Court Allows Revision, Sets Aside Enhancement of Turnover in Sales/Trade Tax Case

Case Name:

Sales/Trade Tax Revision No. 99 of 2023 - M/S Sri Shanti Readymade v. The Commissioner, Commercial Taxes, U.P.

Key Takeaways:

1. The court held that the rejection of books of account under local sales does not necessarily lead to the rejection of books of account under the Central Sales Tax Act.
2. The enhancement of turnover cannot be justified solely based on the rejection of books of account under the UP VAT Act.
3. The court emphasized the need for cogent material to support the enhancement of turnover under the Central Sales Tax Act.
4. The court referred to previous judgments that stated the books of accounts and disclosed turnover under the Central Sales Tax Act cannot be rejected solely because the books of account under local tax have been rejected.
5. In the absence of any finding or material indicating that the assessee had made any central sales, the enhancement of turnover was not sustained.

Case Synopsis:

This is a court case with the Neutral Citation No. 2023:AHC:219955. The case is titled “SALES/TRADE TAX REVISION No. 99 of 2023” and involves the revisionist, M/S Sri Shanti Readymade, and the opposite party, The Commissioner, Commercial Taxes, U.P. The case was heard by Hon’ble Piyush Agrawal, J., in Court No. 5.

The revision was filed against the judgment and order dated 16.5.2023 passed by the Commercial Tax Tribunal in Second Appeal No. 46 of 2022 (A.Y. 2014-15) in the proceedings under Section 9(2) of the Central Sales Tax Act.

The revision was admitted on 10.8.2023 on the following questions of law:

(A) Whether the Tribunal was justified in rejecting the account books and affirming the best judgment assessment, even after recording the finding in favor of the applicant that the assessing authority and the first appellate authority have not given any basis for fixing the turnover and the best judgment assessment should not be whimsical, else it would be illegal?

(B) Whether the tribunal was justified in only partially allowing the appeal filed by the applicant and estimating the turnover of undisclosed Central Sale at Rs. 10 Lakh merely on the basis of alleged entry of UP sale of Rs. 1.10 lakh found to be recorded in the documents seized during the survey, which does not relate to the applicant and which relates to the period prior to the commencement of business of the applicant?

(C) Whether the tribunal was justified in enhancement of turnover under the Central Sales Tax Act merely on the basis of surmises and conjunctures, in the absence of any material of suppression of Central Sales?

The counsel for the revisionist argued that the applicant is a registered dealer under the UP VAT Act and is engaged in trading of ready-made garments. The business was commenced from Assessment Year 2014-15. During a survey conducted on 27.9.2014, six loose documents were found that were related to the transactions of the previous assessment year when the revisionist was not in possession of the shop in question and it was being used by the erstwhile tenant. The counsel submitted that the disclosed turnover of Central Sales Tax cannot be rejected merely on the ground that the books of account under UP VAT Act have been rejected and some suppression has been found. She relied upon the judgments of M/s R.D. Gupta and Company Vs. C.S.T., UP, 2004 NTN (Vol 25) 1243 and Guru Prasad Roller Flour Mills Pvt. Limited Vs. Commissioner of Commercial Tax, U.P., 2016 NTN (Vol. 62) 345 to support her contention.

On the other hand, the learned Additional Chief Standing Counsel for the opposite party supported the impugned order and prayed for the dismissal of the revision.

After hearing the arguments of both parties, the court perused the records. It was observed that the books of account under UP VAT Act were rejected and the disclosed turnover was enhanced based on a survey conducted on 27.9.2014. However, the rejection of books of accounts under local sales was upheld, but the enhancement of turnover was not justified. The court noted that the rejection of books of account under local sales does not necessarily lead to the rejection of books of account under the Central Sales Tax Act in the absence of any cogent material available on record.

The court referred to the judgments in the cases of M/s R.D. Gupta and Company and Guru Prasad Roller Flour Mills Pvt Limited, where it was held that the books of accounts and disclosed turnover under the Central Sales Tax Act cannot be rejected merely because the books of account under local tax have been rejected. The court further observed that the enhancement of turnover cannot be justified solely on the basis of the rejection of books of account under the UP VAT Act.

In the present case, none of the authorities below have recorded any finding or disclosed any material that would necessarily lead to the conclusion that the assessee had made any central sales.

Therefore, the court held that the enhancement of turnover made by the impugned order cannot be sustained in the eyes of the law. The revision was allowed, and the order of the tribunal was set aside.

The substantial questions of law were answered accordingly.

[Source: Neutral Citation No. - 2023:AHC:219955]

FAQ:

Q1: What was the case about?

A1: The case involved a revision filed against the judgment and order passed by the Commercial Tax Tribunal regarding the enhancement of turnover in a Sales/Trade Tax case.

Q2: What were the key arguments presented by the revisionist?

A2: The revisionist argued that the disclosed turnover of Central Sales Tax cannot be rejected solely based on the rejection of books of account under the UP VAT Act. They relied on previous judgments to support their contention.

Q3: What was the court’s decision?

A3: The court found that the enhancement of turnover made by the tribunal was not justified and set aside the order. The court emphasized the need for cogent material to support the enhancement of turnover under the Central Sales Tax Act.

