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2016 (10) TMI 785 - HC - VAT and Sales TaxTax liability - assessment proceedings - Entry tax - Best judgement assessment - tax evasion - survey of premises - rejection of books - discrepancies in the recorded quantities of raw material and finished products - entries in the RG-1 Register did not match with what was actually found during the course of the survey operations - Held that: - Section 28 of the Act empowers the assessing authority to reject the books of account of an assessee where it finds that the same are not worthy of credence. The provision when it empowers the assessing authority to reject the turnover of sales and purchases as declared casts a duty to come to a positive conclusion that the assessee is undertaking operations without all transactions being dutifully and faithfully recorded in the books of account. It is only when he comes to form an opinion that no credence at all can be laid upon the disclosures made by the assessee that the books of accounts are to be rejected - the authority must come to a conclusion that the books of accounts as maintained and as a whole cannot be relied upon or held worthy of confidence. The difference itself was of only 0.67 per cent. This, in the opinion of the Court, did not form sufficient ground to come to a conclusion that the books maintained by the assessee were not worthy of credence or that the transactions were not faithfully or dutifully recorded in the account books. Pausing here, it becomes relevant to clarify that this Court does not intend to lay down as a broad proposition that a singular transaction cannot in all situations be sufficient to reject the books of account. There may be a case where the singular discrepancy may be of such vital import that it cannot be brushed aside or ignored. What would have to be necessarily be borne in mind is the significance of the infraction and whether the same is indicative or evidence of a deliberate attempt to suppress and conceal turnover. Estimation of turnover - the Court finds that although the Tribunal accepts the submission of the revisionist that all the thirty eight machines were not functioning in May 2008, it has proceeded to estimate the escaped turnover to be ₹ 1,40,00,000/-. On what basis this figure has been arrived at is neither noted nor elaborated upon by the Tribunal. While it is true that a best judgment assessment would necessarily entail a certain degree of guess work, the guess itself which is arrived at by the authority must be fair, informed, intelligent and referable to some valid or cogent basis for arriving at the figure of escaped turnover. It can neither be arbitrary, fanciful or based wholly on conjecture. For the purposes of arriving at the figure of escaped turnover to be ₹ 1,40,00,000/-, the Tribunal neither refers to the scale of operations in the succeeding months nor does it rest its estimation upon any material or contemporaneous record which may have been found in the course of the survey operations. On both scores, therefore, this Court is unable to sustain the orders passed by the assessing authority as well as the Tribunal. The assessment under the Entry Tax enactment is based solely upon the assessment undertaken under the Act. For the reasons recorded above, the same must also necessarily fall. Revision allowed - decided in favor of assessee.
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