Unreliable account books may justify turnover assessment, but exemption claims need a speaking order on the material facts.

Rejection of account books was justified where survey material showed unrecorded transactions and gur sales outside the books, and the turnover assessment based on the record was not arbitrary; that finding was upheld against the assessee. By contrast, the exemption claim for goods sold on behalf of ex-U.P. principals could not be finally decided because the Tribunal did not discuss the necessary facts or give a speaking order on that issue; the matter was remitted for fresh adjudication in favour of the assessee on that limited point.

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Issues: (i) whether the rejection of the account books and the determination of turnover were justified; and (ii) whether the claim of exemption in respect of goods sold on behalf of ex-U.P. principals could be sustained on the basis of the Tribunal's order.

Issue (i): whether the rejection of the account books and the determination of turnover were justified.

Analysis: The account books were found to be unreliable as transactions outside the books had been detected in survey, and further sales relating to gur were not recorded in the books. The turnover was assessed on material on record and was not shown to be arbitrary.

Conclusion: The rejection of the account books and the turnover determination were upheld, against the assessee.

Issue (ii): whether the claim of exemption in respect of goods sold on behalf of ex-U.P. principals could be sustained on the basis of the Tribunal's order.

Analysis: The claim required consideration of the relevant facts and law, but the Tribunal's order did not discuss the necessary facts and was not a speaking order on this aspect. The last fact-finding authority was required to record reasons before affirming or rejecting the claim.

Conclusion: The order was set aside on this limited issue and the matter was remitted for fresh decision, in favour of the assessee.

Final Conclusion: The revision was allowed only to the extent of the exemption claim relating to sales on behalf of ex-U.P. principals, while the findings sustaining rejection of the books of account and the turnover assessment were left undisturbed.

Ratio Decidendi: A fact-finding authority must give a speaking order and discuss the material facts before finally rejecting or affirming a substantive claim for exemption; otherwise that part of the decision is liable to be set aside for fresh adjudication.

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