Q4: What were the key takeaways from the case?

A4: Rejection of books of account under local sales does not necessarily

lead to the rejection of books of account under the Central Sales Tax Act.

Enhancement of turnover cannot be justified solely based on the rejection of books of account under the UP VAT Act.

Cogent material is required to support the enhancement of turnover under the Central Sales Tax Act.

Previous judgments have established that the books of accounts and disclosed turnover under the Central Sales Tax Act cannot be rejected solely because the books of account under local tax have been rejected.

In the absence of any finding or material indicating that the assessee had made any central sales, the enhancement of turnover was not sustained.

1. Heard Ms. Sanyukta Singh for the revisionist and Mr. B.K. Pandey, learned Additional Chief Standing Counsel for the opposite party.

2. The present revision has been filed against the judgement and order dated 16.5.2023 passed by Commercial Tax Tribunal in Second Appeal No. 46 of 2022 (A.Y. 2014-15) passed in the proceedings under Section 9(2) of Central Sales Tax Act.

3. The present revision has been admitted vide order dated 10.8.2023 on

the following questions of law: -

“(A) Whether the Tribunal was justified in rejecting the account books

and affirming the best judgement assessment, even after recording the finding in favour of the applicant that assessing authority and the first

appellate authority has not given any basis of fixing the turnover and

the best judgement assessment should not be whimsical, else it would

be illegal?

B. Whether the tribunal was justified in only partially allowing the appeal filed by the applicant and estimating the turnover of undisclosed Central Sale at Rs. 10 Lakh merely on the basis of alleged entry of UP sale of Rs. 1.10 lakh found to be recorded in the documents seized during the survey, which does not relate to the applicant and which relates to the period prior to the commencement of business of the applicant?

C. Whether the tribunal was justified in enhancement of turnover under the Central Sales Tax Act merely on the basis of surmises and conjunctures, in absence of any material of suppression of Central Sales ?

4. Learned counsel for the revisionist has submitted that the applicant is a registered dealer under the UP VAT Act (hereinafter referred to as the ‘Act’) and engaged in trading of ready-made garments and his business was commenced from Assessment Year 2014-15. She submitted that on 27.9.2014 a survey was conducted in the business premisses of the revisionist and at the time of survey, the revisionist was not present at the spot. She submitted that at the time of survey business of the applicant was closed but the shop was opened for carpentry work. It was submitted that during spot inspection, six loose documents were found which were relating to the transactions of previous assessment year when the revisionist was not in possession of the shop in question and same was being used by the erstwhile tenant.

5. She further submitted that the disclosed turnover of Central Sales Tax

cannot be rejected merely on the ground that the books of account under UP VAT Act has been rejected and some suppression have been found. She further

submitted that in the absence of any material suppression of Central Sales Tax enhancement of turnover cannot be said to be justified in the eyes of law.

6. In support of her contention she relied upon the judgement of this Court in the case of M/s R.D. Gupta and Company Vs. C.S.T., UP, 2004 NTN (Vol 25)

1243 and Guru Prasad Roller Flour Mills Pvt. Limited Vs. Commissioner of

Commercial Tax, U.P., 2016 NTN (Vol. 62) 345 and prayed for allowing the

present revision.

7. Per contra, learned A.C.S.C. has supported the impugned order and prayed for dismissal of the present revision.

8. After hearing learned counsel for the parties, the Court has perused the

records.

9. Admittedly, business premisses of the petitioner was surveyed on 27.9.2014 and on the basis of said survey, the books of account under UP VAT

Act was rejected and disclosed turnover was enhanced. However merely the

books of accounts were rejected and enhancement was made and same was challenged before this Court in Sales/ Trade Tax Revision No. 106 of 2013

which has been partly allowed by this Court by a separate order passed today in which the Court has upheld the rejection of books of accounts under local sales but enhancement of turnover is not justified. Merely because books of account under local sales have been rejected, the same will not necessary to led the ground for rejecting the books of account under Central Sales Tax Act also in the absence of any cogent material available on record.

10. From perusal of the impugned order, neither any reference nor any material have been brought on record sustaining the enhancement of disclosed

turnover under Central Sales Tax Act.

11. This Court in the case of M/s R.D. Gupta (supra) has held that the books

of accounts and disclosed turnover under Central Sales Tax Act cannot be

rejected merely because books of account under local tax have been rejected and it has been further observed that the enhancement of turnover cannot be justified.

12. Again this Court in the case of Guru Prasad Roller Flour Mills Pvt Limited (Supra) has held that merely on the basis that the books of account of assessee was rejected under UP VAT Act, the same would not led to a conclusion that the assessee had infact entered into Central Sales in the absence of any material available on record.

13. The case is in hand none of the authorities below have recorded any

finding or disclosed any material which would necessarily led to the conclusion that the assessee had infact made any central sales.

14. In view of above, the enhancement of turnover made by the impugned

order cannot be sustained in the eyes of law. In the results, the revision is allowed and the order of the tribunal is set aside.

15. The substantial questions of law are answered accordingly.

Order Date :- 20.11.2023

Rahul Dwivedi/-