Best judgment assessment and taxable turnover rules: suppressed sales may be estimated, but exempt liquor turnover must be excluded.

In a best judgment assessment, incriminating material indicating suppressed turnover may be extrapolated across the assessment period where no books of account or rebuttal evidence are produced, and a bare challenge to the method is insufficient to displace the estimate. A claim that restaurant sales were made by a third-party operator will not be accepted without reliable particulars where the business and licensing context show the food activity to be integral to the assessee's operation. For rate determination under the Andhra Pradesh Value Added Tax Act, liquor turnover taxable only at the first sale in the State cannot be included in the assessee's taxable turnover; once excluded, the correct slab must be applied on the remaining turnover.

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Issues: (i) whether turnover could be extrapolated from incriminating material in a best judgment assessment in the absence of books of account or contrary material; (ii) whether the turnover from the restaurant activity could be attributed to the petitioner despite the plea of a third-party operator; (iii) whether the liquor turnover formed part of the taxable turnover for determining the applicable rate under the Andhra Pradesh Value Added Tax Act, 2005.

Issue (i): whether turnover could be extrapolated from incriminating material in a best judgment assessment in the absence of books of account or contrary material.

Analysis: On discovery of incriminating material showing suppression of turnover, the assessing authority was entitled to extend that material to the assessment period as part of a best judgment exercise. The petitioner did not produce books of account or any material to disprove the estimated turnover, and a bare objection to the method of assessment was insufficient to dislodge the assessment.

Conclusion: The extrapolation-based best judgment assessment was upheld against the assessee.

Issue (ii): whether the turnover from the restaurant activity could be attributed to the petitioner despite the plea of a third-party operator.

Analysis: The plea of a third-party running the restaurant was not supported by any reliable particulars beyond a vague name. The licensing and business context also indicated that food service was integral to the bar operation. In these circumstances, the claim that the food sales were wholly conducted by another person was not accepted.

Conclusion: The restaurant turnover was attributable to the assessee.

Issue (iii): whether the liquor turnover formed part of the taxable turnover for determining the applicable rate under the Andhra Pradesh Value Added Tax Act, 2005.

Analysis: The statutory scheme distinguished between total turnover, taxable turnover, and exempted turnover. Liquor under Schedule VI was taxable only at the first sale in the State, and the petitioner's subsequent sales were not exigible to tax. Once the liquor turnover was excluded, the remaining food turnover was below the turnover threshold for the higher rate under Section 4(9)(c), and the assessment had to be aligned with the correct slab.

Conclusion: The liquor turnover was directed to be excluded and the assessment was required to be modified accordingly.

Final Conclusion: The assessment and rectification orders were interfered with only to the extent that liquor turnover had been wrongly included in the taxable base, and the matter was remitted for fresh assessment on the correct turnover foundation.

Ratio Decidendi: In a best judgment assessment, incriminating material may justify turnover extrapolation when the assessee produces no rebutting accounts or material, but turnover that is statutorily exempt or taxable only at an earlier stage cannot be included in the taxable turnover for rate determination.

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