2018 (7) TMI 1977 - HC - VAT and Sales Tax

Bank's Failure to Record Gold Imports Leads to Upheld Assessment & Criticism for Tribunal

The High Court upheld the assessment in a case involving a bank's failure to record imported gold in its accounts, resulting in a gross profit addition ... Whether the assessee, M.G. Road Branch of the Indian Bank, was obliged to record, the gold imported from abroad on a bill of lading in its name, in its accounts? - HELD THAT:- The clear admission of the Bank before the Assessing Officer indicates a suppression having been carried out by the Bank. The accounts of the Branch did not record the import. We are in fact surprised that such an exercise was carried out by a Nationalised Bank. In any event, we do not think that the Tribunal was correct in having deleted the addition for reason of absence of reasons in the Assessing Authority's order; which we find to be amply available. The Assessing Authority has been indulgent in so far as not making any addition for probable omissions and suppression. In the context of our finding, we do not think that there is any warrant for a remand to the First Appellate Authority. We find the order of the First Appellate Authority though non-speaking quite appropriate on the facts and circumstances as explained herein above. The Tribunal had acted perversely in so far as deleting the addition when a clear suppression is found on the admission of the assessee itself. The assessee has failed to comply with the provisions of the KVAT Act and failed to account its import of gold, which admittedly was subsequently sold - Revision allowed. Issues:- Obligation to record imported gold in accounts- Validity of addition for purchase suppression- Justification for not disclosing specific import in books of accountsAnalysis:Issue 1: Obligation to record imported gold in accountsThe case revolved around whether the M.G. Road Branch of the Indian Bank was required to record imported gold in its accounts. The gold worth &8377; 2,09,08,641/- was imported but not accounted for. The assessing officer added a gross profit of 25% due to unsatisfactory explanation. The Tribunal found no valid reason for the addition and directed its deletion. However, the High Court observed that the Tribunal should have remanded the matter to the assessing officer if no valid reasons were found in the assessment order. The Court noted the explicit facts and upheld the assessment, finding that the bank had indeed suppressed the import in its accounts.Issue 2: Validity of addition for purchase suppressionThe Tribunal was questioned for deleting the addition made for purchase suppression. The bank's explanation that the import was controlled centrally by the Head Office and transferred to other branches was not accepted. The Court emphasized that if an import is made in the branch's name but centrally controlled, it must be accounted for in the branch's books. The absence of supporting documents for the transfer of goods from Kerala to other locations raised doubts. The Court found the bank's admission of suppression and criticized the Tribunal for deleting the addition based on insufficient reasons in the assessing authority's order.Issue 3: Justification for not disclosing specific import in books of accountsThe bank's argument that being a Nationalized Bank, it does not engage in suppressions was dismissed by the Court. The Court highlighted the bank's failure to account for the import of gold, which was subsequently sold without proper documentation supporting the interstate movement of goods. The Court concluded that the Tribunal had acted perversely in deleting the addition, as the bank failed to comply with the provisions of the KVAT Act. Consequently, the Court allowed the revision, setting aside the Tribunal's order and restoring the assessment regarding the suppression.