Stock difference must be assessed from physical inventory and proper accounts, not a formula-based monetary method.

Stock variation under the TNVAT framework must be determined on a proper and scientific basis. The absence of a stock register does not, by itself, justify assessing stock difference through a trading account or other formula-based monetary method, especially where physical stock was inspected and accounts were available for verification. The assessing authority may call for a sworn statement and test the correctness of the accounts, but it should not resort to formula valuation for stock difference. The assessment order was quashed and the matter remitted for fresh determination of stock difference in physical terms and in accordance with law.

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Issues: Whether stock variation could be determined by adopting a formula method in the absence of a stock register, and whether the assessment order based on such method was liable to be quashed and remanded for fresh consideration.

Analysis: The assessment had been completed on a deemed assessment basis under Section 22(2) of the TNVAT Act, 2006, and the dispute arose from a stock difference worked out through the trading account / formula method. The absence of a stock register was noted, but that by itself did not justify computation of stock difference by a non-scientific monetary formula. The governing principle applied was that stock variation must be ascertained in a proper and scientific manner, and where inspection had already taken place and physical stock had been inventoried, the assessing authority could require the assessee to furnish a statement on oath and then verify the correctness of the accounts. Rule 6 of the TNVAT Rules required maintenance of accounts, but the authority was directed not to resort to formulae valuation for stock difference.

Conclusion: The impugned assessment order was quashed and the matter was remitted for fresh assessment in accordance with law, with a direction to determine stock difference in physical terms and not by formula method.

Final Conclusion: The assessment did not survive in its existing form, and the matter was sent back for a lawful re-determination of stock difference on the basis of physical stock and proper accounts.

Ratio Decidendi: Where stock difference can be ascertained from physical inventory and available accounts, the authority cannot determine tax liability by a formula-based monetary method merely because a stock register is not maintained.

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