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Books of accounts merit being rejected where entries recorded in duplicate books of accounts are not reconciled with the regular books of accounts: HC

2019-TIOL-2015-HC-ALL-VAT

IN THE HIGH COURT OF ALLAHABAD

Sales/Trade Tax Revision No. – 1091 Of 2008

M/s MOTILAL AMRESH CHAND

Vs

COMMISSIONER COMMERCIAL TAX

Saumitra Dayal Singh, J

Dated: July 03, 2019

Appellant Rep by: Rakesh Ranjan Agarwal
Respondent Rep by: 
CSC

Sales tax/VAT – best judgment assessment – rejection of books

During the assessment year in question, the assessee was engaged in trading in food grains. On account of survey conducted at its business premises, the books of account of the assessee came to be rejected and best judgment assessment was made. Thus, against disclosure of total purchase of Rs.88,64,717.30/- and sale of Rs.77,48,452.10/- resulting in taxable purchases Rs.87,46,527/- and admitted total tax liability of Rs.3,35,958.16/-, the AO vide his assessment order fixed the total taxable purchase of assessee at Rs.1,80,21,069/-. Consequently, he enhanced the tax liability to Rs.4,14,826.38/-. On appeal, the FAA reduced the assessed tax liability to Rs.3,76,341/-. This finding of FAA came to be upheld by the Tribunal.

On revision, the HC held that,

Whether once entries recorded in the duplicate books of account stand not reconciled from the regular books of account, then it calls for rejection of books – YES: HC

++ insofar as the rejection of books of account is concerned, that issue of fact has been decided on the basis of material and evidence on record. Once it is undisputed that certain entries recorded in the duplicate books of account was not reconciled from the regular books of account, the finding of rejection of books of account cannot be assailed;

++ insofar as the estimation of the turnover is concerned, in view of the rejection of books of account, certain estimate had necessarily to be made. In the present case besides other fact, it is seen that the first appellate authority had given substantial relief to the assessee by reducing the enhancement from Rs.80,000/- to Rs.40,000/-. No microscopic further examination is required to be done to test the correctness of the estimation made. Insofar as the concealment has been detected and addition has been made on the basis of entries found recorded in the duplicate books of account, the exactness of the estimate may not be a matter that may interest this Court any further.

Assessee’s revision dismissed

JUDGEMENT

Per: Saumitra Dayal Singh:

1. Heard learned counsel for the applicant-assessee and learned Standing Counsel for the revenue.

2. The present revision has been filed by the assessee against the order of the Commercial Tax Tribunal, Bench-IV, Varanasi dated 08.05.2008 in Second Appeal No.889 of 2003 for A.Y. 1995-96.

3. During the assessment year in question, the assessee was engaged in trading in food grains. On account of survey conducted on 06.08.1996 at business premises, books of account of the assessee came to be rejected and best judgment assessment was made. Thus, against disclosure of total purchase of Rs.88,64,717.30/- and sale of Rs.77,48,452.10/- resulting in taxable purchases Rs.87,46,527/- and admitted total tax liability of Rs.3,35,958.16/-, the Assessing Authority vide his assessment order dated 06.07.2003 fixed the total taxable purchase of the assessee at Rs.1,80,21,069/-. Consequently, he enhanced the tax liability to Rs.4,14,826.38/-.

4. The matter was carried in appeal by the assessee. The first appellate authority vide his order dated 26.09.2003 partly allowed that appeal and reduced the assessed tax liability to Rs.3,76,341/-. This would have resulted in disputed tax liability of about Rs.40,000/-.

5. The matter was carried in appeal both by the assessee and the revenue, which appeals have been rejected by the Tribunal.

6. Learned counsel for the assessee submits that though it is a fact that survey was conducted on 06.08.1996 and certain material was seized during that survey, however, the assessing authority has erred in making additions on the basis of Ex-1, Ex-3 and Ex-6, inasmuch as, majority of the entries recorded on those exhibits were found reconciled with the assessee’s regular books of account. Therefore, in his submission no further addition should have been made on that basis. Also, it is his submission that no addition could have been made on the basis of Ex-2, Ex-4 and Ex-5 inasmuch as they did not relate to A.Y. 1995-96.

7. On the other hand learned Standing Counsel would submit, that in the present case, it is not disputed that some of the entries were found recorded in the duplicate books of account represented by Ex-1, Ex-3 and Ex-6 were not found reconciled with the regular books of account of the assessee. Two sets of account having been maintained by the assessee and the same having been found to be not completely reconciled, the entries found recorded outside the regular books of account formed sufficient and relevant basis for the rejection of those books. Insofar as, the addition on the basis of estimation is concerned, learned Standing Counsel would submit that against the admitted tax liability of Rs.3,35,958.16/-, the assessing authority had made an addition of about Rs.80,000/- to the tax liability which has been reduced to about Rs.40,000/-. Once the suppression was found in the books of account of the assessee, certain additions were necessary to be made. Substantial relief has already been granted by the first appellate authority therefore, no further interference is warranted in the present proceeding.

8. Having heard learned counsel for the parties and having perused the record, insofar as the rejection of books of account is concerned, that issue of fact has been decided on the basis of material and evidence on record. Once it is undisputed that certain entries recorded in the duplicate books of account was not reconciled from the regular books of account, the finding of rejection of books of account cannot be assailed.

9. Insofar as the estimation of the turnover is concerned, in view of the rejection of books of account, certain estimate had necessarily to be made. In the present case besides other fact, it is seen that the first appellate authority had given substantial relief to the assessee by reducing the enhancement from Rs.80,000/- to Rs.40,000/-. No microscopic further examination is required to be done to test the correctness of the estimation made. Insofar as the concealment has been detected and addition has been made on the basis of entries found recorded in the duplicate books of account, the exactness of the estimate may not be a matter that may interest this Court any further.

10. In view of the above, no substantial question of law arise. Accordingly, the present revision is dismissed.

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