2015 (9) TMI 158 - HC - VAT and Sales Tax

Increase of Turnover and tax liability Best judgment assessment AO held that two challans, showing sale of goods to certain dealers could not be explained as Assesse had neither produced relevant sale records nor entered sales reflected in said challans in sales tax account registers Appeal preferred by Assessee was also rejected Held that - order passed by Appellate authority and tribunal does not consider any of Assessee s contentions Clearly, two challans cannot be basis for rejecting assesse s books and increasing taxable turnover In absence of any purchases by Assessee, it was doubtful whether Trading Account could be prepared AO enhanced turnover principally on basis that Assessee had failed to produce Trading Account Also turnover was increased on basis of excess stock allegedly found at premises of Assessee, AO has not indicated as to how excess stock would affect declared turnover While making best judgment assessment, AO did not examine records pertaining to commission received/receivable by Assessee Assessment Order does not indicate any basis for AO to enhance turnover by 10% Matter remanded to AO to decide afresh in accordance with law Decided in favour of Assesse.

Summary

Issues:
Appeal under Section 81 of the Delhi Value Added Tax Act, 2004 against the Tribunal's order rejecting the appeal on the assessment order dated 4th February, 2000 for the Assessment Year 1996-97.

Analysis:
The Assessee, engaged in distribution as a consignment sale agent, challenged the assessment order based on a survey conducted in 1996. The AO found discrepancies in sales records, leading to a best judgment assessment enhancing sales by Rs. 2.5 crores. The Assessee contended that all relevant records were produced and discrepancies were not adequately explained. The FAA upheld the assessment, stating the Assessee failed to explain excess stock and unverified challans. The Tribunal affirmed this decision, prompting the Assessee's appeal.

The main contention was the lack of consideration for the Assessee's explanations in the assessment orders. The Assessee argued that specific discrepancies were not identified, particularly concerning two challans amounting to Rs. 1250. The Court noted the absence of material supporting adverse findings against the Assessee. The Assessee's turnover increase by Rs. 2.5 crores based on excess stock was deemed unjustified, given the consignment nature of received stocks not subject to taxes.

The Court highlighted that the Assessee acted as an agent for Asian Paints Ltd., receiving commissions without making purchases. The absence of a Trading Account was not obligatory, yet the turnover was enhanced based on its non-production. The Court questioned how excess stock affected declared turnover, especially without evidence of undeclared sales. The AO's failure to consider the commission records further undermined the turnover increase rationale.

Considering the lack of basis for the turnover enhancement, both parties agreed to remand the matter for fresh consideration. The Court allowed the appeal, setting aside previous orders and remanding the case to the AO for a fresh decision in compliance with the law. The Assessee was directed to appear before the AO for further proceedings.