2023 (12) TMI 561 - HC - VAT and Sales Tax

Enhancement of turnover - Best Judgement assessment affirmed - rejection of books of accounts - first appellate authority has not given any basis of fixing the turnover - undisclosed purchase of cloth and tailoring material - benefit of ITC not given - HELD THAT - From perusal of the finding recorded by the Tribunal, it is evident that the Tribunal being the last court of fact has recorded a finding that authorities have not given any substantial reason for enhancing the turnover. On the said finding, the books of account can be rejected but it is not necessary to enhance the turnover. Again this Court in the case of RATAN HARI ROLLING MILLS LTD. VERSUS COMMISSIONER OF TRADE TAX, UP., LUCKNOW 2007 (1) TMI 539 - ALLAHABAD HIGH COURT have categorically held that estimate for whole year is not justified when suppression was found in a particular period. Once the findings of fact has been recorded in favour of the petitioner, there is no cogent reason for enhancing the turnover. The tribunal was not justified in confirming the enhancement of turnover in view of the fact that at the time of survey loose papers were found which have been explained by the revisionist and merely on that ground the books of account can be rejected but enhancement should not be made. The revision is partly allowed and the order of the tribunal is modified to the extent that taxable turnover of the revisionist relating to the assessment year in question, is hereby accepted.

Summary

Issues Involved:
The judgment involves issues related to rejection of account books, best judgement assessment, estimation of turnover, undisclosed purchase and sales, and legality of enhancing turnover without substantial basis.

Rejection of Account Books and Best Judgement Assessment:
The revision was filed against the judgement and order passed by the Commercial Tax Tribunal under Section 28(2)(ii) of UP VAT Act. The revisionist argued that the assessing authority and the first appellate authority did not provide any basis for fixing the turnover, and the best judgement assessment should not be whimsical. The Tribunal was criticized for rejecting the account books and affirming the best judgement assessment without sufficient grounds, as per the questions of law admitted in the revision.

Estimation of Turnover and Undisclosed Sales:
The Tribunal was questioned for estimating the turnover of undisclosed sales at Rs. 57.50 Lakh based on an alleged entry not related to the applicant or the relevant assessment year. The revisionist contended that the Tribunal's assessment of undisclosed purchase and sale of stitched cloth without giving benefit of ITC was unjustified, especially considering the absence of unstitched cloth or tailoring material during the survey.

Legality of Enhancing Turnover without Substantial Basis:
The revisionist, a registered dealer engaged in trading of ready-made garments, challenged the enhancement of turnover based on loose documents found during a survey. The revisionist argued that the enhancement was made without sufficient evidence or material to support such a decision. The Tribunal's decision to affirm the total tax liability upon the application of Rs. 4,19,600/- was contested as arbitrary and lacking a proper basis.

Judicial Precedents and Findings:
The Court referred to various legal precedents to support its decision, emphasizing that enhancing turnover after rejecting account books should be based on substantial reasons. The Tribunal's failure to provide a valid basis for enhancing turnover was deemed unjustified, especially when no material pointing to suppression or concealment of sales and purchases was found. The Court highlighted that best judgement assessments should not be made arbitrarily but should be supported by tangible evidence.

Conclusion:
In conclusion, the revision was partly allowed, and the Tribunal's order was modified to accept the taxable turnover of the revisionist for the relevant assessment year. The Court emphasized the importance of providing a valid basis for enhancing turnover and cautioned against arbitrary best judgement assessments based on conjectures or surmises.

This summary provides a detailed breakdown of the issues involved in the judgment, the arguments presented by the parties, legal precedents cited, and the ultimate conclusion reached by the Court.