IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST Rev No. 110 of 2005()
1. M/S.THE CAKE HOUSE,
... Petitioner
Vs
1. STATE OF KERALA, REPRESENTED BY
... Respondent
For Petitioner :SRI.E.P.GOVINDAN
For Respondent : No Appearance
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice P.N.RAVINDRAN
Dated :14/12/2007
O R D E R
H.L.Dattu,C.J. & P.N.Ravindran,J.
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S.T.Rev.No.110 of 2005
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Dated, this the 14th day of December, 2007
ORDER
H.L.Dattu,C.J.
M/s. The Cake House, Kalamassery is the assessee in this
Sales Tax Revision.
(2) The assessee questions the legality or otherwise of the
orders passed by the Sales Tax Appellate Tribunal, Additional Bench-I,
Ernakulam in T.A.No.418 of 2004 dated 15th October, 2004.
(3) The assessee has framed the following questions of law for
our consideration and decision. They are as under:
(i) Whether on the facts and in the circumstances of the
case the Tribunal was justified in sustaining the addition made
by the lower authorities.
(ii) Whether on the facts and in the circumstances of the
case the tribunal was justified in holding that a pattern of
suppression was established in the case of the appellants.
(iii) Whether on the facts and in the circumstances of the
case the Tribunal was justified in holding that the petitioners
were maintaining duplicate copy of bills.
(iv) Whether on the facts and in the circumstances of the
case the Tribunal was justified in passing a remark against the
petitioners without verifying the report of the inspecting officers.
(v) Whether on the facts and in the circumstances of the
case the appellate authority was justified in endorsing the
findings of the lower authorities without making an independent
analysis of the facts”.
S.T.Rev.No.110 of 2005 – 2 –
(4) The factual matrix are:
(i) The assessee is a dealer, registered under the provisions of the
Kerala General Sales Tax Act, 1963 (“Act” for short). He is a dealer in Cake
and Bread. The assessment year in question is 2001-02.
(ii) The Inspecting Wing of the Department had inspected the business
premises of the assessee on 20.12.2001 and on such inspection, had detected
unaccounted sales and unaccounted purchases. The total suppression was in
a sum of Rs.4,32,324.75.
(iii) The assessee had compounded the offence departmentally, in lieu
of the prosecution proceedings.
(iv) The assessee had filed its annual returns, conceding a total and
taxable turnover of Rs.45,78,782.20 and Rs.41,21,598.90 respectively. The
assessing authority had rejected the books of accounts in view of the report
received from the Inspecting wing of the Department. After such rejection of
the return filed by the assessee, the assessing authority had issued
pre-assessment notice to the assessee proposing to make an addition of three
times of the suppressed sales and purchases. After receipt of the
pre-assessment notice, the assessee has filed his objections, inter alia,
bringing to the notice of the assessee that the proposal so made is contrary to
the conceded total and taxable turnover. The assessing authority, after
considering the explanation so offered by the assessee, has proceeded to
pass an order by way of best judgment assessment and in that has made an
addition of three times the suppression detected to the total and taxable
turnover conceded by the assessee. After such addition, has quantified the tax
liability.
(v) The orders passed by the assessing authority is confirmed by the
S.T.Rev.No.110 of 2005 – 3 –
first appellate authority as well as by the Tribunal. Aggrieved by these orders,
the assessee is before this Court in this Sales Tax Revision.
(5) Before we refer to the arguments canvassed by
Sri.E.P.Govindan, learned counsel appearing for the assessee, we intend to
remind ourselves to the observations made by the apex Court in the case of
Commissioner of Sales Tax, Madhya Pradesh v. H.M.Esufali H.M.Abdulali
[(1973) 32 STC 77]. In the aforesaid decision, the apex Court has stated as
under:
“In estimating any escaped turnover, it is inevitable that there is
some guess-work. The assessing authority while making the
“best judgment” assessment, no doubt, should arrive at its
conclusion without any bias and on rational basis. That authority
should not be vindictive or capricious. If the estimate made by
the assessing authority is a bona fide estimate and is based on
a rational basis, the fact that there is no good proof in support of
that estimate is immaterial. Prima facie, the assessing authority
is the best judge of the situation. It is his “best judgment” and
not of anyone else. The High Court could not substitute its “best
judgment” for that of the assessing authority”.
(6) This settled legal position is not reversed by any subsequent
decision by the apex Court.
(7) Sri.E.P.Govindan, learned counsel appearing for the
assessee, would submit that since the inspection was conducted by the
Inspecting Wing of the Department on 20.12.2001, there is no justification for
the assessing authority to have made an addition of three times the
suppressed purchases and sales. Further it is stated that, the addition made is
excessive and, therefore, this Court should reduce the addition so made by the
S.T.Rev.No.110 of 2005 – 4 –
assessing authority.
(8) Per contra, Sri.Mohammed Rafiq, learned Senior
Government Pleader, ably justifies the impugned order.
(9) The facts are not in dispute. The Inspecting Wing of the
Department had inspected the business premises of the petitioner nearly after
six months from the date of commencement of the assessment year. After
such inspection, the Inspecting Wing of the Department had detected a pattern
of suppression of sales and purchases in a sum of Rs.4,32,324.75. This
inspection, as we have already noticed, was after six months from the date of
commencement of the assessment year.
(10) After such inspection, the assessee has volunteered to
compound the offence departmentally by paying the compounding fee, in lieu
of the prosecution.
(11) The assessee had filed his annual return for the
assessment year 2001-02 and in that had conceded a total and taxable
turnover of Rs.45,78,782.20 and Rs.41,21,598.90 respectively. The assessing
authority has rejected the books of accounts in view of the report of the
Inspecting Wing of the Department. The assessing authority has, thereafter,
proceeded to complete the best judgment assessment. While doing so, the
assessing authority has not whimsically made addition to the conceded
turnover of the dealer. He has taken into consideration the pattern of
suppression by the assessee and has made an addition of three times the
suppression detected to the total and taxable turnover conceded by the
assessee. After such addition, has quantified the tax liability. It is his estimation
and it is his best judgment assessment and that best judgment assessment
should not be replaced by this Court by keeping in view the dicta of the apex
S.T.Rev.No.110 of 2005 – 5 –
Court in H.M.Esufali’s case.
(12) The appellate authority as well as the Tribunal also have
taken the view that the assessing authority is justified in making an addition of
three times the suppressed turnover detected. These are all findings of fact
and those findings of fact cannot be disturbed by this Court in exercise of its
powers under Section 41 of the Act.
(13) In that view of the matter, we do not find any ground to
interfere with the orders passed by the Tribunal. Therefore, the questions of
law framed by the assessee requires to be answered against the assessee
and in favour of the Revenue.
(14) Consequently, I.A.No.596 of 2005 is dismissed.
Ordered accordingly.
H.L.Dattu
Chief Justice
P.N.Ravindran
Judge
vku/-