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 FRIDAY, THE 20TH JUNE 2008 / 30TH JYAISHTA 1930 S.T.Rev.No.391 of 2006 --------------------------------------- T.A.NO.425/2004 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE (ORDER DAQTED 27.02.2006) (ASSESSMENT YEAR 1998-99). .................... PETITIONER:- -------------------- V.SASIDHARAN, PROPRIETOR, MS.V.S.TIMBERS, NALLALAM, CALICUT. BY ADV. SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENTS:- ------------------------ 1. SALES TAX OFFICER, V CIRCLE, DEPT. OF COMMERCIAL TAXES, CALICUT. 2. APPELLATE ASST. COMMISSIONER OF COM. TAXES, KOZHIKODE. 3. STATE OF KERALA, REP. BY COMMISSIONER OF COM. TAXES, THIRUVANANTHAPURAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 20/06/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:- H.L.Dattu,C.J. & A.K.Basheer,J. -------------------------------------------- S.T.Rev.No.391 of 2006 -------------------------------------------- Dated, this the 20th day of June, 2008 ORDER H.L.Dattu,C.J. The petitioner is a dealer in timber logs and sizes. He has also registered himself as dealer, both under the provisions of the Kerala General Sales Act, 1963 (“K.G.S.T.Act” for short) and Central Sales Tax Act, 1956 (“C.S.T.Act” for short). 2. For the assessment year 1998-99, the petitioner had filed his annual returns before the assessing authority, both under the K.G.S.T. provisions and C.S.T. provisions, conceding a particular turnover as total and taxable turnover. The assessing authority, being of the opinion that the annual return so filed by the dealer is untrue and incorrect, had rejected the same and had issued a proposal, proposing to make certain additions. 3. The additions proposed by the assessing authority, apart from others, are as under: (i) The petitioner had made an unaccounted purchase of 8.600 cum (8 logs) of pinkoda timber for Rs.1,00,421/- on 01.09.1998 as per Bill No.26 and Karnataka Dept. Del.Note 082856 from Mangaly Timbers, New Mangalore: Addition of Rs.1,00,421/- with 15% gross profit and freight; S.T.Rev.No.391/2006 - 2 - (ii) The petitioner had admitted unaccounted purchase of timber as per bill No.152 dated 04.06.1998 for Rs.70,200/- for which a sales suppression of Rs.80,730/- has been estimated with a further addition of of equal amount for “probable omissions and suppressions”; (iii) The petitioner had admitted unaccounted purchase of timber as per bill Nos.48 and 49 dated 14.01.99 for a total of Rs.1,64,169/-, for which a sales suppression of Rs.1,97,013/- has been estimated with a further addition of equal amount for “probable omissions and suppressions”; and (iv) There has been undervaluation as is indicated by the difference of Rs.7,87,864/- between the estimated inter-State purchase price and the cost of goods conceded as sold based on which an addition of Rs.9,05,836/- has been made.. 4. After receipt of the proposals so made, the assessee has filed his detailed objections, objecting to each one of the proposals made by the assessing authority. In fact, the assessing authority has culled out the objections filed by the assessee to the proposal made in the pre-assessment notice. 5. The assessing authority, after rejecting the reply/objections filed by the assessee, has confirmed the proposals while quantifying the tax liability of the assessee for the assessment year S.T.Rev.No.391/2006 - 3 - 1998-99 by his order dated 14.01.2003. The order of the assessing authority is confirmed by the Appellate Assistant Commissioner in the appeal filed by the assessee. Aggrieved by these two orders, the assessee was before the Tribunal in T.A.No.425 of 2004. The Tribunal has confirmed the orders passed by both the authorities below. That is how the assessee is before us in this revision petition. 6. The questions for our consideration and decision are as under: “A. Whether in the facts and circumstances of the case, the Appellate Tribunal was right in upholding the action of the assessing authority in holding that the petitioner had purchased the materials as per Bill No.26 dt.01.09.98, the petitioner having denied the same? B. Whether the Appellate Tribunal should not have found that in respect of the above, Sec.30B(4) ought to have been invoked by the lower authorities? C. Whether the Appellate Tribunal was justified in retaining the addition of equal amount towards “probable omissions and suppressions” having specifically found that no other purchase suppressions have been established? D. Whether in the facts and circumstances of the case, the Appellate Tribunal was right in upholding the addition of Rs.9,05,836/- based on a presumed undervaluation?” S.T.Rev.No.391/2006 - 4 - 7. In so far as the proposal made for “probable omissions and suppressions” in a sum of Rs.80,730/- and