Books of account rejection and opening stock exemption under a two-tier levy scheme turned on stock discrepancies and factual probability.

Rejection of books of account was justified where inspection revealed stock discrepancies and suppressions, and the dealer had compounded the offence; the resulting estimated additions to turnover were sustained. Opening stock of Indian made foreign liquor carried into the changed levy regime could not be denied exemption merely because separate stock accounts were absent; the fact-finding authority had to examine the relevant schedule entries and the factual probability that the stock belonged to the non-taxable category. The turnover inclusion on that limited issue was set aside and remitted for fresh consideration.

---

---

Issues: (i) whether the rejection of the dealer's books of account and the consequential additions to turnover were justified; (ii) whether the inclusion of the opening stock of Indian made foreign liquor as on 1 April 1988 in the taxable turnover was sustainable under the two-tier levy scheme.

Issue (i): whether the rejection of the dealer's books of account and the consequential additions to turnover were justified.

Analysis: The accounts were found to contain stock discrepancies and suppressions on inspection, and the dealer had compounded the offence. Those circumstances were sufficient to discredit the books and support the estimating authority's additions, including the estimate relating to cooked food and other items.

Conclusion: The rejection of the accounts and the general additions were upheld, against the assessee.

Issue (ii): whether the inclusion of the opening stock of Indian made foreign liquor as on 1 April 1988 in the taxable turnover was sustainable under the two-tier levy scheme.

Analysis: The opening stock was claimed to consist of liquor purchased before the change in the levy structure, and the absence of separate stock accounts did not automatically defeat that claim. In such a situation, the natural presumption may operate that a trader would follow the course taking goods out of the taxable category, and the Tribunal was required to examine the matter in the light of the relevant schedule entries and the factual probabilities before denying exemption.

Conclusion: The inclusion of the opening stock turnover was set aside to that limited extent and the matter was remitted for fresh consideration, in favour of the assessee.

Final Conclusion: The revision succeeded only on the limited question relating to the opening stock of liquor, while the rejection of accounts and the other additions were sustained.

Ratio Decidendi: Where stock is not separately accounted for after a change in tax incidence, the fact-finding authority must still examine whether the opening stock more probably belongs to the non-taxable category before denying exemption.

---