Madras High Court
M/S.Jambu Associates vs Tamil Nadu Sales Tax Appellate ... on 26 October, 2022
W.P. No. 42526 of 2006
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 26.10.2022
CORAM :
THE HON'BLE MR. JUSTICE S.VAIDYANATHAN
AND
THE HON'BLE MR. JUSTICE C.SARAVANAN
W.P.No.42526 of 2006
and M.P.No.1 of 2006
M/s.Jambu Associates,
rep. by its Proprietor J.Rajendran,
50, Lakhminagar Main Road,
Tiruppur, Coimbatore District. .. Petitioner
Versus
1. Tamil Nadu Sales Tax Appellate Tribunal,
(Additional Bench),
Commercial Taxes Buildings,
Coimbatore-18.
2. The Deputy Commercial Tax Officer,
Lakshminagar Assessment Circle,
Tiruppur. .. Respondents
Prayer: Writ Petition filed under Article 226 of Constitution of India for
issuance of Writ of Certiorari to call for the records of the First
Respondent in its order in CTA No.198/2003 dated 28.03.2006 and
quash the same as illegal.
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W.P. No. 42526 of 2006
For Petitioner : Mr.S.Ramanathan
For Respondents : Mr.T.N.C.Kaushik (R1)
Additional Government Pleader
****
ORDER
S.VAIDYANATHAN,J
and
C.SARAVANAN, J
The Petitioner has filed this Writ Petition challenging the
Impugned Order dated 28.03.2006 passed by the 1st Respondent in
CTA. No.198/2003.
2. The Petitioner had suffered an assessment order in the hands of
the 2nd Respondent vide order dated 26.06.2001 for the Assessment
Year 1999-2000. Certain additions were made based on the slips and
books recovered from the petitioner. Aggrieved by the aforesaid order,
the Petitioner preferred Appeal by the Appellate Assistant Commissioner
Commercial Tax, Pollachi in Appeal No.156 of 2001. The said authority
by order dated 17.03.2003 partly allowed and partly dismissed the
petitioner's Appeal. Aggrieved by the same, the Petitioner preferred
Second Appeal before the 1st Respondent in C.T.A.No.198/03. The State
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W.P. No. 42526 of 2006
of Tamil Nadu, represented by the Deputy Commissioner (CT),
Coimbatore preferred Appeal in C.T.SA.No.293/03 which have
culminated in the Impugned Order dated 28.10.2006. Relevant portion of
the Impugned Order reads as under:
"8. We have considered the arguments of
both the sides and also verified the connected
records. It is seen from the records that the
original assessment on the appellant/respondent
was made under section 12 (1)(a) of the TNGST
Act. The place of business was inspected by the
officers of the department on 23.3.00. At the time
of inspection they had verified the stock and found
difference in the same valued at Rs.1,72,910/. It
was explained by the appellant/respondent before
the first appellate authority that the stock
difference had been arrived at adopting incorrect
details of opening stock and also purchase and
sales. The inspecting officers had also adopted
gross profit 20% instead of the correct gross profit
of 12.17%. The first appellate authority had got
the above details verified through the learned
Departmental Representative and had found that
the claim of the appellant/respondent was correct,
he had thus found that the stock difference was
arrived at adopting incorrect details and had
therefore set aside the assessment on the same.
The department seeks for restoration of assessment
without giving any specific reasons or argument to
disprove or discredit the findings recorded by the
first appellate authority. The appellant/respondent
had not countered the fact that there was incorrect
adoption of details of opening stock, purchases,
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W.P. No. 42526 of 2006
sales and also gross profit. When all these details
were found to be incorrect, the consequential
difference is also not correct and not sustainable.
We find no reason to interfere with the order of the
first appellate authority. With reference to the
entries in slip no.2, 5 and 6, the first appellate
authority had confirmed the assessment on the
turnover of Rs.2,23,711/- stating that the
appellant/dealer had not raised any argument. But
as rightly pointed out by the learned Authorised
Representative for the appellant/dealer, he had
raised objections before the first appellate
authority and the same had not been properly
considered. As regards the entries in slip no.2 and
6, the explanation of the appellant that he had
advanced an amount of Rs.1,95,000/- to his driver
for the purchase of second hand van and to
substantiate the claim, he had filed a xerox copy of
the Day Book page to show that there was sufficient
as a cash balance. But the explanation of the
appellant is not acceptable. The availability of the
cash balance as per accounts on a particular day
could not be a ground to treat the transaction of
sale recorded in the recovered records as an
advance made for purchase of van. The appellant
had conveniently omitted to furnish the details of
van such as Make, Model, Owner etc. and he also
had not offered proper explanation as to why the
van was found to be not worthwhile after
satisfactory verification of the vehicle and fixing its
value for purchase. The appellant had fixed the
value and also the date of purchase. What was
found worthwhile for an amount of Rs.1,95,000/- is
claimed to be worthless on the next day itself. We
find that the first appellate authority is correct in
sustaining the assessment on the turnover of
Rs.1,95,000/-
As regards the entries in slip no.5 and 6, it is
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W.P. No. 42526 of 2006
the claim of the appellant/dealer that he had raised
bill no.220 and 220-A on 21.03.00 and brought the
same to accounts. But it is to be pointed out that
the place of business was inspected on 23.3.00 and
no books of accounts other than the delivery notes
were produced before the inspecting officers. Even
the sale bill books were not produced before the
inspecting officers. At the time of processing, the
appellant/dealer had produced only bill no.220
dated 21.3.00 and he had not produced bill
no.220-A. In respect of slip no.6, though the
appellant had claimed before the processing officer
that he had raised bill, he had not produced it.
