Unrebutted affidavit and unproved loose papers cannot justify turnover addition or penalty in tax-paid goods disputes.

An adverse turnover addition and penalty could not be sustained where the assessee's unrebutted affidavit stated that it dealt only in tax-paid tyres and tubes, and the revenue failed to prove that the seized loose papers and diary entries reflected actual sale transactions. The tribunal noted that the affidavit was material evidence that should have been considered, that no purchaser was examined, and that the disputed entries were not adequately verified against the regular books of account. In the absence of proof linking the papers to concealment of taxable goods or any tax advantage from suppression, the assessed turnover and consequential tax and penalty were liable to be set aside.

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Issues: Whether the addition of turnover and the consequential tax and penalty could be sustained when the assessee's affidavit remained unrebutted, the seized loose papers were not proved to relate to sales, and the disputed entries were found to concern tax-paid tyres and tubes.

Analysis: The assessee had filed an affidavit asserting that it dealt only in tax-paid tyres and tubes and was not an importer of the goods in question. That affidavit was neither rebutted nor challenged, and it constituted material evidence in favour of the assessee which the assessing authority ought to have considered. The assessment order itself showed that the entire evaded turnover related to tyres and tubes, while the record did not disclose any material showing concealment of taxable goods or any tax advantage from the alleged suppression. The department also failed to discharge its burden of proving that the loose papers and diary entries represented actual sale transactions, as no purchaser was examined and the entries were not adequately verified against the regular books of account.

Conclusion: The assessment of the disputed turnover and the penalty could not be sustained; the tax and penalty imposed on the tax-paid tyres and tubes were liable to be set aside.

Ratio Decidendi: Where the assessee's unrebutted affidavit supports its defence and the revenue fails to prove that seized loose papers constitute actual sales, an adverse assessment and penalty cannot be sustained.

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