TaxTMI 
TaxTMI 
2018 (1) TMI 1049
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder the Tamil Nadu Value Added Tax Act, 2006. 3. Vide assessment orders, the assessment officer rejected the gross profit claimed by the revision petitioner. While arriving at the deemed sales turn over on the civil works contract executed, for the respective assessment years, the assessing officer adopted a notional gross profit of 10% and arrived at the corresponding deemed sales turn over under Section 5 of the Tamil Nadu Value Added Tax Act, 2006. The assessing officer also assessed sale of assets and reversed certain ineligible ITC. The Assessing Officer also levied penalty under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. 4. Being aggrieved, the assessee / revision petitioner, filed appeals in A.P.Nos.101, 102, 4 and 5 of 2013 to the appellate authority viz., the Appellate Deputy Commissioner (CT)-III, Chennai. The Appellate Deputy Commissioner, sustained the reversal of ITC, but allowed the appeals preferred by the assessee on other aspects. 5. Being aggrieved, appellate Joint Commissioner (CT), preferred STA Nos.109 & 110 of 2015 and 200 & 201 of 2014, respectively, before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai. After c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tual finding to the effect that the petitioners did not maintain proper accounts as stipulated under rule 8(5) of the TNVAT Rules, 2007. The Tribunal did not call for and examine the accounts maintained by the petitioners, and in such circumstances, the tribunal ought not to have held that "the petitioner did not maintain the proper accounts, as stipulated in the relevant Rules; that the petitioner have not maintained correct and complete accounts disclosing their purchase turnovers, salaries, wages, contract receipts and all other expenses and receipts and not a single purchase or other omission has been pointed out by any of the assessment, inspecting or appellate authorities". According to the learned counsel for the petitioner, adoption of Gross Profit of 10% by the assessing officer and the Tribunal, was "merely on surmises and approximation". 11. Per contra, inviting the attention of this Court, to the assessment order, for the abovesaid years, Mr.V.Haribabu, learned Additional Government Pleader (Taxes) submitted that though the dealer, in the objections had stated that 10% Gross Profit as not warranted, perusal of the accounts by the assessing officer revealed that the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner, certificates issued by the Chartered Accountant ought to have been treated as proof of their trading account and gross profit earned. It is also his contention that books of accounts and annual reports were submitted by the Tax Case (Revision) petitioner, for the abovesaid assessment years. 16. Refuting the abovesaid submission and inviting the attention of this Court to the order of the tribunal, Mr.V.Haribabu, learned Additional Government Pleader (Taxes), submitted that the dealer has not maintained proper accounts, as stipulated under Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007. Dealer has not produced any accounts for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, to arrive at the taxable turn over under Section 5 of the Tamil Nadu Value Added Tax Act, 2006. Learned Additional Government Pleader (Taxes) submitted that on surmises, the dealer has chosen to adopt 5% Gross Profit to arrive at the deemed sales turn over. According to him, certificate of the Chartered Accountant alone is not sufficient. The A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... two points for consideration. "1. Whether the adoption of 10% notional Gross Profit on the purchases effected, while arriving deemed sale turnover by the Assessing Officer is correct or not? 2. Whether the order of the Appellate Deputy Commissioner (CT) is sustainable or not?" 23. The tribunal, discussed and answered the issue, in favour of the revenue, as hereunder. "The adoption of 10% notional Gross Profit: The one and only dispute is whether liability on the deemed sales turnover to be fixed by adopting 5% Gross Profit as being done by the respondent dealer or by adopting 10% Gross Profit as being levied by the learned Assessing Officer in the impugned order. The respondent dealer have opted to pay tax under section 5 of the TNVAT Act 2006, which is reproduced as below. "5. Levy of tax on transfer of goods involved in works contract: (1) Notwithstanding anything contained in this Act, but subject to the provisions of this Act, every dealer, shall pay, for each year, a tax on his taxable turnover, relating to his business of transfer of property in goods involved in the execution of works contract, either in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ars; the profit percentage norms accepted in the industry for works contracts of a similar kind; etc. While the assessing authority may adopt any other reasonable method, judicial pronouncements and authoritative texts would serve as a useful guide in such estimation. Reference in this context can be made to A.T.Brij Paul Singh v. State of Gujarat [1984] 4 SCC 59, P.M.Paul v. Union of India AIR 1989 SC 1034, Mohd. Salamatullah v. Government of Andhra Pradesh