Turnover estimation in mining business may include lease expenditure and reasonable profit where accounts are unreliable.

In estimating turnover for a sand-mining business under a fixed-term lease, the authority may treat royalty and other lease-acquisition expenditure, together with a reasonable profit margin, as a legitimate basis for computation. The text states that declared turnover below the expenditure incurred to secure the mining right is ordinarily unacceptable unless supported by cogent and exceptional reasons. It also notes that where cash memos appear bogus and the books of account are not properly maintained, the declared turnover may be rejected and recomputation made in accordance with law. The Tribunal's acceptance of the disclosed turnover without proper reconsideration was therefore found unjustified, and re-examination of turnover was required.

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Issues: Whether, in estimating the turnover of sand-mining dealers, the royalty and other expenditure incurred for obtaining the mining lease could be treated as part of the taxable turnover and whether the turnover disclosed by the dealers could be accepted despite the assessment findings rejecting the account books.

Analysis: The business under a mining lease is a fixed-term and planned commercial activity in which the dealer knows the nature of the goods, the area of mining, and the expenses required to obtain the lease. In such a case, turnover below the expenditure incurred for acquiring the right to mine, without cogent and exceptional reasons, is not ordinarily acceptable. The explanation based on low-grade sand, water logging, and uneven mining area was found to be routine and unconvincing. The assessment findings also included rejection of the books of account on the ground that the cash memos appeared bogus and the accounts were not properly maintained. Where turnover has to be estimated, the expenditure incurred and a reasonable profit margin can legitimately be taken into account.

Conclusion: The Tribunal was not justified in accepting the declared turnover without proper reconsideration. The matter had to be re-examined and the turnover recomputed in accordance with law, including the expenditure incurred for the mining lease and a reasonable profit element.

Ratio Decidendi: In estimating turnover for a planned mining business, the authority may legitimately treat the expenditure incurred to obtain the lease, together with a reasonable profit, as the proper basis for computation, and may reject declared turnover where the account books are found unreliable.

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