2024 (9) TMI 1765 - HC - VAT / Sales Tax

Assessee cannot retract sworn statement admitting stock discrepancies by introducing stock transfer theory later

The HC upheld the assessment order based on best judgment where assessee failed to maintain day-to-day stock accounts and closing stock inventory. During ... Determination of total taxable turnover on the basis of judgement assessment - suppression of turnover - stock variation - non-maintenance of day to day stock account or closing stock inventory for the goods dealt - levy of penalty u/s 12(3)(b) of the Tamil Nadu General Sales Tax Act,1959 - HELD THAT:- Admittedly the petitioner's place of business was inspected by the Authorities on 22.10.2002 and 24.12.2002 and it was noticed that the Assessee had not maintained the day to day stock accounts or the closing stock inventory for the goods dealt by them and the sales bills have not been maintained in series. There was also a stock variation found in the opening stock and the materials available in the place of business with the corresponding sales to a tune of Rs.5,28,252/-. The Assessee did not offer any explanation for the same but rather on his own had voluntarily given a sworn statement admitting the above position. The Assessing Officer had rightly proceeded to pass the Assessment Order to the best of his judgement. When the records submitted before the Authorities were found to be with interpolation and admittedly this theory of stock transfer was only introduced at the later stage by the Assessee who did not have any explanation available at the time of inspection and as such had voluntarily given a sworn statement admitting that there is difference in stock to the value of Rs.5,28,252/- and he has no explanation to offer, the Assessee is only making an attempt to retract from the sworn statement furnished earlier which cannot be allowed to be done and the statement must be given effect to. In the instant case, as the Assessee did not have any plausible explanation to offer after inspection for the variation in stock, had admitted the discrepancies in the stock available and had voluntarily given sworn statement that there is no explanation available with them. Therefore the voluntary sworn statement offered by the Assessee has to be given effect to and the Assessee cannot be allowed to approbate and reprobate at the later stage. In view of the settled position, the view expressed by the Appellate Authority that the materials submitted by the Assessee to substantiate their claim has to be considered rather then relying on the statement given by them during the inspection cannot be sustained and the Tribunal by taking note of these aspects has rightly arrived at a decision and set aside the order of the Appellate Authority by restoring the Assessment Order, which in our considered opinion needs no interference and thus sustained Petition dismissed. The core legal questions considered by the Court include: whether the petitioner, having voluntarily given a sworn statement admitting stock discrepancies during inspection, can later retract that statement to claim a stock transfer from a sister concern; the validity and effect of such a sworn statement under the Tamil Nadu General Sales Tax Act, 1959; the proper approach of the Assessing Officer and Appellate Authorities in evaluating evidence including documentary proof versus voluntary admissions; and the applicability of the principle of approbate and reprobate in the context of tax assessments and appeals.Regarding the first issue of the voluntariness and binding nature of the sworn statement admitting stock discrepancies, the relevant legal framework is the Tamil Nadu General Sales Tax Act, 1959, particularly provisions related to assessment and penalty under Section 12(3)(b). The Court relied heavily on precedent from this jurisdiction, notably the decision in Yousuf Radio Vs. Board of Revenue, which establishes that an assessee cannot approbate and reprobate-that is, cannot make a voluntary sworn statement and subsequently retract it to escape tax liability. The Court emphasized that unless there is suspicion or coercion at the time the statement was made, such statements must be given full effect.The Court analyzed the facts that the petitioner was inspected twice in 2002, during which no day-to-day stock accounts or serially raised sales bills were maintained. The petitioner admitted stock variation of Rs.5,28,252/- in a voluntary sworn statement and offered no explanation at that time. Subsequently, the petitioner claimed a stock transfer of Rs.5,80,000/- from a sister concern, Tvl Trisul Dyes and Chemicals, which had a separate registration that was cancelled prior to the assessment year. The petitioner submitted documents including the cancellation certificate and assessment orders of the sister concern to substantiate this claim.The Assessing Officer rejected the claim of stock transfer, relying on the petitioner's earlier sworn statement and the absence of any explanation during inspection. The Appellate Assistant Commissioner, however, accepted the petitioner's claim after examining the documentary evidence and modified the assessment order to grant relief by reducing the suppression amount significantly. The Tribunal reversed this, restoring the original assessment order on the ground that the petitioner cannot retract the voluntary sworn statement to avoid tax liability.In applying the law to the facts, the Court noted that the petitioner had no plausible explanation for the stock variation at the time of inspection and had voluntarily admitted the discrepancy. The subsequent claim of stock transfer was introduced only as an afterthought. The Court found that the documents submitted to support the stock transfer were interpolated, as the computerized purchase list did not originally contain the stock transfer entry, which was later added in ink. This manipulation undermined the credibility of the petitioner's claim.The Court carefully considered the competing arguments. The petitioner's counsel argued that the Assessing Officer should have considered the documentary evidence of the sister concern's assessment and registration cancellation, and that the Appellate Authority rightly granted relief based on these records. Conversely, the Government Advocate contended that the sworn statement was voluntary and binding, and the petitioner's after-the-fact claim was an attempt to evade tax. The Court sided with the latter, emphasizing the principle that voluntary statements made under oath cannot be retracted without compelling reasons, especially in tax matters.Ultimately, the Court concluded that the Tribunal correctly restored the Assessment Order, rejecting the petitioner's attempt to approbate and reprobate. The Appellate Authority's order allowing relief based on the documents was set aside as unsustainable in law and fact.Significant holdings include the reaffirmation of the principle that an assessee who voluntarily makes a sworn statement admitting tax discrepancies cannot later retract that statement to avoid liability. The Court quoted extensively from the Yousuf Radio decision, underscoring that 'once a voluntary overt act results in a sworn statement, it should be given effect to and an opportunity ought not to be given to the assessee to retract therefrom unless there is some suspicion, proved and circumstantial, available at the time when such a statement was made.'The Court further held that reliance solely on documentary evidence submitted after inspection cannot override a voluntary sworn statement made at the time of inspection, especially if the documents are found to be interpolated or manipulated. The principle that an assessee cannot 'escape at every possible inconvenient stage from the force of the taxing provisions because he could make suitable statements at opportune moments' was emphasized.In conclusion, the Court dismissed the writ petition, sustaining the Tribunal's order restoring the original assessment and penalty. The core principles established include the binding nature of voluntary sworn statements in tax assessments, the inadmissibility of afterthought claims contradicting such statements without credible proof, and the reaffirmation of the approbate and reprobate doctrine in the context of sales tax law.