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 WEDNESDAY, THE 3RD DECEMBER 2008 / 12TH AGRAHAYANA 1930 S.T.Rev.No.331 of 2008 ----------------------------------------- T.A.NO.117/2007 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, THIRUVANANTHAPURAM (ORDER DATED 25TH AUGUST, 2007) (ASSESSMENT YEAR 2004-2005) .................... PETITIONER/APPELLANT/ASSESSEE:- --------------------------------------------------------- R.PRABHAKARAN, PRAJEESH GLASS EMPORIUM, KUNDARA, KOLLAM. BY ADV. SRI.S.SANTHOSH KUMAR RESPONDENT/RESPONDENT/REVENUE:- -------------------------------------------------------------- STATE OF KERALA, REPRESENTED BYTHE SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 03/12/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:- H.L.Dattu,C.J. & A.K.Basheer,J. -------------------------------------------- S.T.Rev.No.331 of 2008 ------------------------------------------- Dated, this the 3rd December, 2008 ORDER H.L.Dattu,C.J. This revision case arises out of an order passed by the Sales Tax Appellate Tribunal, Thiruvananthapuram in T.A.No.117 of 2007 dated 25th August, 2007. (2) The assessee is a dealer in glass, hardwares, etc. at Kundara in Kollam and also is running a Bar attached Hotel at Chamakkada in Kollam. (3) The relevant assessment year is 2004-2005. (4) The dispute pertains to estimation of sales turnover of Bar attached Hotel. The assessing authority has rejected the books of accounts and estimated the taxable turnover on best judgment assessment basis. The sales turnover of Indian Made Foreign Liquor (“IMFL” for short) was estimated by adding gross profit at the rate of 40%, though the assessee had declared the gross profit at 17.92%. The assessing authority, in his order, has noticed, that, the gross profit reported on the sales turnover of IMFL is too low, considering the nature and volume of business. (5) The assessee, being aggrieved by the additions so made by the assessing authority, had called in question the said assessment order before the first appellate authority. Before the said authority, it was S.T.Rev.No.331 of 2008 - 2 - contended, that, the assessing authority did not notice, that, the assessee has discontinued the Bar Hotel business in the subsequent assessment year, in view of the heavy loss suffered by him. The first appellate authority, in his order, confirms the rejection of books of accounts and the returns filed, by the assessing authority. However, being of the opinion, that, the additions made by the assessing authority towards the gross profit is on a higher side, modifies it, by directing the assessing authority to make an addition of only 25% of the gross profit to the returned turnover. (6) The assessee has not accepted the verdict of the first appellate authority. Accordingly, had questioned the said order before the Tribunal. (7) The assessee's representative had brought to the notice of the Tribunal, the earlier orders passed by it in T.A.Nos.384 of 2005 and 385 of 2005 for the previous assessment years, wherein, the Tribunal had sustained the gross profit only at 15.21% to the returned total and taxable turnover. The Tribunal, after noticing the aforesaid order passed, has, still, thought it fit to sustain the orders passed by the first appellate authority, keeping in view the nature of business and the volume of business of the assessee. The correctness or otherwise of the said order is the subject matter of this revision petition. S.T.Rev.No.331 of 2008 - 3 - (8) The assessee has framed the following questions of law for our consideration and decision. They are as under: “(i) Was the Appellate Tribunal justified in law in sustaining the estimated sales turnover of Indian Made Foreign Liquor fixing the gross profit at 25%? (ii) Was the Appellate Tribunal justified in law in discarding the gross profit reported by the assessee and fixing a higher gross profit when no suppression or irregularities detected in the sales of Indian Made Foreign Liquor? (iii) Was the Appellate Tribunal justified in law in not following its own finding on gross profit of the assessee for the previous years and fixing a higher gross profit without entering a finding on any change in circumstances warranting increase in the gross profit?” (9) Admittedly, the assessee's books of accounts and the returns filed for the assessment year in question is rejected by the assessing authority and after such rejection, has proceeded to complete the assessment by resorting to best judgment assessment. (10) Except in exceptional cases, this Court, in exercise of its powers under Section 41 of the Kerala General Sales Tax Act, is not expected to substitute its best judgment assessment to the best judgment assessment already completed by the assessing authority and confirmed by the first appellate authority and the Tribunal. The law on the point is well S.T.Rev.No.331 of 2008 - 4 - settled. The apex Court in the case of Commissioner of Sales Tax v.H.M.Esufali H.M.Abdulali [(1973) 32 STC 77] has observed as under: “In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's. The High Court cannot substitute its best judgment for that of the assessing authority”. (11) In the instant case, the assessee has declared the gross profit in the returns filed for the assessment year in question at 17.92%. The assessing authority, being of the opinion, that, the gross profit declared by the assessee is too low when compared to the nature and volume of business and also keeping in view, that, in the case of the dealers, dealing in liquor in Bar attached Hotels, the normal gross profit is more than 30%, has thought it fit to fix the gross profit at 40% to the conceded turnover of the dealer. The order so passed by the assessing authority was modified by the first appellate authority, by reducing the estimate by adding a gross profit of S.T.Rev.No.331 of 2008 - 5 - 25% only. This order of the first appellate authority is confirmed by the Tribunal also. (12) Since there is a concurrent finding by the authorities under the Act and since no question of law as such is involved in this revision petition, we decline to entertain this revision petition and confirm the orders passed by the first appellate authority and the Tribunal. (13) In view of the orders passed in the revision petition, I.A.No.2635 of 2008 is also rejected. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/-