Rita Enterprises vs State of Tamil Nadu

Chitra Venkataraman, J.—The tax case revision is filed as against the order of the Tamil Nadu Sales Tax Appellate Tribunal restoring the order of the assessing authority. The appeal was admitted on the following substantial questions of law:

Whether the Appellate Tribunal is right in stating that the Appellate Assistant Commissioner has sustained the turnover of slip No. 1 and therefore ought not to have allowed the turnover pertaining to other slips as all the slips were recovered at the same time of inspection?

Whether the Appellate Tribunal is justified in sustaining the assessment order based on the findings which were neither available at the time of inspection nor at the time of assessment?

It is seen from the records that in respect of the assessment year 1996-97, there was an inspection in the business premises on December 5, 1996 noticing the following defects:

Day book was not written after November 13, 1996.

The stock book maintained had not been posted up to date.

On production of accounts on January 26, 1997, before the enforcement wing officials, the opening stock of goods as on April 1, 1996 and the purchases during the period from April 1, 1996 to December 4, 1996 and the sale from April 1, 1996 to December 4, 1996, i.e., till the date of inspection were compared with the physical stock taken as on December 4, 1996, which reveal a deficit stock of finished goods of 466.995 kgs. at the rate of Rs. 75 per kg. to a tune of Rs. 32,24,-00.

At the time of assessment, the assessee contended that as the proprietor was not available at the time of inspection, the person in charge then could not say anything on the slips as relatable to their business. However in the objection to the show-cause notice, the assessee stated that the transactions noted in the slips did not relate to any purchase or sale of goods, but related to some other transactions other than purchase and sales. The assessing authority rejected the objection and confirmed the proposal already made.

Aggrieved by the order of the assessing authority, the assessee preferred an appeal before the Appellate Assistant Commissioner, who allowed the appeal in part, while confirming the addition as well as slip No. 1. As regards slip No. 2, the appellate authority held that it only related to cash transaction with one Subramaniam and he had also merely noted the details and there was no purchase and sale involved. As regards slips 3 and 6, the first appellate authority pointed out that they related to issue of materials to the labourer and return of the manufactured goods from them, which were all accounted for in the books of accounts. Consequently, the addition of slip Nos. 3 to 6 were deleted.

With reference to slip 4, the appellate authority held that it was only a cash transaction, hence, they treated as addition.

As regards slip No. 5, the Appellate Assistant Commissioner pointed out that the names of the parties and the amount payable and goods supplied as per books of accounts related to cash transactions.

With reference to slip No. 7, it was noted that it related to the payment due from the assessee and there was no sale involved. Thus out of seven slips, suppression as regards slip No. 1 was sustained apart from a portion in slip No. 7. Rest of the additions was deleted. The corresponding addition and probable omission were also cancelled.

Aggrieved by the order of the appellate authority, the Revenue went on appeal before the Tribunal, wherein the Sales Tax Appellate Tribunal, after considering the submissions of the assessee as well as the Revenue pointed out that the explanation offered by the assessee was merely an afterthought, since at the time of enquiry they disowned the slips and thereafter, in reply to the show-cause notice, the assessee contended that there were no sale or purchase transaction involved. However before the Appellate Assistant Commissioner, the assessee sought to offer explanation by correlating the entries to the transactions, an exercise which was never done either before the assessing authority or before the Enforcement Wing Officer. In these circumstances, the Tribunal set aside the order of the Appellate Assistant Commissioner directing the assessing authority to assess the turnover deleted by the Appellate Assistant Commissioner. Aggrieved by the same, the assessee has filed the above revision.

The learned counsel appearing for the petitioner/assessee pointed out that when the appellate authority had given a detailed reasoning for cancelling the addition, the Tribunal ought not to have cancelled the order of the Appellate Assistant Commissioner to restore the assessment order. There are no materials to substantiate the addition made.

Heard the counsel on either side.

A perusal of the orders of the authorities shows that there was an inspection conducted in the assessee''s business premises on December 5, 1996. It was found that the day book was not written after November 13, 1996 and physical verification of the stock taken on December 4, 1996 showed the deficiencies in actual stock. Apart from it, certain slips were also recovered indicating the suppression. In the course of the enquiry, the assessee disowned the slips as not pertaining to the business. However, on a perusal of slip No. 1, it related to the business transactions and consequently, the assessment was made. As far as slip No. 1 is concerned, there is no dispute in the present revision, since the Appellate Assistant Commissioner confirmed the addition of assessment made on the slip.

As regards slip No. 2, the assessee had no material to substantiate the contention that it related to cash transactions. The view of the Appellate Assistant Commissioner upholding the contention of the assessee appears to be totally without any material, and the Tribunal rightly confirmed the addition.

However as regards slip Nos. 3 and 6, the Tribunal rejected the assessee''s plea on different footing. They related to the materials issued on items received as early as on April 8, 1996 as well as on July 19, 1996 covered by labour bill form dated August 14, 1996. The entries in the account books really showed that they pertained to the dealings which took place and rightly recorded in the books of accounts much prior to the date of inspection during December, 1996. It is not as though the petitioner had not shown the transactions in the books of accounts, on the other hand, the only ground on which the Revenue contested before the Tribunal was that the assessee had not produced the books of accounts or correlated the accounts. The Appellate Assistant Commissioner accepted the explanation of the assessee in the appeal. Thus an appeal under the tax laws is treated as continuation of the assessment proceedings, no exception could be taken to the appellate authority going through the materials produced before it, particularly when the details are available in the books of accounts. In these circumstances, the Appellate Assistant Commissioner cancelled slip Nos. 3 and 6.

As regards slip No. 4, it is stated that the cash payment made to various parties were found in the ledger accounts dated April 6, 1996. The entries were also made in the receipts on various dates, hence, they were only cash transactions and not sale. As already pointed out, slip Nos. 3 and 6 relate to cash transactions for the period prior to the date of inspection. Even though the assessee had not produced any evidence through the parties, with whom the assessee had cash transactions yet the accounts of the parties indicated receipt and payment on various dates. The fact, however, remains that even though the assessee treated it as a loan transaction, absolutely no materials were brought forth by letting in evidence from the parties to substantiate the claim. The assessee is a manufacturer and dealer in stainless steel items. In the absence of material to show that they were only cash transactions, these entries, per se, would not justify the deletion of the turnover. Slip No. 5 shows the opening balance as regards various entries noted therein. Going by the details therein, they are also dealers in steel. Even though the assessee contended that they are cash transactions, going by the very nature of entries in the slips, we do not find any justification in the contention of the assessee that they are merely cash transactions. Consequently, the estimation under slip No. 5, as confirmed by the Tribunal, stands.

With reference to slip No. 7, there are entries as regards goods dealt with therein as well as entry on payment of cheque books. The Tribunal pointed out that these entries including one relating to the goods, did not disclose any purchase or sale. A perusal of the order of the appellate authority shows that no material was there to substantiate the contentions that the entries with reference to the transactions referred to therein, did not relate to the assessee. It must be noted that inspections revealed stock variation of 466.995 kgs. Going by the slips and the stock difference noted, it is very difficult for us to accept the case of the assessee that the order of the Tribunal is unsustainable. In the circumstances, we have no hesitation in confirming the order of the Tribunal. Accordingly, the appeal stands dismissed. No costs.