## **IN THE HIGH COURT OF KERALA AT ERNAKULAM**
# **PRESENT**
**THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN**
## **&**
## **THE HONOURABLE MR. JUSTICE T.R.RAVI**
**TUESDAY, THE 21ST DAY OF JULY 2020 / 30TH ASHADHA, 1942**
## **OT.Rev.No.79 OF 2019**
**AGAINST THE ORDER IN TAVAT 344/2016 DATED 10-01-2019 OF AGRL. INCOME TAX AND SALES TAX APPELLATE TRIBUNAL,ADDITIONAL BENCH, THIRUVANANTHAPURAM**
## **REVISION PETITIONER/RESPONDENT/REVENUE:**
**THE STATE OF KERALA, REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE TAX (LAW), STATE GOODS AND SERVICES TAX DEPARTMENT, ERNAKULAM - 11.**
**BY SR.GOVERNMENT PLEADER SRI MOHAMMED RAFIQ**
## **RESPONDENT/APPELLANT/ASSESSEE:**
**SRI RAJENDRAN NAIR, P.R.ELECTRICALS, PUNALUR - 691 305.**
**BY ADV. SRI.S.ARUN RAJ**
**THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 21.07.2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:**
OT.REV.No.79/2019
-2-
## “ **CR”**
## **ORDER**
## **T.R.RAVI, J.**
The revision petition is filed by the Revenue being aggrieved by Annexure C order dated 10.01.2019 issued by the KVAT Appellate Tribunal in T.A.(VAT)No.344 of 2016.
2. The question involved is regarding the assessment of the respondent/assessee for the year 2012-13. During the said period, action had been taken against the assessee by the Intelligence Officer, who had on verification of the books of accounts, found that
four bills, the details of which are given below, were suppressed.
|Sl.No.|Bill No.& Date|Amount(Rs.)|
|---|---|---|
|1|7/26.04.2012|27135.86|
|2|63/26.06.2012|5207.27|
|3|90/24.07.2012|56795.28|
|4|93/01.08.2012|3021.50|
||Total|92159.91|
The Intelligence Officer found that the dealer had practiced
suppression by resorting to sale through a parallel set of bills, not
reflected in the accounts. The tax due on the suppressed turnover
OT.REV.No.79/2019
-3-
was Rs.8,650/- and as per order dated 22.05.2014, the dealer compounded the offence by remitting the said amount as compounding fee along with tax and interest. The Assessing Officer found that, apart from the above four bills, two other bills the details of which are given below, have also not been accounted.
|Sl.<br>No.|Bill No. & Date|Name of the dealer with<br>TIN|Amount<br>(Rs.)|VAT<br>(Rs.)|
|---|---|---|---|---|
|1|191/19.12.2012|Kerala Tourism<br>Development Corporation|517.00|33.00|
|2|233/04.02.2013|“|828.00|48.00|
|||Total|1,345.00|81.00|
The Assessing Officer also noticed that there were unaccounted purchases to the tune of Rs.4,51,668.28. In the above circumstances, the Assessing Officer rejected the return filed by the assessee and proceeded to complete the assessment under Section 25(1) of the KVAT Act. The assessee had submitted explanations stating that the bills were actually accounted for. The Assessing Officer found that except for one bill relating to unaccounted purchases, the assessee has failed to produce any evidence in support of his claim that the sale bills were accounted. By Annexure A assessment order dated 31.12.2014, the assessee was issued with a demand notice for a sum of Rs.3,53,662/-.
OT.REV.No.79/2019
-4-
3. The assessee challenged the assessment order before the Deputy Commissioner (Appeals), who vide order dated 23.08.2016, dismissed the appeal. The assessee challenged the appellate order before the KVAT Appellate Tribunal. By order dated 17.12.2018, the Tribunal has allowed the appeal in part and proceeded to estimate the sale suppression by adding 5% of the conceded sales turnover. Aggrieved by Annexure C order issued by the Tribunal, the Revenue has filed this revision.
4. Heard the Senior Government Pleader Sri Mohammed Rafiq on behalf of the revision petitioner and Sri Arun Raj S., on behalf of the respondent. The Senior Government Pleader contended that Annexure C order of the Tribunal has been issued without any basis whatsoever. The Assessing Authority had noticed a pattern of suppression and found that the assessee has resorted to parallel billing and that the pattern extends throughout the year. It is submitted that as such neither the Assessing Authority nor the First Appellate Authority can be faulted for estimating the escaped turnover on the basis of the serial number of the last bill and the average suppression arrived at from the six bills detected as suppressed. The Counsel for the respondent on the other hand
OT.REV.No.79/2019
-5-
contends that the authorities ought not to have taken the average of the amounts shown in the bills.
5. The questions of law arising in the revision petition have been re-framed as follows:
a) Whether the re-estimation of the suppressed sales turnover made by the Tribunal is justified, in the absence of a finding that the estimation made by the Assessing Authority was without any materials and unreasonable ?
b) Whether the Tribunal was legally justified in interfering with the order of assessment, confirmed in appeal, solely for the purpose of making a reestimation of the suppressed sales turnover ?