Rs.1,97,013/-, it is based on the shop inspection report and the offence was compounded departmentally by the assessee in lieu of prosecution. It is not in dispute and cannot be disputed by the assessee that a shop inspection had been conducted by the Intelligence Wing of the Department and had detected certain suppressions. Keeping that shop inspection report in view, the assessing authority has found that there is probable omissions and suppressions in a sum of Rs.80,730/- and Rs.1,97,013/-. In our view, the addition so made by the assessing authority has rational basis and therefore they need not be disturbed by this Court, since the parameters of the revisional jurisdiction of this Court under Section 41 of the K.G.S.T. Act is very much limited. 8. Now we come to the proposal made by the assessing authority with regard to the unaccounted purchase of 8.660 cum (8 logs) of pinkoda timber for Rs.1,00,421/- as per bill No.26 dated 1.9.1998. 9. The assessee while filing his objections to the pre-assessment notice, had specifically denied the entire transaction and further had contended that the assessing authority is expected to make appropriate enquiries as provided under Section 30B(4) of the K.G.S.T. Act. The assessing authority, without holding any enquiry whatsoever, has S.T.Rev.No.391/2006 - 5 - again relied upon the Check Post declaration to complete the assessment. 10. Section 30B(4) of the K.G.S.T. Act clearly envisages that, if, for any reason, any dealer disputes the purchase of the particular goods from a consignor who is outside the State, an appropriate verification requires to be done. In the instant case, the assessing authority, without making any enquiries as envisaged under Section 30B (4) of the Act, merely relying upon the Check Post declaration to complete the assessment, has made certain additions towards the unaccounted purchase in a sum of Rs.1,00,421/-. The addition so made is contrary to Section 30B(4) of the Act and contrary to the decision of this Court in W.P.(C).No.16707 of 2003 dated 9.6.2003 and, further, contrary to the Circular/Instruction issued by the Commissioner of Commercial Taxes in No.13/2004 dated 25.05.2004. In that view of the matter, the addition of a sum of Rs.1,00,421/- made by the assessing authority requires to be deleted from the quantified tax liability of the assessee for the assessment year 1998-99. 11. In so far as the allegation of under-valuation of the purchase and sales of timber is concerned, the assessee had specifically contended before the assessing authority that without having sufficient material to arrive at a conclusion of undervaluation, the assessing authority on mere presumption cannot conclude that the dealer has S.T.Rev.No.391/2006 - 6 - undervalued the sales and purchases and, therefore, the proposal to make addition is impermissible in law. This objection of the assessee is just glossed over by the assessing authority and has confirmed the proposal made by him. 12. The assessing authority, while making addition towards under-valuation, had made addition both under the provisions of the K.G.S.T. Act and C.S.T. Act. The additions so made under the C.S.T. Act had been questioned by the assessee before the Tribunal in T.A.No.426 of 2004. The Tribunal, while allowing the claim of the assessee, has stated as under: “We have considered the contentions raised by both sides. It is seen that the assessing authority has given an addition of 50% at the rate of closing stock value conceded by the appellant. The records reveal that the assessing authority has not detected any case of suppression on inter-State sales. There is no evidence on receipt of any payment in excess of the sale value conceded by the books of accounts”. 13. The very Tribunal, when it comes to the intra-State purchases and sales, has sustained the additions made by the assessing authority. Again the records do not indicate that the assessing authority had detected any suppression on intra-State sales. In the absence of any S.T.Rev.No.391/2006 - 7 - evidence regarding receipt of any payment in excess of the value conceded in the books of accounts, in our opinion, the assessing authority could not have made any addition. Therefore, the addition so made towards undervaluation of purchases and sales requires to be deleted from the quantified tax liability of the assessee. 14. In the above view of the matter, the orders passed by the assessing authority and the Tribunal requires to be modified to the aforesaid extent. Further, a direction is issued to the assessing authority to modify the assessments in the light of the observations made by this Court while disposing of this revision petition and issue a fresh demand notice. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/dk.