IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER THURSDAY, THE 28TH AUGUST 2008 / 6TH BHADRA 1930 ST.Rev..No. 284 of 2004 -------------------------------- T.A.317/2001 of COMMR.KERALA AGR.IT & STAT,TVM. .................... REVISION PETITIONER/RESPONDENT/REVENUE: ----------------------------------------------------------------------- STATE OF KERALA, REP. BY DEPUTY COMMISSIONER (LAW) COMMERCIAL TAXES, ERNAKULAM. BY GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ RESPONDENTS: APPELLANT/ASSESSEE: ---------------------------------------------------------- SRI. S. KAMARADDIN, KOLLAM STORES, PUTHENCHANTHAI, VARKALA, THIRUVANANTHAPURAM. BY ADV. SRI.S.SOMAN FOR R1 THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 28/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - S.T.Rev.No.284 OF 2004 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 28th day of August 2008 ORDER H.L.DATTU, C.J. Revenue being aggrieved by a portion of the order passed by the Sales Tax Appellate Tribunal, Thiruvananthapuram, in T.A.No.317/2001 dated 12.12.2001, is before us in this revision petition. 2. Revenue has raised only one question of law for our consideration and consequential decision. The question is as under: “Whether on the facts and in the circumstances of the case, Tribunal is justified in limiting the estimation to actual quantum of suppression as revealed from the check post declaration” 3. The assessment year in question is 1997-1998. The assessee had filed its annual returns. After receipt of information with regard to the check post declaration, the assessing authority, after verification of the books of accounts, has rejected the same and consequently the returns also. 4. After such rejection of the books of accounts and the returns filed, the assessing authority had issued pre-assessment notice to the petitioner proposing to pass the best judgment assessment. After S.T.Rev.No.284 OF 2004 :: 2 :: considering the reply filed, the assessing authority had quantified the tax liability and has made an addition of 10 times towards the probable suppression of purchases and sales of the commodity dealt by the assessee. 5. The order of assessment so passed had been called in question by the assessee by filing the first appeal in S.T.A.No.738/2000. The appellate authority had rejected the appeal and, thereby, has confirmed the additions made by the assessing authority by its order dated 24-2-2001. 6. The assessee had filed second appeal before the Tribunal in T.A.317/2001. Tribunal has granted certain reliefs to the assessee while disposing of the appeal by its order dated 12-12-2001. In that, at para 4, the Tribunal has stated as under: The next point relates to the reasonableness of the estimate. The Assessing Authority made an addition at 10 times of the suppression detected after adding 8% gross profit to the purchase of Rs.69,600/-. We find that the addition is highly excessive and has no nexus to the alleged defects. This is not a case where suppression is detected through inspection or stock variation which may S.T.Rev.No.284 OF 2004 :: 3 :: give the Assessing Authority to estimate the suppression for the whole year. The suppression is taken in this case is from out of the departments own records. So an addition of 10 times of the transaction revealed through check post declaration has no justification. The assessing authority is therefore directed to modify the assessment by adding back the actual quantum of suppression revealed from check post declaration.” 7. Tribunal, while modifying the orders passed by the First Appellate Authority and the assessing authority, has directed the assessing authority to make addition of the actual quantum of suppression revealed in the check post declaration. 8. A Full Bench of this court had occasion to consider the view taken by two Division Benches of this Court in case of M/S Surya Agencies V. State of Kerala [(2004) 12 KTR 215] and C.O.Varghese V. State of Kerala [(2004) 12 KTR 528, wherein this court has observed that in these type of matters, the additions that can be made towards the probable suppression of intra and inter-State sales should be the actual suppression detected in the check post declaration. The view expressed by the Division Bench of this court is not accepted by the Full Bench of S.T.Rev.No.284 OF 2004 :: 4 :: this court while furnishing its opinion in S.T.Rev.Nos.202/06, 125 & 219/04 & T.R.C.No.577 of 2001 dated 11th April, 2008. In the said decision, the Full Court has stated as under: “We are therefore of the view that decision of the Division Benches in the above two decisions restricting addition on account of suppression of inter-State purchases only for the value of actual suppression noticed is not correct law. We therefore overrule this view expressed by the Division Bench in the above two decisions. We further declare that once accounts are found to be incomplete or incorrect on account of material defect found by the Department, such as purchase or sales suppression, whether it is local or inter- State, the assessing office is free to reject the books of accounts and proceed for estimation of turnover in accordance with the principles laid down in Section 17(3) of the Act and the law declared by High Courts and Supreme Court. Since petitioners have raised other issues particularly reasonableness of addition, we feel the cases should go back to the Division Bench for considering these issues. We accordingly remit the cases to the Division Bench for decision on other issues consistent with the law declared above.” S.T.Rev.No.284 OF 2004 :: 5 :: 9. In view of the latter dictum laid down by the Full Bench of this Court, in our opinion, the Tribunal was not justified in directing the assessing authority to modify the assessment by making addition only to the extent of the actual quantum of suppression revealed in the check post declaration. Accordingly, we set aside the directions so issued by the Tribunal. 10. Then the question that would arise for consideration is, whether 10% addition made by the assessing authority towards the probable suppression for the check post declaration is justiciable. 11. In our opinion, there is only one check post declaration and in that the assessee had declared that he had purchased 40 bags of Tank Oridhal which was valued at Rs.69,600/-. The check post authorities have not found any other check post declarations and this check post declaration has not been reflected in the books of accounts maintained by the dealer in the regular course of business. Therefore, in our opinion, the additions made by the assessing authority is excessive and in the sense, it is on higher side. Therefore, we direct the assessing authority, if it has not already done, to pass appropriate order in accordance with law keeping in view the observations made by the Full S.T.Rev.No.284 OF 2004 :: 6 :: Bench of this court in S.T.Rev.No.202/06, 125 & 219/2004 and T.R.C.No.577 of 2001 dated, 11th April, 2008. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE jes