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2003 DIGILAW 116 (KER)

C. O. VARGHESE v. STATE OF KERALA

2003-02-11

G.SIVARAJAN, J.M.JAMES

body2003
JUDGMENT G. SIVARAJAN, J. – The assessee is the revision petitioner. The State is the respondent. The assessment year concerned is 1992-93. The assessee is a dealer in rice and provisions. The assessee filed a return for the year 1992-93 under the Kerala General Sales Tax Act, 1963 (for short "the Act"), declaring a total and taxable turnover of Rs. 8,77,260.82 and Rs. 37,90,935.10 respectively. There was an inspection in the business premises of the assessee on January 27, 1993 and a shop inspection report was prepared. Subsequent verification of the books of account with reference to the SIR revealed that the assessee had effected unaccounted purchase and sale of about 23 items. The assessee had admitted the offence and compounded the offence by paying a sum of Rs. 4,540. It has also come out from the check-post declarations that the assessee had purchased groundnut oil from outside the State parties evidenced by five bills to the tune of Rs. 1,95,000. On the basis of these materials, the assessing authority proposed to reject the return and the accounts and to make addition to the estimated turnover on two counts. The first one is on the basis of the discrepancies found in the inspection conducted on January 27, 1993. Since the actual suppression found was Rs. 87,615 the suppression estimated twelve times the actual suppression which came to Rs. 10,51,380 was proposed to be added. Similarly the sale price of the goods (covered by five bills) was fixed at Rs. 2,34,000 and addition of 10 times the sum of Rs. 23,40,000 was also proposed to be added. The assessee in his reply objected to both the proposals. Regarding the addition on account of the check-post declarations the assessee wanted the check-post details as well as to cross examine the drivers of the vehicle which carried the goods through the check-post. The assessing authority rejected the explanations and completed the assessment as proposed. The assessee took up the matter in appeal before the first appellate authority, who by it's order dated September 30, 1995 remanded the matter to the assessing authority with the following observations : "In order to get a reasonable opportunity to the appellant to prove his case this addition is deleted and the case remanded to the assessing authority for the limited purpose of giving an effective opportunity to the appellant to produce sufficient evidence to prove his claims. The assessing authority is at liberty to retain or revise the estimate on the basis of the fresh evidence to be adduced by the appellant." Pursuant to the said appellate order, the assessing authority issued three notices dated January 30, 1996, January 15, 1998 and February 28, 2001. But the assessee did not respond to the said notices. Consequently the original assessment was restored. The assessee took up the matter again before the first appellate authority, who with reference to the directions contained in the first appellate order declined to afford any further opportunity to the assessee to establish his case. However the first appellate authority reduced the addition of Rs. 23,40,000 to Rs. 14,04,000, i.e., 10 times the actual sale price of the suppressed transaction was reduced to six times of the said amount. On further appeal by the assessee, the Tribunal also justified the denial of any further opportunity. However, the Tribunal considered the reasonableness of the additions made on account of the discrepancies in the inspection and the addition made on the basis of check-post declarations. Both the additions were reduced to three times the actual suppression found as against six times adopted by the first appellate authority and ten times adopted by the assessing authority. The learned counsel appearing for the assessee submits that in the present case the inspection of the business premises was conducted only on January 27, 1993, i.e., towards the fag end of the assessment year and therefore, even assuming that the stock variation found on the basis of the material gathered in the inspection represented unaccounted transactions still there was no justification for making any addition on account of probable omissions and suppressions. On the question of addition based on check-post declarations, the counsel submitted that the assessee had denied the transactions covered by the check-post declarations and had also sought for cross-examining the drivers and consignors of the goods covered by the check-post declaration but the assessing authority did not afford any such opportunity. Counsel also submitted that when the assessing authority has relied on the check-post declarations and the transactions covered by the said declarations, there was no justification for the assessing authority to make any further addition based on the same. The counsel submitted that even assuming that the transaction covered by the check-post declarations, are of the assessee, no more additions to the said amount was warranted. The counsel submitted that even assuming that the transaction covered by the check-post declarations, are of the assessee, no more additions to the said amount was warranted. We have also heard the learned Government pleader appearing for the respondents. He submits that considering the unaccounted transaction found both on the basis of the inspection and on the basis of check-post declarations, the reliefs already granted by the first appellate authority and by the Tribunal are reasonable and no further interference in revision is called for. The Government pleader also pointed out that the check-post declarations related only for a period of one month and that the assessee might have made such transactions during other periods also. We have considered the rival submissions. So far as the addition made on the basis of the inspection conducted on January 27, 1993 and the actual suppression found, we do not find any reason to interfere with the order of the Tribunal, for according to us substantial reliefs have been granted to the assessee. But so far as the addition made on the basis of check-post declarations are concerned, according to us, there was no justification for making any addition apart from the actual amount covered by the check-post declaration on the assumption that assessee might have practiced similar unaccounted transactions also. The check-post declarations, it must be noted, came to the notice not on the basis of any inspection by the assessing authority but only after the assessment year was over. If the assessee had transported goods through the check-post for other periods also, it could have been brought to light. Certainly, the assessing authority could have called for those declarations from the same check-post or from other check-posts. The assessing authority has no case that the assessee had in fact, transported goods either through the very same check-post or through other check-posts in the State for the other periods. In these circumstances, unlike in the case of additions to be made on the basis of inspection conducted in the business premises during the assessment year both towards actual suppression and towards probable omissions and suppressions of the similar nature, additions towards probable omissions and suppressions, cannot be made with reference to check-post declarations. The Tribunal, in fact, has found that the addition made is arbitrary and calls for interference. The Tribunal, in fact, has found that the addition made is arbitrary and calls for interference. The Tribunal has only reduced the addition from six times the value determined on the basis of check-post declarations to three times. According to us, the Tribunal should have sustained addition of only the sale value of the purchases covered by the five check-post declarations. In the above circumstances in modification of the order of the Tribunal, we direct the assessing authority to modify the assessment for the year 1992-1993 by adding only the sale value of the purchases covered by the five check-post declarations. This is in addition to the addition of three times the suppressed amount of Rs. 87,615 sustained by the Tribunal. The order of the Tribunal shall stand modified as above. Thus the T.R.C. is allowed to the above extent.