TMI Blog2018 (9) TMI 1780X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate and S. Sunil Kumar, Advocate ORDER K. Vinod Chandran, 1. Both these revisions by the State raise a common question of law, though the facts slightly differ. The respondents in both the revisions are Metal Crusher Units, in whose premises an inspection was conducted and turnover estimated on the basis of power consumption. In O.T. Revision No. 124/2014 the Intelligence Officer inspected the place of business of the respondent assessee and called for the books of accounts. The assessee sought adjournment and though it was granted, eventually no books of accounts were produced. The Intelligence Officer, even as per the order at Annexure A proposed to estimate the sales turnover for the year 2007-08 on the basis of the actual power consumption of the Crusher unit during the year 2007-08 as obtained from the Assistant Engineer, KSEB, Electrical Section, Thuravoor (sic). The estimation was made on the basis of the details of the electricity consumed and taxable turnover determined; by estimating the turnover probable on consumption of the units of power metered. In first appeal, the First Appellate Authority deleted the estimation made finding that penalty has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearance for the respondent in OT. Revision No. 124/2014. The respondent in O.T. Revision 206/2014 was represented by the Learned Senior Counsel Sri Muhammed Kutty. The learned Senior Counsel at first submits that there is unreasonable delay in finalisation of the proceedings. The inspection was conducted on 22/10/2007. First notice in the name of one Sulaiman was issued on 15/03/2009, after two years. A reply was filed by 20/03/2009 contending that he had not done any business. He had also disclosed the name of the respondent assessee. Again the Intelligence Officer sat on the crime file and issued a notice only on 01/12/2010. The learned Senior Counsel would contend that there could be no estimation made based on the electricity consumption as has been held by the Division Bench of this Court in Khadeeja Makkar v. State of Kerala 2014 KHC 294 : 2014 (22) KTR 558 (Ker.). It is also submitted that there could not be any estimation under Section 67 going by the binding precedent in U.K. Monu Timbers. 5. The learned Special Government Pleader (Taxes) would submit that the Division Bench decision in Khadeeja Makkar goes against the accepted principle of estimation being made of tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12. Section 67 does not confer power to make a reasonable estimate. The suppression or omission must be clearly disclosed from the materials available and there should be evidence of the amounts sought to be suppressed from the turnover. In cases where the same is not discernible, the only option is to make an order of imposition of fine not exceeding ₹ 10,000/-. Any suppression detected or rather any file generated on a crime so detected and penalised necessarily gives the assessing authority the power to make estimations to compensate the State against probable omissions and suppressions. Such exercise, as is mandated by the Statute, has to be regulated by the best judgment of the individual officer which definitely is subject to the principles of reasonableness, proportionality and of course natural justice. Such estimation on best judgment would definitely have to be done with due notice and after affording a personal hearing. Such estimation should be reasonable and should have a nexus with the gravity and frequency of the commission of offences as also the quantum of loss suffered by the State. This exercise, in our opinion, cannot be undertaken by the officer empo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsport of 10 tonnes of rubber, the books of accounts were verified and 16 instances were detected where the transport of less than one tonne of raw rubber was seen made in vehicles having capacity of six to ten tonnes. The assessee was directed to produce the duplicate copies of delivery notes; which they were liable to maintain, statutorily. The assesee failed to produce the same in which context, evaded tax was determined based on the capacity of the vehicles used in the respective transports. The Division Bench found that the assessee could have proved actual quantity transported by producing the duplicate copies of delivery notes, which were not produced and that the burden so to do was squarely on the assessee in penalty proceedings. The Division Bench, in that circumstance also specifically found that U.K. Monu Timbers was not applicable. The decision turns on its own facts and has not taken a different view in law, from that taken in U.K. Monu Timbers. 9. Hotel Surya v. State of Kerala - S.T. Rev. No. 9/2013 dated 30/05/2016 is again a Gross Profit addition made in a Bar Hotel, on the basis of an inspection carried out by the Intelligence Officer. The learned Senior Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ader (Taxes) that when books of accounts are not produced and even when they are produced, there could be estimation made based on the various factors like consumption of electricity which was used for the manufacturing process or consumption of LPG in cooking; two activities arising in the cited decisions. But the essential question is as to who has the power to carry out such estimation. 12. An Intelligence Officer invoking his power under Section 45A of the KGST Act or Section 67 of the KVAT Act (in pari materia provisions) has been held to have no power to carry out an estimation. Estimation is a reasonable and rational reckoning of taxable turnover; which necessarily is a guess work based on various factors, aspects and activity of the concerned dealer, arriving at a probabilistic approximate determination of the taxable turnover; on the best of judgment of the taxation officer, as has been found in Commissioner of Sales Tax, M.P. v. H.M. Eusafali 1973 KHC 540 : (1973) 2 SCC 137 : AIR 1973 SC 2266 : 1973 (3) SCR 1005 : 1973 (90) ITR 271 : 1973 (32) STC 77 : 1973 Tax LR 2258 : 1973 (2) CTR (SC) 317; by the Hon'ble Supreme Court. There could be no estimation carried out i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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