IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 1ST JULY 2008 / 10TH ASHADHA 1930 S.T.Rev.No.97 of 2006 ------------------------------------- T.A.No.134/2001 OF SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOTTAYAM (ORDER DATED 20th MAY, 2005) [ASSESSMENT YEAR 1994-95] .................... PETITIONER/APPELLANT/APPELLANT/ASSESSEE:- --------------------------------------------------------------------------- SOUTH INDIAN TIMBER INDUSTRIES, KUDAMALOOR, KOTTAYAM. BY ADV. SRI.RAMESH CHERIAN JOHN RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:- ----------------------------------------------------------------------------------- STATE OF KERALA, REPRESENTED BY COMMISSIONER OF COMMERCIAL TAXES. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 01/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:- H.L.Dattu,C.J. & A.K.Basheer,J. -------------------------------------------- S.T.Rev.No.97 of 2006 ------------------------------------------- Dated, this the 1st day of July, 2008 ORDER H.L.Dattu,C.J. The petitioner is a firm and it is engaged in the purchase of wood and sale of wood products. 2. During the assessment year 1994-95, the business premises of the petitioner was inspected by the Intelligence Officer of the Department. After such inspection, had noticed that there was a stock variation of about 32 items in the books of accounts, and the value of suppression would work out in a sum of Rs.7,73,030/-. 3. The assessee had filed its annual returns before the assessing authority for the assessment year 1994-95. The books of accounts produced and the return filed by the assessee were rejected by the assessing authority and thereafter has proceeded to complete the assessment by making addition of 20% to the sales turnover declared by the assessee towards the probable omission of purchases and sales by the assessee. 4. Aggrieved by the additions so made by the assessing authority to the conceded turnover, the assessee had approached the first appellate authority in S.T.A.1211 of 2000. The first appellate authority has modified the orders passed by the assessing authority and has reduced S.T.Rev.97/2006 - 2 - the addition made to the sales turnover from 20% to 10%. Aggrieved by the orders so passed by the first appellate authority, the assessee was before the Appellate Tribunal in T.A.No.134 of 2001. The Tribunal has confirmed the orders passed by the first appellate authority. That is how the assessee is before us in this revision petition. The assessee had raised the following questions of law for our consideration. They are as under: “i) Whether on the facts and circumstances of the case the Tribunal was justified in merely approving the addition of 10% sustained by the Deputy Commissioner (Appeals) without coming to any independent finding based on the contentions raised by the assessee which were based on the findings of the first appellate authority and the revisional authority which had attained finality? ii) Whether on the facts and circumstances of the case the Tribunal was justified in sustaining the addition of 10% made by the 1st appellate authority when the said authority himself has come to the specific finding that there is 1) no sale suppression established; 2) No clandestine record or books which should show unrecorded purchase or sale and 3) there was only one inspection and a pattern of suppression was not established? iii) Whether on the facts and circumstances of the case the Tribunal was justified in not considering the finding of the Board of S.T.Rev.97/2006 - 3 - Revenue after reducing the penalty to the actual tax effect, holding that the business run by the petitioner is of such nature that there is always a possibility of goods in different stage of production?”. 5. Sri.Ramesh Cherian John, learned counsel appearing for the assessee would submit that the first appellate authority, which is also a fact finding authority, having observed in its order, that, there is no suppression in sales or purchases and the inspecting authority has not detected any unrecorded purchases or sales and, further, has not established a pattern of suppression etc., could not have sustained the additions made by the assessing authority. The learned counsel has taken us through the observations made by the first appellate authority while disposing of the assessee's appeal. They are as under: “The addition works amounting to Rs.22,44,860/-. The enhancement of turnover was made to the inter-State sales and export sales. No suppression in such sales are established. No clandestine record or books were detected which would show unrecorded purchase or sale. There was only one inspection and a pattern of suppression was not established”. (emphasis supplied by us) 6. Sri.Muhammed Rafiq, learned Senior Government Pleader has sought to sustain the orders passed by the first appellate authority and the Tribunal. S.T.Rev.97/2006 - 4 - 7. In this revision, the one and only question that arises for our consideration and decision is, whether the first appellate authority was justified in just reducing the additions made by the assessing authority from 20% to 10% to the conceded total and taxable turnover by the assessee. 8. In the instant case, the first appellate authority, which is also a fact finding authority, notices the defects pointed out by the Inspecting Wing of the Sales Tax Department when they visited the business premises of the petitioner-assessee on 10.01.1995. At the time of inspection, the Inspection Wing had noticed that the assessee had not made entries of the purchase and sales of 32 items and the sale of those items, which would work out in a sum of Rs.7,73,030/-. The first appellate authority has further noticed that the assessing authority has not pointed out any defects in the books of accounts maintained by the dealer and further, the assessing authority has failed to establish a pattern of suppression by the assessee. Having said all that, in our opinion, there was no justification for the first appellate authority to reduce the additions made by the assessing authority from 20% to 10%. At the most, it should have directed the assessing authority to make an addition of Rs.7,73,030/- to the conceded turnover by the assessee, since the assessing authority had failed to establish a pattern of suppression of purchase and sales of wood S.T.Rev.97/2006 - 5 - and the wood products. In that view of the matter, the orders passed by the authorities under the Act requires to be modified while allowing this revision petition filed by the assessee. 9. Accordingly, we pass the following: Order (i) The revision petition is allowed in part. (ii) A direction is issued to the assessing authority to make an addition of only a sum of Rs.7,73,030/- to the conceded total and taxable turnover of the dealer and then issue a fresh demand notice. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/dk