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Judgment
K. Vinod Chandran, J
Three assessment years, viz., 2006-07, 2007-08 and 2009-09, are the subject matter of the above revision filed by the assessee. The assessee, a dealer in ice creams, was registered under the Kerala Value Added Tax Act, 2003 (hereinafter referred to as "the Act") and for all these years, opted to pay tax as a presumptive tax payer u/s 6(5) of the Act. Section 6(5) provides payment of tax at the rate of 0.5% by those dealers whose total turnover for an year is below Rs.50 lakhs; the limit being so for the respective assessment years.
For the years 2006-07 and 2007-08, the dealer conceded a turnover respectively of Rs.32,72,510/- and Rs.45,46,917.60. On verification of certain records of the supplier of the assessee, the assessing authority found that for the two years the assessee had suppressed purchase turnover to the tune of Rs.13,32,506/- and Rs.11,55,970/- respectively. Hence, the sales turnover was estimated by adding the gross profit conceded by the assessee in both these years and also made addition of two times the suppressed turnover. On such estimation being made, the turnover of the above two years exceeded Rs.50 lakhs and, hence, the assessing authority denied the benefit of payment of presumptive tax u/s 6(5) and proceeded to assess the turnover u/s 6(1). For the year 2008-09, by virtue of third proviso to Section 6(5), the assessee was held to be not entitled to exercise such option. The proviso specifically denied the eligibility to opt for payment of presumptive tax in the circumstance of the turnover having exceeded Rs.50 lakhs during the preceding year, under the Act or the KGST Act, 1963.
Before the first appellate authority and the Tribunal the assessee could not get any relief with respect to the exclusion from payment of presumptive tax ordered by the Assessing Officer. However, the further addition for the two years was reduced to 1= times the suppressed turnover by the first appellate authority and modified still further to 25% of the suppressed turnover by the Tribunal.
The assessee raises the following questions of law for our consideration and decision:
(i) Whether the authorities below were right in law making and in sustaining arbitrary additions for an offence which has already been compounded? Were not the authorities below committed patent error in the matter of construction of Section 74 of the KVAT Act?
(ii) Whether the authorities below are right in law in making additions more than the actual suppression detected?
(iii) Whether the authorities below are justified in adding gross profit without any reasons?
The 1st question of law raised is with respect to the authority of the Assessing Officer to make additions for an offence which has already been compounded by the assessee. Admittedly, on suppression being detected, the assessee had moved for composition of the offence u/s 74 of the Act, which was allowed by the assessing authority. The consequence of composition of offence u/s 74(1) is specifically laid down in sub-clause (2). Section 74(2) reads as follows :-
On payment of such amount under sub-section (1), no further penal or prosecution proceedings shall be taken against such person, in respect of that offence.
The relief provided, hence, is only from further penal or prosecution proceedings under Sections 67(1), 67(2), 68, 69(1), 70, 70A, 70B, 71 (1), 71(2), 71A, 72 and 73 of the Act. This does not extend to assessment proceedings. Estimation is made on the basis of the offences detected, invoking the powers of "best judgment", to compensate any loss that could have been suffered by the State. An assessee practising evasion has to subject itself to such best judgment assessment on the principle that all instances of evasion would not have come to the notice of the authorities. This exercise does not at all amount to or is in the nature of penalty. The indications as to how such best judgment assessment, essentially a discretionary exercise, has to be made are succinctly stated in The Commissioner of Sales Tax, Madhya Pradesh Vs. H.M. Esufali, H.M. Abdulali, Siyaganj, Main Road, Indore, . The composition of an offence does not release the assessee from assessment proceedings, which are to be undertaken under Chapter V of the Act. Hence, the 1st question raised by the assessee is answered against the assessee and in favour of the Revenue.
The two other questions raised are with respect to the additions made over and above the actual suppression and the justification of adding gross profit. On the questions of additions made, the discussion made above with respect to best judgment assessment would equally apply here. The learned counsel for the assessee would contend that necessarily the entire suppression has been detected since the purchases of the assessee is only from one supplier. From the facts of the above case, we do not see any warrant for such assumption. There is definitely a pattern of suppression established in the years 2006-07 and 2007-08. The suppression itself is more than 25% of the conceded turnover for both the years. The consistent reduction made by the appellate authorities cannot at all be relied on by the assessee for claiming total exemption from additions. The reduction made by the appellate authorities can only be considered as discretionary exercise, again based on the facts and circumstances of the case. The attempt of the assessee is to make itself eligible for payment of presumptive tax in the year 2006-07, since an addition of the actual suppression with gross profit conceded would bring the turnover of the assessee for the year slightly less than the limit prescribed u/s 6(5), i.e., less than Rs.50 lakhs. For one, we cannot be interfering with the estimations made by the lower authorities unless the same are found to be patently perverse. In any event, the best judgment assessment made by the Assessing Officer, as modified by the appellate authorities, would be the turnover of the assessee as determined under the Act and no exclusion or differential treatment with respect to additions made on best judgment can be made under the provisions of the Act. The limit of total turnover for an year prescribed u/s 6(5) can only be the total turnover as determined under the Act. The gross profit addition is a necessary concomitant of multiple sale and we find that what is adopted for the respective years is that conceded by the assessee. The questions (ii) and (iii) raised by the assessee, hence, are in the realm of facts and we refuse to answer the same.
In the result, the revision petitions are dismissed, confirming the orders of the Tribunal. Before leaving the case, we would notice a very disturbing fact which came fore on going through the records. This was a case where suppressions of purchase turnover was detected in the case of a dealer who opted payment of presumptive tax u/s 6 (5). On detection of suppression, best judgment assessment was made and the turnover of the assessee determined as per the assessment proceedings exceeded the limit prescribed for presumptive tax payment. In such circumstances, the turnover has to be assessed at the rate applicable u/s 6(1). We see that the Tribunal has made such an observation and has also found that the rate applicable to the goods dealt with by the assessee, i.e., ice cream, is 12.5%. However, on going through the assessment order, we find that the tax has been assessed in the concluding portion at the rate of 0.5% on Rs.50 lakhs and at the rate of 12.5% on Rs.31,67,472/-. That is to say, even on finding that the dealer goes out of the presumptive tax net; upto the limit prescribed for being included in the presumptive tax net, the Assessing Officer has imposed only 0.5%; and 12.5% tax u/s 6(1) has been imposed for the turnover exceeding the limit prescribed u/s 6(5). We are definite in our mind that this is not what the Act postulates. On a reading of the provisions of the Act, it would reveal that this is not what the legislature intended.