2008 (11) TMI 728

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....he relevant assessment year is 2001-2002. (4) The Head Office, by way of branch transfers, despatches goods (medicines) to the assessee, which is a Branch Office. The Branch Office effects sales, both intra and inter-State sales. (5) The assessee had filed its annual returns for the assessment year 2001-2002 and, in that, had conceded the total and taxable turnover in a sum of Rs. 2,19,47,709.22. (6) The assessing authority, after verification of the books of accounts, has rejected the returns filed by the assessee for the following reasons: "1. Verification of the accounts revealed that goods are sold at a loss. No explanation has been offered for that. Cost of goods available for sale is Rs. 2,56,30,385.17 (Opening stock....

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....;Rs.2,94,86,232.16                       Rs.2,94,86.230.00" (7) Accordingly, had issued a pre-assessment notice, directing the petitioner to file his objections, if any, to the proposal made in the pre-assessment notice. (8) The assessee has filed its objections to the proposal made in the pre-assessment notice.. (9) The assessing authority, after considering the objections so filed by the assessee, has proceeded to quantify the tax liability, on the ground, that, the assessee, in the returns filed, has shown that the goods received by him is sold at loss. The assessing authority has also taken into consideration the cost ....

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....sed". (10) Keeping in view, that, a prudent businessman would not be effecting sales of stocks received by him at a price less than the price indicated by the Head Office, had made an addition of 10% to the cost of the goods by way of profit and has quantified the tax liability. (11) This order of the assessing authority was called in question before the first appellate authority, who, in turn, has modified the order by directing the assessing authority to add only 5% towards the gross profit to the cost of the goods and issue an appropriate demand notice. The conclusions reached by the authority for modification of the best judgment assessment is as under:- "With the finding that the turnover conceded by the appellant result....

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....ed the following questions of law for our consideration and decision. They are as under: (i) Whether the Tribunal is right in upholding the assessment which was completed by adding gross profit to the transfer value of stock received from head office/branches treating the transfer price as cost price? (ii) Whether the Tribunal is right in holding that the sales turnover is liable to be estimated when stocks are sold at a price below the stock transfer value show in F form declaration? (iii) Is the Tribunal erred in disregarding the explanation that the transfer price is fixed by the head office of the petitioner considering all the expenses discounts, replacements and profit? (iv) Is the Tribunal erred in....