Suppression of inter-State purchases can justify rejection of books and best judgment turnover estimation

Proof of suppression in inter-State purchases, coupled with incomplete accounts, permits rejection of the books and a best judgment turnover assessment. The assessing authority is not confined to adding only the exact value of the suppressed purchases actually detected, because border check-posts are not the only source for tracing goods movement and incomplete records undermine the credibility of the returns. Reliable materials may be used to estimate turnover under section 17(3) of the Kerala General Sales Tax Act, 1963. The earlier view limiting additions to the quantified suppression was rejected as unrealistic and incorrect.

---

---

Issues: Whether, on proof of suppression of inter-State purchases and consequent incompleteness of accounts, the assessing authority is confined to adding only the value of the actual suppression detected, or may reject the books of account and make a best judgment estimation of turnover.

Analysis: The existence of border check-posts does not make them the exclusive or complete source for verifying all inter-State purchases, since goods may enter the State through rail, coastal shipping, and unmanned routes. The dealer remains bound to maintain full and separate accounts of all transactions, and returns are acceptable only when the accounts are correct and complete. Once suppression is found, the accounts lose credibility and the assessing authority is entitled to proceed under section 17(3) on a best judgment basis using reliable materials, without being restricted to the exact quantum of suppression actually detected. The earlier view limiting additions only to the value of proved suppression was rejected as unrealistic and incorrect.

Conclusion: The assessing authority is not confined to the value of the detected suppression and may reject incomplete accounts and estimate turnover under section 17(3) of the Kerala General Sales Tax Act, 1963. The contrary view was overruled.

Ratio Decidendi: Proof of material suppression rendering the accounts incomplete authorises rejection of the books and a best judgment assessment of turnover, and the addition is not confined to the exact amount of suppression actually detected.

---