2007 (8) TMI 666 - HC - VAT and Sales Tax

Dismissal of Revisions Upheld for Lack of Manufacturing Account Compliance

Hira Lal Vinod Kumar Versus Commissioner of Trade Tax, UP., Lucknow

The judge dismissed all three revisions under section 11 of the U.P. Trade Tax Act, 1948, as the assessing authority's best judgment assessment of taxable ... Non maintenance of books of accounts - Held that:- Admittedly, the applicant has not maintained the manufacturing account in accordance with section 12(2) of the Act. Merely because in the previous years for non-maintenance of manufacturing account, books of account has been accepted the claim of the applicant for acceptance of the books of account cannot be accepted in the years under consideration. Revision dismissed. Issues:Assessment of taxable turnover based on best judgment assessment due to rejection of books of account for non-maintenance of manufacturing account under section 12(2) of the U.P. Trade Tax Act, 1948.Analysis:The judgment involves three revisions under section 11 of the U.P. Trade Tax Act, 1948, challenging the Tribunal's order related to the assessment years 1985-86, 1986-87, and 1987-88. The assessing authority had rejected the books of account of the applicant, a registered dealer engaged in the business of manufacturing and selling metal ingots, due to non-maintenance of a manufacturing account as required under section 12(2) of the Act. Consequently, the taxable turnover was estimated through best judgment assessment. The Deputy Commissioner (Appeals) later allowed the appeals filed by the applicant, accepting the disclosed turnover based on the details of raw materials and goods provided. However, the Commissioner of Trade Tax appealed to the Tribunal, which reinstated the assessing authority's order based on the technical defect of non-maintenance of the manufacturing account, citing the apex court's decision in a similar case.Upon hearing arguments from both parties, the judge noted that the applicant failed to maintain the manufacturing account as mandated by section 12(2) of the Act. The judge emphasized the importance of stock registers for verifying accounts in manufacturing businesses and referenced the apex court's ruling that non-maintenance of stock registers could lead to unreliable accounts, warranting best judgment assessment by the assessing authority. The judge disagreed with the applicant's claim for acceptance of the books of account based on previous years' practices, as each assessment year must be considered independently. Consequently, the judge found no merit in the revisions and dismissed all three.Therefore, the judgment highlights the significance of maintaining accurate records, especially in manufacturing businesses, to ensure reliable accounts and proper assessment of taxable turnover. The decision underscores the assessing authority's discretion to estimate turnover through best judgment assessment when account books are rejected due to technical defects like non-maintenance of required records, emphasizing the need for compliance with statutory provisions for fair tax assessments.