeals) reduced the addition from 15 per cent. to five per cent. - Tribunal found that the assessment made by the assessing officer was justified and reversed the findings of the first appellate authority and confirmed the order passed by the assessing officer. - Held that - It is not in dispute that the assessee only returned the taxable turnover of Rs. 14, 20, 328. Apparently the first assessing authority without any basis reduced the quantum of escaped assessment to five per cent. which will work out to an amount even less than what was conceded. Therefore there is justification on the part of the Tribunal to have interfered with the order passed by the first assessing authority. A method has to be adopted by the assessing officer to find out the turnover suppression by the assessee. He has adopted a method by taking 15 per cent. of the sale of liquor which is not unreasonable or illegal in any form especially when the assessee conceded the turnover at Rs. 14, 20, 328. Under these circumstances we are of the view that the assessing officer as well as the Tribunal is justified in rejecting the claim of the petitioner. - Demand confirmed - Decided against the assessee.

Summary

Issues:
1. Justification of Tribunal's interference with the order passed by the first assessing authority.
2. Validity of estimating turnover based on suppression of sales.
3. Legality of estimating turnover on a best judgment basis in escaped assessment proceedings.

Analysis:
1. The appeal was filed against the order of the Kerala Value Added Tax Appellate Tribunal. The assessing authority conducted an inspection and found a purchase suppression of &8377; 22,960 related to soft drinks, snacks, and provisions. The assessing authority proposed an escaped assessment, adding 15% of Indian-made foreign liquor sales to the turnover of cooked food and beverages. The Deputy Commissioner reduced the addition to 5%, but the Tribunal upheld the assessing officer's decision. The petitioner questioned the Tribunal's interference with the first assessing authority's order. The High Court held that the Tribunal was justified as the initial reduction was without basis, resulting in an amount less than the conceded turnover.

2. The issue of estimating turnover based on suppression arose. The intelligence officer found suppression amounting to &8377; 22,960 in stock. The Tribunal considered this suppression along with the sales of liquor. The assessing officer's method of taking 15% of liquor sales to estimate turnover was deemed reasonable. The High Court agreed with this approach, especially since the petitioner had admitted to a lower turnover of &8377; 14,20,328. The Court found no grounds to challenge the Tribunal's decision on this issue.

3. The legality of estimating turnover on a best judgment basis in escaped assessment proceedings was also questioned. The High Court opined that as the factual issues were not disputed, and the assessing officer's method was reasonable, no substantial legal question arose. The Court concluded that since the assessing officer's approach was justified, there was no basis to challenge the Tribunal's order. Consequently, the revision was dismissed based on the lack of grounds to challenge the Tribunal's decision.