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1996 (12) TMI 427

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....also five accounts slips were taken for verification. The petitioner compounded the offence of not maintaining true and correct accounts in respect of his business for a sum of Rs. 3,000/- under section 47 of the Act. Based on the alleged stock discrepancies and the compounding the assessing authority proposed to reject the books of accounts of the assessee and to estimate the turnover on the best judgement basis. A show cause notice was issued to the above effect. In that notice the assessing authority also proposed to estimate the turnover at three times of the value of average running stock, which came to Rs. 4,99,134.90 rounded to Rs. 4,99,1307-. The petitioner filed a reply to the pre-assessment notice explaining the various irregularities pointed out in the show cause notice. The assessing authority did not accept the explanations and completed the assessment as proposed determining the total and taxable turnover at Rs. 4,99,1307-. Aggrieved by the said assessment order the petitioner took up the matter in appeal before the first appellate authority namely: the Appellate Assistant Commissioner of Agricultural Income tax and Salestax, Cannanore, who by his ....

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....nning stock method. He further submitted that having regard to the unaccounted transaction found on inspection, the estimation of the turnover at three times running stock is not at all excessive. He accordingly justified the orders of the authorities and Tribunal. 5. We have considered the matter. Having regard to the fact that there were stock discrepancies and that the assessee has not accounted the transactions contained in the slips in the day book, etc. at the time of inspection and the further fact that the day book was written only upto 1-7-1986 while the inspection was conducted on 24-7-1986, we are of the view that the assessing authority was perfectly justified. in rejecting books of accounts of the assessee and that the appellate authority and the Tribunal were also justified in confirming the same. But we find some merit in the submission of the learned counsel for the revision petitioner that the addition made is arbitrary and excessive. 6. The principles regarding best judgement are very well settled. After rejecting the returns and the books accounts, it is open to the assessing authority to estimate the turnover on best judgement basis. Certainly it is the best j....

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....ide Varghese Vs. State of Kerala (1989) 75 S.T.C. 378 and T.R.C. Nos. 144, 145 and 146 of 1980] and held that in appropriate cases the estimate can go upto six times of the average running stock. [P.T. Joseph Vs. State of Kerala (T.R.C. Nos. 144,145 and 146 of 1980)]. But the determination of the number of times of the average running stock that should be adopted in a particular case will depend on various circumstances the place where his business is situate, capital employed by him in the business, popularity enjoyed by him, the variety of ornaments that he offers and various other factors. These circumstances have been highlighted by this court in Kunhikannan's case (mentioned supra) and also observed that the estimation necessarily depends upon the facts of each case. 7. It is seen from the assessment order that the assessee had compounded the offence of not maintaining true and correct accounts for a sum of Rs. 3,000/- and the further fact that the assessee has written accounts only upto 1-7-1986 while the inspection was conducted on 24-7-1986, which according to the assessing authority is a method adopted for evasion of payment of tax. According to the ass....

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.... on the basis of the inspection conducted on 24-7-86. The inspection on 24-7-86, revealed difference in stock in several items. The difference in stock noticed in gold chain was 89.600 grams (excess) and that, in finger rings was shortage of 23.500 grams and in ear rings and stud, it was 15.200 grams (shortage) and in necklaces 22.100 grams (excess). This itself cannot be said to be negligible. Further, the slips recovered at the time of inspection, slip No. 1 was in respect of an advance of Rs. 6,000/-from one C. Annamma for manufacture of gold ornaments. This has not been accounted and slip No. 22 also represented receipts of amount of Rs. 3,000/-plus Rs. 450/- plus Rs. 150/- from 3 various persons, and slip No. 4 shows a transaction of Rs. 3,802/- which was also not accounted. Slip No. 5 shows supply of certain items of gold ornaments (20 grams), and in advance of Rs. 890/-received. These also were not accounted for. The day book was written upto 1-7-86 at the time of inspection on 24-7-86. The difference in stock and other defects were admitted and the offence compounded departmentally on payment of the compounding fee of Rs.&nb....