MATHEW JACOB v. STATE OF KERALA. — 1996 DIGILAW 457 (KER)

JUDGMENT The judgment of the Court was delivered by V. V. KAMAT, J. - The revision petitioner is running a rice mill under the name and style of "Mathichiparambil Rice Mill" near boat jetty at Changanacherry. He is a dealer under the Kerala General Sales Tax Act, 1963, attached to the Sales Tax Officer, Changanacherry. 2. For the assessment year 1984-85 the sales turnover disclosed by him was Rs. 7,44,976.50. There was an inspection on March 21, 1985 and it revealed unaccounted sale of rice for Rs. 2,210 and other variations noticed in paddy and bran. The irregularities seen from the order of the Sales Tax Officer, if considered mainly concentrate with regard to the non-keeping of stock register for showing the bran, the sales turnover under this item is very low. Meter card is not produced for verification. The assessee contended that mainly the sales of rice are on commission basis. The officer did not accept this because there is no acceptable proper evidence in regard thereto. The method adopted for arriving at the purchase turnover is estimated by deducting 2 per cent gross profit from the sales turnover of rice and assessed to tax under section 5A of the Act. The irregularities showed 71 quintals of paddy in excess, 10.62 quintals of boiled paddy, 40 kgs. excess of rice and 150 kgs. excess of rice bran all revealing a total unaccounted sale of rice for Rs. 2,210 on the day of inspection. It appears that there was compounding on payment of penalty of Rs. 200. 3. The assessee contended that there was no real variation. He also contended that non-maintenance of stock register cannot be considered as a grave irregularity. He also contended that the meter card was not called for. 4. Taking into consideration the Sales Tax Officer added equal amount to cover up suppression on sale of rice. With regard to the bran he added 1 per cent of the sales tax turnover estimated. He granted deduction of 2 per cent gross profit on the sale turnover of rice estimated and in the process with reference to the declared turnover of Rs. 7,44,976.56 taking resort to best judgment assessment fixed total taxable turnover at Rs. 29,32,762.68. As a result of total tax due ascertained in the above process was fixed at Rs. 17,913.50 and deducting tax paid recorded balance of Rs. 7,44,976.56 taking resort to best judgment assessment fixed total taxable turnover at Rs. 29,32,762.68. As a result of total tax due ascertained in the above process was fixed at Rs. 17,913.50 and deducting tax paid recorded balance of Rs. 9,202 with the addition of surcharge in the same process at Rs. 867. 5. The first appellate authority - the Appellate Assistant Commissioner of Agricultural Income-tax and Sales Tax, Kottayam, after hearing the assessee, perusing the assessment record and the defects pointed out by the assessing authority agreed that there are substantial grounds for rejection of accounts and upheld the same to that extent. 6. In regard to the above question the first appellate authority has observed in the following manner : "So even admitting the fact that the appellant was continuing the same pattern of suppression for the balance period also the suppression will not exceed Rs. 15,000. In the light of the irregularities and the suppression detailed in the inspection the addition of cent per cent is excessive. An addition of 50 per cent to the conceded turnover will meet the ends of justice and 1 order accordingly. Considerable deduction will be allowed for purchase of paddy also." This is with regard to the assessment year in question. 7. In spite of the above observations of the first appellate authority to the effect that the suppression will not exceed Rs. 15,000, also to the effect that addition of cent per cent is excessive, which will also receive approval on perusal of the order of the assessing authority, this order is interfered with. 8. The proceedings were taken up before the Kerala Sales Tax Appellate Tribunal, Additional Bench, Kottayam both by the revenue as well as by the assessee. 9. The Tribunal has in fact reproduced the fact-finding of the first appellate authority relevant to the matter of exercise of discretion. However it is in the matter of discretion that the Tribunal as the second appellate authority has interfered. The Tribunal has given its reason that the examination of the proceedings of the Intelligence Officer was not done by the first appellate authority and had it been, it would have become clearer that the matter required serious consideration. However it is in the matter of discretion that the Tribunal as the second appellate authority has interfered. The Tribunal has given its reason that the examination of the proceedings of the Intelligence Officer was not done by the first appellate authority and had it been, it would have become clearer that the matter required serious consideration. Following are the observations of the Tribunal in the context : "It cannot be totally denied that no pattern of suppression has been detected in this case, so even admitting the fact that the appellant continuing the same pattern of suppression for the balance period also the suppression will not exceed Rs. 15,000." The Tribunal has restored the order of the Sales Tax Officer on the ground that the nature of suppression discussed by the Inspection Officer are not looked into by the first appellate authority. We have referred to the factual position with reference to the irregularities based on the verification as a result of the inspection dated March 21, 1985. Addition is a matter of exercise of discretion, may not be in a capricious manner, but with reference to certain necessary and connected aspects in regard thereto. The Tribunal as the second appellate authority, in exercise of its discretion relating to the jurisdiction in the matter of addition would have to be slow in the process. Unless in the process of reasoning with reference to the factual position the Tribunal reaches the conclusion that the first appellate authority has acted in vacuum representing features of capricious method to arrive at the conclusion in the determination of the percentage of addition, as the second appellate authority, interference would be normally beyond expectation. We have referred to the reasons recorded by the first appellate authority. We have also seen that the first appellate authority has considered the material before the Sales Tax Officer. We have ourselves referred to the irregularities and the explanation of the assessee in regard thereto. 10. We do not find that the Tribunal as the second appellate authority could justifiably feel that the discretion used by the first appellate authority was so palpably wrong that it required interference and substitution of that of the Sales Tax Officer. We have ourselves referred to the irregularities and the explanation of the assessee in regard thereto. 10. We do not find that the Tribunal as the second appellate authority could justifiably feel that the discretion used by the first appellate authority was so palpably wrong that it required interference and substitution of that of the Sales Tax Officer. In our judgment in the matter of discretion the views of the first appellate authority do not require interference unless the use of discretion could be said to be leaning more on the side of being capricious in the context. Interference would be an erroneous exercise of jurisdiction. The appellate authority has not given such reasons to justify the interference, in the matter of rejection. For the above reasons we do not find that the order of the first appellate authority should have been interfered with in the manner in which it has been done. Tax revision case succeeds. Impugned order dated December 14, 1992 of the Kerala Sales Tax Appellate Tribunal, Additional Bench, Kottayam (annexure III) gets quashed and set aside and instead the order dated February 20, 1989 (annexure II) gets restored. The Sales Tax Officer-II, Changanacherry is directed to act accordingly. Petition allowed.