6. The assessment records clearly show that there were six unaccounted sales which were noticed. It can be seen that the bills which were found to have not been accounted bear Sl.Nos.7, 63, 90, 93, 191 and 233 pertaining to 26.04.2012, 26.06.2012, 24.07.2012, 01.08.2012, 19.12.2012 and 04.02.2013 respectively. The total sales suppressed as per the detected bills is found to be Rs.93,505/-. It can thus be seen that there is a clear pattern of
OT.REV.No.79/2019
-6-
suppression throughout the year between April, 2012 and February, 2013. Going by the Serial Numbers of the bills, it can be seen that there is a continuity when matched with the respective dates which also invites a presumption of a definite pattern of suppression over the entire assessment year. It is in these circumstances that the Assessing Officer proceeded to find the average bill amount by dividing the total bill amount by 6 and thereafter multiplying the said amount by 233, which is the serial number of the last bill which had been detected in the series. The assessee has not produced any records to show that the bills did not belong to the same series. It can be seen from the amounts shown in the bills that they range from Rs.517/- to Rs.56,795/-. In the above circumstances, the Assessing Officer cannot be faulted in any manner for making an estimation on the basis of the average arrived at from the detected bills. The assessee claimed that the first five bills ought to be taken for determining the average i.e., for 191 bills and the rest upto 233 on the basis of the last bill bearing number 233. There is no basis for such splitting up and there is no reason to assume that the assessee would have only practiced minimal suppression after the 191[st] bill. In fact the contention of the assessee only lends credence
OT.REV.No.79/2019
-7-
to the finding of the Assessing Officer that there is a pattern of suppression, since the assessee indirectly admits that there was a parallel set of bills and that the same was used regularly in the course of the whole year. The Tribunal on the basis of the percentage of the actual suppression detected as against the total turnover found it reasonable to make an addition of 5% alone; which would amount to substituting the best judgment of the assessing officer. Best judgment is a reasonable estimation made on the facts of the defect noticed and there is no warrant for the Tribunal to interfere with the same by a more reasonable estimation as subjectively found by the Tribunal.
7. We find that the estimation of the escaped turnover has been made, by the Assessing Officer, based on materials and that the said estimation is reasonable. The Tribunal has neither found that there are no materials before the Assessing Authority for making the estimation nor that the estimation made is unreasonable or arbitrary. The Appellate Tribunal has not offered any legal justification for interfering with the estimation of the suppressed turnover by the Assessing Officer. In our opinion, there can be no re-estimation of the suppressed turnover merely on the
OT.REV.No.79/2019
-8-
_ipsi dixit_ of the Tribunal. The Tribunal can interfere with the orders, if the Assessing Officer or the First Appellate Authority had made any legal error in making the estimation of the suppressed turnover. The Assessing Officer when acting under Section 25(1) of the KVAT Act proceeds to determine the turnover to the best of its judgment. Unless it is shown that such judgment of the Assessing Authority is legally unwarranted, there can be no interference on the same. The KVAT Act does not provide for the best of judgment by the Assessing Officer followed by the best of judgment by the First Appellate Authority and thereafter by another best of judgment by the Tribunal. Annexure C order of the Tribunal is legally unsustainable and is liable to be set aside.
8. We deem it apposite to refer to the principle laid down by a Full Bench of this Court in the decision in **Alukkas Jewellery v. State of Kerala** reported in **[2009 (1) KLT 785]** . While dealing with the question of the jurisdiction of the Deputy Commissioner to reopen and revise a best judgment assessment, the Full Bench observed in paragraph 4 as follows:
“4. ..... .... ….. Estimation of turnover after rejection of books of accounts has to be based on materials. In fact in appeal reasonableness of estimation or addition of the
OT.REV.No.79/2019
-9-
turnover is tested based on materials on which such estimation is made. Estimation of turnover therefore has two aspects, one is the material based on which it was done, and the other is reasonableness of estimation made based on such materials. ..... .... ….. .”
9. The revision petition is hence allowed, setting aside Annexure C order of the Appellate Tribunal and answering the questions of law raised in favour of the Revenue. The parties will bear their costs.
Sd/-
## **K. VINOD CHANDRAN JUDGE**
Sd/- **T.R. RAVI JUDGE**
dsn
OT.REV.No.79/2019
-10-
## **APPENDIX**
## **PETITIONER'S EXHIBITS:**
**ANNEXURE A TRUE COPY OF THE PROCEEDINGS DATED 31/12/2014 OF THE ASSESSING AUTHORITY.**
**ANNEXURE B TRUE COPY OF THE FIRST APPELLATE ORDER DATED 23/08/2016.**
**ANNEXURE C TRUE COPY OF THE ORDER OF TRIBUNAL DATED 10/01/2019.**
