2016 (11) TMI 414 - HC - VAT and Sales Tax

Judicial review of turnover assessment and evaded sales impacts tax implications

M/s U.P. Furnitures Versus The Commissioner Commercial Tax

The Tribunal's decision to set aside the Appellate Authority's finding was upheld, with the court supporting the assessment of turnover from job work but ... Best judgement assessment - Job-work - turnover pertaining to job-work and repairing activity - Held that: - The findings of manufacture of furniture and sales thereof is supported by concurrent findings of fact recorded by the authorities based on material on record. That apart the Assessee, in his reply to the show cause notice, has himself admitted the nature of his business activity to be manufacture, repair and job work. However, he could not prove job work. Thus the findings of the Tribunal that the Assessee is engaged in the manufacture and sales of furniture, does not require any interference. Repair activity - the Assesee has clearly stated and produced sufficient material before the Assessing Authority, the First Appellate Authority and the Tribunal with regard to receipt of amount on account of repairs from two agencies, namely, UCO Bank and the I.T.A.T. which comes to ₹ 9,900. The Assessing Authority has not made any inquiry from the aforesaid UCO Bank and I.T.A.T. with regard to the genuineness of repairing disclosed by the Assessee. Thus the receipt of repairing charges from the aforesaid two persons can not be doubted and the addition in the turnover on the basis of receipt of repairing from these two persons is wholly unjustified. Rest of the amount of receipts from repairs could not be proved by the Assessee. Since the profit shown from repairing has been proved by the Assessee to the extent of ₹ 9,900/- hence proportionate addition in sales turnover deserves to be reduced. Consequently, the sales turnover, applying the gross profit rate of 10% as adopted by the Tribunal, is reduced by ₹ 1 lac and the evaded sales turnover is fixed at ₹ 24 lacs - the Revisions are partly allowed to the extent indicated above. The addition in sales turnover of furniture is reduced by Rs. one lac and the unaccounted purchases subjected to tax is deleted. Issues Involved:1. Tribunal's setting aside of the appellate authority's finding without reasons2. Assessment of evaded extra purchases and sales by the Tribunal3. Restoration of evaded sales and purchases by the Tribunal without considering previous assessment ordersIssue 1: Tribunal's Setting Aside of Appellate Authority's FindingThe case involved the Assessee engaged in trading, job work, and furniture repair. The Assessing Officer issued a show cause notice regarding discrepancies in accounts. The Assessee admitted profit from job work and repair but failed to provide adequate proof. The Assessing Authority made a best judgment assessment, determining evaded turnovers. The First Appellate Authority partially allowed the appeal, reducing the demand. The Assessee and the Commissioner filed Second Appeals, leading to the Tribunal's decision to allow the respondent's appeal and dismiss the Assessee's appeal. The Assessee argued that the determination of unaccounted purchases and sales lacked a basis. The court upheld the findings of manufacture and sales but found the addition in turnover based on repair charges unjustified due to lack of inquiry into receipts from UCO Bank and I.T.A.T. The Tribunal's determination of turnover from job work was considered reasonable, given the Assessee's failure to provide relevant documents.Issue 2: Assessment of Evaded Extra Purchases and SalesThe Tribunal assessed evaded extra purchases and sales, leading to a demand against the Assessee. The Assessee contended that the determination lacked a proper basis. The court found merit in the Assessee's argument, noting the lack of evidence supporting unaccounted purchases. The Assessing Authority's findings on material usage were accepted, and the Tribunal's decision was deemed unsupported by material, resulting in the set aside of the unaccounted purchases determination. The court reduced the sales turnover based on proven repair charges but upheld the Tribunal's gross profit rate for determining evaded sales turnover.Issue 3: Restoration of Evaded Sales and PurchasesThe Tribunal restored evaded sales and purchases without considering previous assessment orders. The Assessee challenged this restoration, arguing that the determination lacked a proper basis. The court agreed with the Assessee, setting aside the unaccounted purchases determination due to insufficient evidence. The court reduced the sales turnover and deleted the tax on unaccounted purchases. The revisions were partly allowed, with adjustments made to the sales turnover and unaccounted purchases based on the court's findings.This detailed analysis of the judgment highlights the key issues addressed by the court regarding the Tribunal's decisions on evaded turnovers, unaccounted purchases, and the Assessee's business activities, providing a comprehensive overview of the legal proceedings and outcomes.