Declared turnover can be rejected when unreal, and taxable turnover may be estimated using reasonable gross profit data.

Declared sales turnover may be rejected where the figure is shown to be unreal and below the market-based value already accepted for tax collection. In such circumstances, turnover can be estimated on a reasonable gross profit basis, particularly where comparable traders disclose substantially higher margins and the assessee's transport documents do not reflect the real purchase cost. Here, the Kerala High Court upheld rejection of the returned turnover and sustained the 12% gross profit addition for estimating taxable turnover, relying on the absence of opening or closing stock, the check-post value already adopted, and trade data from similar dealers.

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Issues: Whether the rejection of the assessee's returned sales turnover and the addition of 12% gross profit for estimation of taxable turnover were justified.

Analysis: The assessee had no opening or closing stock, had paid advance tax at the check post on the value fixed by the Commissioner, and had claimed refund on the footing that the declared sale value was lower than the market value. The authorities found that the purchase value shown in the transport documents was not the real purchase cost but a self-declared figure, and that similar traders disclosed gross profit at substantially higher rates. The turnover declared by the assessee was below the value already adopted for check-post tax payment, and the estimation was supported by the market value of timber and the evidence gathered from comparable dealers.

Conclusion: The rejection of the returned turnover and the 12% gross profit addition were upheld.

Ratio Decidendi: Where the declared turnover is shown to be unreal and lower than the market-based value already accepted for tax collection, estimation of turnover on a reasonable gross profit basis supported by comparable trade data is sustainable.

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