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 THURSDAY, THE 24TH JULY 2008 / 2ND SRAVANA 1930 ST.Rev.No.177 of 2004 ----------------------------------------- ( ORDER DATED 25/09/2003 IN T.A.No.13 OF 1998 & CROSS OBJECTION NO. 18 OF 1998 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH-KOZHIKODE) ...................... REVISION PETITIONER/APPELLANT/ASSESSEE: -------------------------------------------------------------------- M/S.KAMATH MARBLES, KANNUR, REPRESENTED BY ITS MANAGING PARTNER, SRI.H.AJITH KUMAR KAMATH. BY ADV. SRI.C.KOCHUNNY NAIR SRI.DALE P.KURIEN RESPONDENT: RESPONDENT/REVENUE: ---------------------------------------------------------- STATE OF KERALA, REPRESENTED BY ITS CHIEF SECRETARY TO GOVERNMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 24/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------------------ S.T.Rev.No.177 of 2004 --------------------------------------------- Dated, this the 24th day of July, 2008 O R D E R H.L.Dattu, C.J. The assessee is a dealer doing business in marble slabs, granite, kadappa stones etc. For the assessment year 1994-1995 the assessee had filed its annual returns conceding total and taxable turnover. 2. In the business premises of the assessee there was an inspection that was conducted by the Intelligence Officer of the department on 19-10-1994 and on verification of the physical stocks, the Intelligence Officer had found large stock variation and had also recovered several loose slips which were not accounted in the books of account of the assessee. The assessee, in fact had compounded the offence departmentally in lieu of the prosecution proceedings. 3. Incorporating the omissions pointed out by the Intelligence Officer of the department in the inspection conducted on 19-10-1994, the assessing authority, after rejecting the books of accounts and the returns filed by the assessee, had issued a pre-assessment notice proposing to make an addition of a sum of Rs.6.38 lakhs to the conceded S.T.Rev.No. 177/2004 -2- total and taxable turnover. The assessee had filed his reply. In that, he had offered only three reasons by way of explanation to the proposal made in the pre-assessment notice. They are as under: “1. That the difference in stock is very negligible when compared to the goods dealt with and 2. That the difference between, the slips recovered and corresponding bills is due to inclusion of delivery charge loading and unloading charge and that 3. The payment of compounding fee paid by them was in the best interest to see that the tax matters are settled immediately.” 4. The assessing authority after considering the objections filed by the assessee and keeping in view the inspection conducted by the Inspecting Wing of the department on 19-10-1994 and further being of the opinion that there is particular pattern of suppression by the assessee in the course of his business, has passed best judgment assessment and in that has made an addition of Rs.6.38 lakhs to the conceded total and taxable turnover. The best judgment assessment order passed by the assessing authority for the assessment year in question is as under: “ I have examined the merits of the contentions raised S.T.Rev.No. 177/2004 -3- by the assessees. The stock difference unearthed by the inspection report is in a considerable extent and cannot be ignored as contended by the assessees. Regarding the difference noticed between the amount shown in the recovered slips and corresponding bills, they are not able to produce any evidence to show that the amount as per the slip include the delivery charge, loading and unloading charges etc. The sale bills issued do not have any indication on that score. Resultant to the inspection at the business places of the assessees it is evidenced that they have not maintained true and correct accounts and the composition offence in lieu of prosecution by paying a sum of Rs.10,000/- was at the request made by the assessees, themselves. As the matters are like this the present plea of the assessees do not have any merits to consider and as such the objections are over ruled. The final assessment for the year 1994-95 stands completed as shown below as proposed. Total turnover fixed. Rs.53,33,276.67 Less 1. 2nd sales turnover of white cement Rs. 15,120.00 2. Sales tax collected separately. Rs.4,23,774.28 -------------------- Rs. 4,38,894.28 Taxable turnover fixed. Rs. 48,94,382.39 Rounded Rs. 48,94,380.00 Tax due on Rs.48,94,380/ @ 10% Rs. 4,89,438.00 Sales tax already paid Rs. 4,25,632.00 Balance due Rs. 63,806.00 Surcharge due @ 10% on Rs.4,89,438 Rs. 48,944.00 Sales already paid Rs. 42,526.00 Balance Rs. 6,418.00 The balance of tax and surcharge due shall be paid as S.T.Rev.No. 177/2004 -4- specified in the demand notice enclosed.” 5. The assessee being aggrieved by the best judgment assessment so passed and also the additions made by the assessing authority has filed first appeal before the first appellate authority. 