When the other bills are typed copies, this bill is in
manuscript. It is seen that the suffix 'A' is added to
bill no.220 only and in respect of the other sale
bills no such prefix is made and it is proved that
the appellant, to escape from the liability to tax,
had created bill no 220-A subsequently. Therefore
it is evident that the bill no.220-A had been raised
not in the regular course of business, but
subsequent to processing of the records and that
therefore the same was correctly treated as
suppressions by the Assessing Authority and also
the first appellate authority. In respect of bill
no.220, with reference to slip no.5, the assessment
on the turnover of Rs.11,181/- is not correct as the
bill was raised in the course of business and the
same cannot be treated as suppressions. The
assessment of this turnover set aside. The learned
Authorised Representative for the appellant/dealer
had not raised any other objections with reference
to other items of actual suppressions. The
assessment on the same is therefore confirmed.
As regards the equal addition considered
and reduced to 50% by the first appellate
authority, it is the claim of the appellant/dealer that
such addition is not warranted. But it is the claim
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W.P. No. 42526 of 2006
of the Department that, the suppression of sales
were found through the entries in the recovered
records and the same established that the books of
accounts had not been maintained correctly and
completely and that such incorrect maintenance of
accounts warrant further additions at equal the
actual suppressions. Though the recovered records
established incorrect maintenance of accounts and
also suppressions, the first appellant authority is
found to have sustained the assessment on a
turnover of Rs.3,82,173/- towards probable
suppressions. The relief granted by him is within
his discretionary powers. There is also no warrant
that the probable suppressions should only be at
equal the actual suppressions. We therefore do not
find any reason to interfere with the orders of the
first appellate authority.
The next item of diute is the general addition
of Rs.5,000/ made by the Assessing Authority for
the defects notied in the books of accounts. The
assessment on the same had been set aside by the
first appellate authority on the ground that the
assessment on the actual suppressions and also the
further estimations make such a further addition
unwarranted. The reasons adduced by the first
appellate authority for setting aside the addition of
Rs.5,000/- are found to be proper and the same is
upheld.
In view of the discussions above, we find that
the order of the first appellate authority is in order
except in respect of the assessment on the turnover
of Rs.11,181/- with reference to slip no.5 and
therefore uphold the same.
In the result, the Tribunal Appeal is PARTLY
ALLOWED and PARTLY DISMISSED and the State
Appeal stands DISMISSED."
3. The learned counsel for the Petitioner submitted that there is no
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W.P. No. 42526 of 2006
basis on which a amount of Rs.1,95,000/- could have been added in the
taxable turnover and that the amount was given to the driver for
purchasing a 2nd hand van for business purpose. It is further submitted
that on the date of inspection i.e., on 23.03.2000, the Petitioner had
sufficient bank balance and therefore it would be incorrect to affirm there
is sale suppression of rubber thread @ 12%. It is further submitted that
sales turnover of Polyster yarn, Textile spares and Rubber Thread are
assessed at 2%, 4% and 12% respectively. It is submitted that the
Assessing Officer ought not to have levied tax at 12% on the entire
turnover of Rs.1,95,000/- treating it as a sales of rubber thread at 12%.
As far as additions are concerned, it is submitted by the learned counsel
for the petitioner that the addition of 50% to taxable turnover in respect
of slip no.5 and 6 is concerned, he further submitted that the issue is now
squarely covered by the Judgment of this Court in the case of State of
Tamil Nadu Vs. Sri Vinayaga Agencies reported in (2010) 27 VST 358
(Mad) wherein it is held as follows:-
"In the assessment order, a mere addition
was made in the last column making an equal
addition without giving any reasoning at all. In
fact, the Assessing Authority is a quasi judicial
authority, who has to give reasons for his finding.
Neither any analysis nor any evaluation was made,
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but straight-away, this equal addition was made
without
giving any reason at all. Contrary, the assessee
had given ample documents, made objections, but
nothing was considered or no opportunity was
given to him to put forth his explanation in regard
to the equal addition at any point of time.
