High Court of Judicature at Allahabad
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The Commissioner, Trade Tax, U.P. Lucknow v. S/S Khandelwal Engineering Corporation, Chhippitola, Agra - SALES/TRADE TAX REVISION No. 761 of 1997  RD-AH 2196 (30 August 2005)
TRADE TAX REVISION NO.761 of 1997
The Commissioner, Trade Tax, U.P., Lucknow. Applicant
S/S Khandelwal Engineering Corporation, Agra. Opp.Party.
Hon'ble Rajes Kumar, J.
Present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 24th February 1997 relating to the assessment year 1986-87 under the U.P. Trade Tax Act.
The applicant was carrying on the business of manufacture and sale of diesel engine. The books of account have been rejected by the assessing authority on the ground that the manufacturing account as required under section 12 (2) of the Act has not been maintained. It has been observed by the assessing authority that in the audit report it has been stated by the auditor that the details of raw material used and the goods manufactured along with the stock, purchase and sale etc have been given, but they are not supported by any account. After rejecting the books of account, the assessing authority enhanced the turnover by way of best judgment assessment. The order of the assessing authority has been upheld in first appeal. The applicant filed appeal before the Tribunal which has been allowed by the impugned order and the books of account and disclosed turnover has been accepted.
Heard counsel for the parties.
Learned Standing Counsel submitted that admittedly the manufacturing account in accordance with Section 12 (2) of the Act has not been maintained. He submitted that even before the Tribunal, the learned counsel for the applicant stated that in the business of assembling of diesel engine, there are 250-300 small, medium and big spare parts, which are utilized of various sizes and specifications and in the assembling of one diesel engine nearly 3-4 days, are consumed, it is not possible to maintain the stock register of raw material. Therefore, the Tribunal has erred in accepting the books of account. In support of his contention, he relied upon the decision of the Apex Court in the case of CST Versus M/S Girja Shanker Awanish Kumar reported in 1997 UPTC 213.
Learned counsel for the applicant submitted that all the purchases and sales are valued and verifiable and non maintenance of manufacturing account is of technical in nature and there are no adverse material available on record and, therefore, in the absence of any adverse material, the turnover is liable to be accepted even after rejecting the books of account for non-maintenance of manufacturing account under section 12 (2) of the Act.
I have perused the order of the Tribunal and the authorities below.
In the case of CST Versus M/S Girja Shanker Awanish Kumar (supra), the Apex Court held as follows:
"The keeping of a stock register, especially in the case of manufacturer, is of great importance. It is a means of verifying the assessee's account by having a quantitative tally. Section 12 (2) of the Act mandates the dealer to maintain stock books in respect of raw materials as well as product obtained at every stage of production. If such a stock book is not maintained, it leads to the conclusion that the account books are not reliable or that particulars are not properly verifiable. If the account books are rejected, the turnover has to be determined to the best of judgment of the assessing authority concerned. We are unable to uphold the view that a defect in non-maintenance of stock register is only technical and so the turnover disclosed in the account books should be accepted. On the facts of a particular case, it is for the assessing authority to consider along with other materials disclosed in the case, to what extent the account books can be relied on for determining the turnover. In normal circumstances, the rejection of account books call for the estimation of the turnover to the best of judgment of the assessing authority. Having upheld that the account books of the assessee were liable to be rejected, the learned Judge of the High Court was wrong in holding that the defect is of a technical nature and the account books should be accepted. We set aside the decision of the High Court and direct that the estimated turnover of the dealer as upheld in appeal, shall stand restored. The appeal is allowed. However, in the facts and circumstances of the case, there shall be no order as to costs."
In the aforesaid case, the Apex Court held that the maintenance of manufacturing account is mandatory and non-maintenance of manufacturing account leads to the conclusion that the account books are not reliable or that particulars are not properly verifiable. The Apex Court further not accepted the plea that the defect of non-maintenance of stock register is only technical and the turnover disclosed in the account books should be accepted. The Apex Court held that the non-maintenance of manufacturing account in accordance to Section 12 (2) of the Act leads to best judgment assessment. In this view of the matter, the order of the Tribunal is not sustainable. It is true that the best judgment assessment does not necessarily always lead to the enhancement of the turnover while making best judgment assessment and estimating the turnover if disclosed turnover is found to be reasonable and there is no adverse material and there is no scope of any evasion of turnover looking to the nature of business and other factors, the same can be accepted, but this aspect of the matter has to be examined by the fact finding authority on the facts and circumstances of the case. Perusal of the order of the Tribunal shows that the Tribunal has not examined this aspect of the matter. In the circumstances, the order of the Tribunal is liable to be set aside.
In the result, revision is allowed. The order of the Tribunal is set aside and the matter is remanded back to the Tribunal to decide appeal no.286 of 1992 relating to the assessment year 1986-87 under the U.P. Trade Tax Act with regard to estimate of the turnover afresh in the light of the observations made above.
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