Best judgment sales tax assessment must be proportionate; stock variation alone cannot justify treating all goods as suppressed turnover.

In a best judgment sales tax assessment, stock variation cannot automatically be treated as suppressed stock, and the turnover estimate must bear a rational and proportionate relation to the discrepancy proved on inspection. The article notes that where supporting vouchers and excise seals were available, stock received from other places could not be treated as unaccounted stock. It also states that a small remaining discrepancy cannot justify adding the entire difference as suppressed turnover. Revisional interference was not warranted where no question of law or arbitrariness was shown, but an excessive and oppressive turnover estimate required fresh determination of taxable turnover.

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Issues: (i) Whether the addition sustained for the assessment year 1987-88 could be interfered with in revision under section 41 of the Kerala General Sales Tax Act, 1963. (ii) Whether the turnover estimated for the assessment year 1988-89 was arbitrary because the stock received from Nellore and Bombay was treated as suppressed stock and the remaining discrepancy was wholly added to the best judgment assessment.

Issue (i): Whether the addition sustained for the assessment year 1987-88 could be interfered with in revision under section 41 of the Kerala General Sales Tax Act, 1963.

Analysis: The Tribunal had reduced the addition to 2 per cent of the returned turnover after considering the discrepancy found on inspection and the surrounding facts. No question of law or arbitrariness was shown to justify interference in revisional jurisdiction.

Conclusion: The addition for 1987-88 was upheld and interference was declined.

Issue (ii): Whether the turnover estimated for the assessment year 1988-89 was arbitrary because the stock received from Nellore and Bombay was treated as suppressed stock and the remaining discrepancy was wholly added to the best judgment assessment.

Analysis: The explanation regarding the jewels received from Nellore and Bombay was accepted because the supporting vouchers and excise seals were available at the time of inspection, showing that those items could not be treated as suppressed stock. The remaining stock difference was small in proportion to the total stock and could not be treated in full as unaccounted stock. The estimate based on the entire alleged suppression was therefore found to be excessive, oppressive, and arbitrary, requiring fresh determination of turnover by the Tribunal.

Conclusion: The assessment for 1988-89 was set aside and the matter was remitted for fresh determination of taxable turnover.

Final Conclusion: The revision succeeded only in part: the 1987-88 addition was maintained, while the 1988-89 turnover estimate was annulled and sent back for reconsideration.

Ratio Decidendi: In a best judgment sales tax assessment, stock variation cannot automatically be treated as suppressed stock, and an estimate of turnover must bear a rational and proportionate relation to the actual discrepancy proved on inspection.

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