2006 (11) TMI 319 - SC - VAT and Sales Tax

Supreme Court reinstates Tribunal's decision on book rejection, emphasizes non-production significance

The Supreme Court set aside the High Court's order, reinstating the Tribunal's decision to reject the books of account and uphold the best judgment ... Rejection of books of accounts - best judgment assessment turnover was enhanced Held that:- Appeal allowed. The expression 'place of business' is defined in section 2(c)(1). The definition is an inclusive one and includes any place where a dealer keeps his books of account. That being so, non-production of the books of account at the time of survey is a factor which can be taken into consideration by the assessing officer while examining the return to find out whether the same is incorrect or incomplete. Production of books of account at the time of assessment does not take away the effect of non- production at the time of survey. Such non-production is a relevant factor which can be considered by the assessing officer while considering whether the books of account are to be accepted as to have been maintained in the regular course of business. It is incumbent upon the assessee to offer plausible explanation as to why they were not produced at the time of survey. The burden is on him to show as to why no adverse inference should be drawn. Issues Involved:1. Rejection of books of account due to non-production during surveys.2. Justification of the best judgment assessment.3. High Court's jurisdiction under Section 11 of the U.P. Trade Tax Act, 1948.Issue-wise Detailed Analysis:1. Rejection of Books of Account Due to Non-Production During Surveys:The applicant, engaged in manufacturing and sales of bricks, maintained books of account in the regular course of business, which were examined by the assessing authority without finding any defects. However, these books were not produced during two surveys conducted on March 29, 1984, and March 30, 1985. The assessing officer rejected the books of account based on their non-production during the surveys and enhanced the turnover through a best judgment assessment. The Tribunal upheld this rejection, but the High Court found that non-production of books at the time of the surveys was not a sufficient ground for rejection, especially since no defects were found during the assessment proceedings. The Supreme Court, however, emphasized that non-production of books during surveys is a relevant factor and can be considered by the assessing officer when determining whether the books were maintained in the regular course of business. It is incumbent upon the assessee to provide a plausible explanation for non-production during surveys to avoid adverse inferences.2. Justification of the Best Judgment Assessment:The assessing officer noted additional factors to justify the rejection of the books of account apart from their non-production during surveys. These included discrepancies in the firing period, lower production rates, and lower selling rates compared to other kilns in the vicinity. The officer used an established norm of one lakh bricks in six days to determine the production at 12 lakh bricks for assessment. The Assistant Commissioner (Judicial) partially adjusted these figures, considering opening and closing stocks and breaking allowance, fixing the sale at 10,10,000 bricks at a rate of Rs. 320 per thousand bricks. The Tribunal further adjusted the sale to nine lakh bricks. The Supreme Court highlighted that these factors, along with the non-production of books during surveys, justified the best judgment assessment, and the High Court erred in focusing solely on the non-production aspect.3. High Court's Jurisdiction Under Section 11 of the U.P. Trade Tax Act, 1948:The High Court's jurisdiction under Section 11 of the Act is limited to addressing questions of law. The Supreme Court noted that the High Court overstepped its jurisdiction by re-appreciating the evidence and ignoring material documents, such as books of account and bills, which were free from defects when produced during the assessment. The High Court should have confined itself to the legal question of whether the non-production of books during surveys alone justified their rejection. The Supreme Court emphasized that the High Court's view, if accepted, would render Sections 12 and 13 of the Act redundant, as these sections mandate the maintenance and production of true and correct accounts and empower authorities to inspect and verify these accounts.Conclusion:The Supreme Court set aside the High Court's order, reinstating the Tribunal's decision to reject the books of account and uphold the best judgment assessment. The appeal was allowed, emphasizing the relevance of non-production of books during surveys and the limited jurisdiction of the High Court under Section 11 of the Act.