AIR 1977 SC 1481, Dwaraka Das v. State of Madhya Pradesh [1999] 3 SCC 500, Government of Andhra Pradesh v. E.C.Techno Industries [1989] 2 ALT 320, Superintending Engineer v. P.Radhakrishna Murthy [1996] 3 ALT 1137, G.V.Malla Reddy & Co., Hyderabad v. A.P.State Trading Corporation Ltd., Hyderabad [2010] 4 ALD 331 and Hudson on "Building and Engineering Contracts" (Tenth Edition, by I.N.Duncan Wallace), wherein the manner of estimation of profits for different works contracts have been dealt with and, in some of the cases, the percentage of profits estimated at 15 per cent has been accepted as being reasonable. We may not be understood to have held that in all cases 15 per cent should invariably be accepted as the norm. We have m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent required for successful execution of the projects it undertakes. The Company is accredited with ISO 9001:2008; ISO 14001:2004 and OHSAS 18001:2007 Certifications. Over the years ITD Cem has built may iconic projects; notable amongst these are the 2nd Container Terminal at Chennai, road projects for NHAI. The Company has build Maritime Structures in major ports in Chennai, Ennore and Tuticorin. Keeping in view of the nature of projects executed the Gross Profit of 5% is far below that the appreciable percentage." 24. From the material on record, it could be deduced that while doing so, the tribunal has also verified the audited Profit & Loss statement and Balance Sheet of the assessee / revision petitioner, for the relevant years. 25. Ultimately, the tribunal held as follows: " The Appellate Deputy Commissioner (CT) has erred in relying on the above all India Balance Sheet, and concluded the Gross Profit is less than 5%, whereas actual gross profit should be calculated on the transfer of property in goods in the same form or some other form relating to the transactions in the state of Tamil Nadu only. Moreover the above audited balance sheet relates to the year en....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is fairly in order. The Assessing Officer thus rightly levied VAT liability by adding 10% gross profit on the above purchase turnover reported under 4% and 12.5% commodities respectively. Thus the following difference of deemed sale turnover resulted due to difference of Gross Profit between 10% & 5% (i) for the year 2006-2007 (Jan 2007 to Mar 2007) is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.11,97,420.00 4% 47,897.00 Rs.2,04,664.00 12.5% 25,583.00 Rs.14,02,084.00 73,480.00 (ii) for the year 2007-08 is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.2,90,29,320.00 4% 11,61,173.00 Rs.49,73,491.00 12.5% 6,21,686.00 Rs.3,40,02,811.00 17,82,859.00 (iii) for the year 2008-09 is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.5,41,85,444.00 4% 21,67,418.00 Rs.1,05,73,253.00 12.5% 13,21,657.00 Rs.6,47,58,697.00 34,89,075.00 (iv) for the year 2009-10 is in o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....therefore, the certificates issued by the Auditor, ought to have been given weightage, for the calculation of gross profit, which according to him, was actually earned by the assessee, and further reiterated the grounds of challenge for reversal of the orders of the tribunal, this Court is not inclined to accept the said contentions, for the reason that the tribunal, after considering the audited Profit & Loss statement, balance sheet for the relevant years, revenue receipts and such other materials, and despite the fact that in a series of judicial pronouncements extracted supra, wherein 15% of the gross profit had been adopted, taking note of the fact that the dealer had not maintained proper accounts, as stipulated under Rule 8(5) of the TNVAT Rules, 2007 and failed to produce the related records, to arrive at a taxable turn, over under Section 5 of the TNVAT Act, 2006, and though, gross profit claimed to have been earned for the relevant years was between 2.89% to 3.56%, held that the approximation of the dealer at, 5% profit was merely on surmises, not supported by any proper accounts, for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s filed. The purchase difference is treated as the purchase omission and the deemed sale value is arrived as follows: Purchase turnover as per balance sheet : Rs.1,18,55,835.00 Purchase turnover as per monthly return : Rs.1,17,30,884.00 Difference : Rs. 1,24,951.00 Add G.P. at 10% : Rs. 12,495.00" 31. Perusal of the same shows that the department has adopted the conventional method of adopting 10% gross profit, and accordingly has worked out the liability. 32. Though learned counsel for the revision petitioner submitted that in the absence of furnishing any material in support of the contention that adoption of the conventional method of arriving at 10% gross profit, there is violation of the principles of natural justice, and in that context, relied on a decision of the Kerala High Court in Income Tax Referred Case No.67 of 1966 dated 06.09.1967 in the matter of Joseph Thomas & Bros Vs. Commssioner of Income Tax, Kerala [reported in [1968] 68 ITR 796 (Ker)], this Court is not inclined to accept the said contentions, for the reason that in the reported case, the question referred was whether, on the facts of the said case, there was, non comp....