Even the Appellate Assistant Commissioner
has not given any finding in regard to the equal
addition and the relevant portion of the order is
extracted as under:
"In this case, the inspecting officials
though not derived variation based on
physical verification, they have obtained such
difference by means of trading account
method, wherein the particulars are verified
with reference to the correct figures taken out
from the accounts of the appellants. The
figures adopted in such workings were not at
all incorrect as argued by the appellant in this
case. Therefore, stock difference arrived in
this case could not be treated as incorrect one.
Therefore, assessment made on stock
difference noticed in the place of business and
its equal addition is sustained."
The order of the Appellate Assistant
Commissioner is also an order without applying
principles of natural justice, as no reason was
given for his findings. The authorities,who are all
quasi judicial authorities, should exercise their
function in the manner known to law. Having given
a clear finding both on facts and on law, he has to
give reasons to sustain such equal addition,
especially when the Assessing Officer had not at all
given any reason and simply had adopted equal
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W.P. No. 42526 of 2006
addition system without any basis.Aggrieved
against the order of the Appellate Assistant
Commissioner, the assessee filed an appeal before
the Tribunal. The Tribunal has gone into detail in
so far as this point of stock variation is concerned
and has come to a clear conclusion, which reads as
follows:
"11. Coming to the addition of equal
amount for probable omission, the argument
of the appellants that there is no subsequent
inspection during 1994-95 and there is no
continuous pattern of suppression or similar
pattern of suppression involved in arriving the
stock variation noticed at the time of
inspection is well founded because of the fact
that the stock variation was only arrived after
taking into consideration of the opening stock
as on 01.04.1994,purchases and sales upto the
date of inspection, which is the cumulative
effect of alleged suppression right from the
period from 01.04.1994 to till the time of
inspection. Moreover, the stock variation was
arrived only on the basis of money value of
the goods and not on the quantitative basis.
Under the above circumstances, we feel that
no further addition is required for the stock
variation arrived by the trading account
method. It is rightly held by the Hon'ble
Madras High Court in the case of T.
Singaravelu reported in 103 STC 543 that in
the absence of any continuous pattern of
suppression or similar pattern of suppression
or in the absence of any brought forward
entries, the further addition for the estimated
suppression for probable omission cannot be
made. Hence, following the principles held by
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W.P. No. 42526 of 2006
the Hon'ble Madras High Court in the case
referred supra, we are of the view that no
further addition is required in this case with
reference to the circumstances stand above.
Accordingly, we set aside and delete the
addition of equal amount of Rs. 1,86,081/-
and allow this portion of the appeal."
The Tribunal has, therefore, rightly applied
its mind, verified the contents, compared the details
and finally given a finding that the stock
verification was arrived at only on the basis of
money value of the goods and not on the
quantitative basis, which has not at all been taken
into consideration either by the Assessing Officer
or the first appellate authority in deciding or in
coming to the conclusion in so far as the stock
variation is concerned.
We see no reason to interfere with the
findings of the Tribunal and accordingly, the
questions of law are answered against the Revenue
and in favour of the assessee. The revision fails
and the same is accordingly dismissed. No costs."
4. Opposing the contention of the learned counsel for the
Petitioner, the learned Additional Government Pleader for the 2nd
Respondent submitted that the present Writ Petition is devoid of merits as
the Impugned Order of the Tribunal is well reasoned. He further
submitted that the Tribunal being the ultimate fact finding authority has
arrived at a right conclusion and the contentions raised by the learned
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W.P. No. 42526 of 2006
counsel for the Petitioner in this Writ Petition is with regard to factual
aspects which cannot be raised under Article 226 of Constitution of India.
5. We have considered the arguments advanced by the learned
counsel appearing on either side.
6. We are of the view that petitioner has not made out any case for
interference of the order of the Tribunal, upholding the order of the
Assessing officer, by reversing the order of the Appellate Commissioner,
in so far as addition of Rs.1,95,000/- and therefore to that extent we are
not inclined to interfere with the order of the learned Tribunal. However,
as far as addition of 50% of the Assessing Authority is contrary to the
law settled by this Court in the Judgment stated supra.
7. Under such circumstances, we are inclined to order deletion of
50% as ordered by the Assessing authority.
The Writ Petition is partly allowed. The Second Respondent is
directed to issue a fresh order calculating the tax liability and a
proportionate penalty within a period of three months from the date of
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receipt of a copy of this order. No costs. Consequently, connected
Miscellaneous Petition is closed.
[S.V.N., J.] [C.S.N., J.]
26.10.2022
Index : Yes / No
Internet : Yes/No
arr
To
1. Tamil Nadu Sales Tax Appellate Tribunal,
(Additional Bench),
Commercial Taxes Buildings,
Coimbatore-18.
2. The Deputy Commercial Tax Officer,
Lakshminagar Assessment Circle,
Tiruppur.
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S.VAIDYANATHAN, J.
and
C.SARAVANAN, J.
arr
W.P.No.42526 of 2006
Dated : 26.10.2022
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