2019 (7) TMI 647 - HC - VAT and Sales Tax

Kerala High Court: Specific Suppression Proof Needed in Tax Evasion Cases

The Kerala High Court overturned the assessment under Section 25(1) of the Kerala Value Added Tax Act, highlighting the need to establish specific ... Addition to sales turnover - difference in the value of stock transfer noted in the Form-F declarations, when compared with the books of accounts - failure to account the entire value of goods received on stock transfer, when compared with the value reflected in 'Form- F' declarations - HELD THAT:- There occurred a failure on the part of the revision petitioner /assessee to reconcile the difference detected in accounted value of the goods received under stock transfer, by producing any proper documents in proof of the same, either before the Assessing Authority or before the first Appellate Authority. However, we take note of the fact that, the authorities have not considered the question whether there occurred any suppression in the sale turnover with respect to the quantity of goods received under stock transfer, with respect to which the difference was detected. The evasion or escapement of tax can be attributed only if there is any specific allegation that there occurred a suppression in disclosing the sales turnover, because the taxable event at the hands of the assessee is the point of sale. Matter remanded for fresh consideration. Issues:1. Challenge to assessment under Section 25(1) of the Kerala Value Added Tax Act.2. Failure to reconcile the difference in the value of goods received on stock transfer.3. Lack of production of proper documents and reconciliation statements.4. Allegations of suppression of turnover and evasion of tax.5. Consideration of technical irregularities and penalization under Section 67 of the Act.6. Opportunity for the assessee to produce proof and reconcile the detected differences.Analysis:The judgment by the Kerala High Court involved a challenge to an assessment under Section 25(1) of the Kerala Value Added Tax Act. The Revision Petitioner, the assessee, contested a common order issued by the Kerala Value Added Tax Appellate Tribunal, Ernakulam. The assessment was based on the failure to account for the entire value of goods received on stock transfer, among other counts. The Assessing Authority presumed the assessee admitted the irregularities by not raising objections, leading to finalization of the assessment. The first Appellate Authority upheld the additions made due to the lack of proper reconciliation statements and supporting documents from the assessee.Before the Tribunal, the assessee argued that explanations regarding the differences in goods' values were not considered by the authorities. However, the Tribunal found the assessee failed to produce necessary records or objections during the assessment process. The Tribunal noted a significant difference in stock transfer values, indicating a turnover suppression of Rs. 2,45,99,012, justifying the addition made based on gross profit. The Tribunal upheld the assessment order and the first Appellate Authority's decision but deleted a further addition alleging omission and suppression.The Court acknowledged the failure of the assessee to reconcile the detected differences in goods' values but highlighted the need to determine if there was suppression in the sales turnover. The Court emphasized that evasion of tax can only be attributed if there is specific suppression in the declared turnover. The authorities had not considered whether the detected differences were already reflected in the turnover. The Court allowed the revision, quashing the assessment for the year 2008-09 to the extent of the additions made based on the noted defect. The matter was remanded for fresh assessment to reconcile the differences and prove no suppression in the turnover, providing the assessee an opportunity to present sufficient proof before the Assessing Authority.