Account rejection needs more than procedural non-compliance; motor vehicle spare parts remained taxable absent proof of exclusion.

Mere non-compliance with a prescribed account-keeping rule does not, by itself, justify rejection of accounts or best judgment assessment; that step is sustainable only where the accounts are unintelligible or otherwise prevent the assessing authority from determining the nature and quantum of business. On the tax classification issue, spare parts of motor vehicles fell within the notification, and the assessee had to show that the goods were ordinarily used for purposes other than motor vehicle parts. As no such evidence was produced, the goods were treated as taxable motor parts. The reference thus succeeded on the account-rejection issue and failed on the classification issue.

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Issues: (i) Whether rejection of accounts and best judgment assessment were permissible for non-compliance with rule 72(2) under section 12 of the U.P. Sales Tax Act. (ii) Whether the goods sold by the assessee were liable to be taxed as motor parts at 10% under the relevant notification.

Issue (i): Whether rejection of accounts and best judgment assessment were permissible for non-compliance with rule 72(2) under section 12 of the U.P. Sales Tax Act.

Analysis: Mere non-compliance with rule 72(2) does not by itself justify discrediting the accounts or resorting to best judgment assessment. Rejection is sustainable only where the accounts are not intelligible or do not permit the assessing authority to ascertain the nature and quantum of business. The fact that the accounts were not maintained in the prescribed manner, without more, was held insufficient.

Conclusion: The question was answered in the negative, in favour of the assessee.

Issue (ii): Whether the goods sold by the assessee were liable to be taxed as motor parts at 10% under the relevant notification.

Analysis: The notification covered spare parts of motor vehicles, except those ordinarily used for purposes other than as motor vehicle parts. The assessee bore the burden of showing that the goods fell within the ing part of the notification. No evidence was led to show that the articles manufactured and sold were used for purposes other than as motor vehicle parts. On the facts, the goods were treated as spare motor parts falling within the notification.

Conclusion: The question was answered in the affirmative, against the assessee and in favour of the department.

Final Conclusion: The reference succeeded on the first question and failed on the second, resulting in divided success for the parties.

Ratio Decidendi: Non-compliance with a procedural account-keeping rule, by itself, does not warrant rejection of accounts or best judgment assessment unless the accounts are found to be unintelligible or unreliable; and where a taxing notification excludes only goods ordinarily used for non-vehicle purposes, the assessee must prove that the goods fall within the exclusion.

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