Accepted books of account barred turnover enhancement based only on lower sale price and suspicion, with proportionate input tax credit applying.

Turnover could not be enhanced merely because coal was sold below purchase price when the books of account were accepted and no adverse material showed suppression or discrepancy. Enhancement based only on the March 2014 sale rate and applied to the whole year was without foundation, because accounts cannot be rejected on suspicion and the revenue cannot dictate the dealer's business method. Section 13(1)(f) of the U.P. VAT Act, 2008 was also recognised as governing proportionate input tax credit where the sale price is below purchase value. The turnover enhancement was unsustainable and the dealer succeeded.

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Issues: Whether the turnover and tax liability could be enhanced merely because the sale rate of coal was lower than the purchase rate, in the absence of any adverse material, and whether section 13(1)(f) of the U.P. VAT Act, 2008 required proportionate input tax credit instead of such enhancement.

Analysis: The books of account were accepted and no discrepancy was found therein. The turnover was nevertheless enhanced only on the basis of the sale rate shown for the month of March, 2014 and by treating that rate as the basis for the whole year. Such enhancement was held to be without foundation, as the revenue cannot dictate the manner in which a dealer conducts its business and accounts cannot be rejected merely on suspicion or surmise when no adverse material exists. The Court also accepted the applicability of section 13(1)(f) of the U.P. VAT Act, 2008 to the extent it governed credit where sale price is below purchase value.

Conclusion: The enhancement of turnover was unsustainable and the revisionist succeeded.

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