6. The first appellate authority, by its non-speaking and cryptic order has modified the best judgment assessment order passed by the assessing authority and has added only Rs.1.5 lakhs towards the conceded total and taxable turnover of the assessee. The order passed by the first appellate authority is as under: “I considered the arguments/stock difference of Green Marble standard cut size is 41 Sq. feet excess and green marble 50 Sq. feet short. So actual stock difference detected by inspection dt.19-10-94 comes to short of 9 Sq.feet only. The inspection was on 19-10-94. The value of stock difference as per inspection comes around 60,000/-. So I feel that justice will be met in this case if a taxable turnover addition of Rs.1.5 lakhs is made. In the result, I hereby direct the assessing authority to modify the assessment of the appellant for the assessment year 94-95 as discussed above. “ S.T.Rev.No. 177/2004 -5- 7. The State had carried the matter by filing second appeal before the Sales Tax Appellate Tribunal. The Tribunal, after setting aside the orders passed by the first appellate authority, has passed the following order: “The question to be decided in this appeal is whether the modification ordered by the first appellate authority is reasonable and just. As observed in para above, the total turnover suppression detected in this case was Rs.92,350/-. The first appellate authority ordered modification on the basis of an incorrect finding that the actual turnover suppression detected is only for Rs.60,000/-. The total addition of Rs.1.50 lakhs sustained by the first appellate authority include the actual suppression detected also. As rightly pointed out by the State Representative, the addition sustained by the Deputy Commissioner (Appeals) towards probable omission and suppression is Rs.58,000/- only which is very low when compared to facts of the case. The inspection was during the middle of the financial year. In addition to the stock variation, the account slips recovered from the business place of the dealer revealed large scale unaccounted transactions. A clear pattern of suppression is therefore proved. The addition of Rs.1.5 lakhs sustained by the first appellate authority is found meagre and quite inadequate. Considering the volume of business, quantum of suppression detected and also the period of inspection, we are of the view that an addition of 10% of the total turnover reported ( Rs. 10% of Rs.46,94,876-67) will be a reasonable estimate. The assessing authority is directed to modify the assessment as stated above.” S.T.Rev.No. 177/2004 -6- 8. Aggrieved by the said best judgment assessment order passed on the estimation basis by the assessing authority, the assessee is before us in this tax revision case. 9. Before we advert to the contentions canvassed by the assessee, in our opinion, it may be useful to refer to the observations made by the Apex Court in the case of Commissioner of Sales Tax Madhya Pradesh Vs. H.M.Esufali H.M.Abdulali {1973 (32) STC 77). In that case it was held thus: “The reassessments were valid. From the circumstance that the assessee had dealings outside the accounts of the value of Rs.31,171.28 for 19 days, it was open to the officer to infer that the assessee had large scale dealings outside the accounts. In such a situation, it was not possible for the officer to find out precisely the turnover suppressed and he could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him was not arbitrary and had a reasonable nexus with the facts discovered, it could not be questioned. It was wrong to hold that the officer must have material before him to prove the exact turnover suppressed.” 10. In the instant case, the assessee is a dealer doing business in marble slabs, granite, kadappa stones etc. It has huge total and taxable turnover. Its business premises was inspected by the Intelligence Wing of the department on 19-10-1994. After such inspection have found out that there is a huge stock variation and also S.T.Rev.No. 177/2004 -7- had recovered loose slips which would reflect the business transaction of the assessee, but were not accounted in the books of account. When it was brought to the notice of the assessee by the Intelligence Officer of the department, the assessee had compounded the offence departmentally in lieu of prosecution. The assessing authority keeping the Mahazar drawn by the Intelligence Officer of the department and also the compounding that was done by the assessee, has rejected the returns filed by the assessee and has proceeded to complete the best judgment assessment and in that has made an addition of Rs.6.38 lakhs towards probable omission and suppression of the assessee in its books of account. 11. The first appellate authority, without assigning any reason whatsoever, has modified the assessment order, by reducing the additions made by the assessing authority from Rs.6.38 lakhs to Rs.1.5 lakhs. This order, in our opinion, has been rightly interfered by the Tribunal. In our view, the orders passed by the assessing authority is purely based on the facts. Further, the Tribunal being the last fact finding authority taking into consideration the facts revealed in the records and further being of the opinion that there was no reason for the first appellate authority to have interfered with the orders passed by the S.T.Rev.No. 177/2004 -8- assessing authority has set aside the same and thereby has confirmed the best judgment assessment order passed by the assessing authority. We do not see any perversity in the factual findings noticed by the Tribunal in its order. In view of this, we are of the opinion, it cannot be said that the Tribunal has failed to decide or decided erroneously any question of law for us to interfere in a petition filed under Section 41 of the KGST Act. 12. In that view of the matter, no questions of law would arise in this revision petition for our consideration and decision. Therefore, the Sales Tax Revision requires to be rejected and the questions of law framed by the assessee requires to be answered against the assessee and in favour of the Revenue. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE MS/dk