The fact that Stocks are not supported by Purchase Bills cannot be a ground for Equal Addition under Tamil Nadu VAT Act: Madras HC [Read Judgment]

The fact that stocks are not supported by purchase bills cannot be a ground for equal addition under the provisions of Tamil Nadu VAT Act, said the Madras High Court while considering the writ petition between M/s.Sri Muruga Hardware & Plywoods vs The Commercial Tax Officer.

In the Instant case, the petitioner is a registered dealer under the provisions of Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) was deemed to have been assessed under Section 22 (2) of the TNVAT Act. During that time, a revision notice was issued by revenue as a result of an inspection conducted by the Enforcement Wing Officers in his premises.

Accordingly, the revenue completed the assessment made high penalty and equal addition by rejecting the petitioner’s objection. Eventually, petitioner approached Madras High Court wherein the court has an opinion that since the AO is a quasi-judicial authority, he shouldn’t follow reassessment solely guided by the observation made by investigation wing.

Justice T.S.Sivagnanam noted the decision in the case of Nokia India Pvt. Ltd., Vs. Deputy Commissioner (CT) -IV, Large Tax Payers Union, Egmore, Chennai and others wherein the same court held that, the power under Section 27(1) (a) of the TNVAT Act, 2006 is a power to revise an assessment, where, the Assessing Officer is empowered to assess escaped turnover and wrong availment of input-tax credit, giving wider power with extended period of limitation for reopening of assessment.

Accepting the contentions of the assessee, the Court said that “If the quantum of turnover was based on the dealer’s book, it cannot be treated as the best judgment assessment. But when the assessing officer comes to the conclusion that no reliance can be placed on the accounts maintained by the dealer, he proceeds to assess the dealer on the basis of his best judgment. The assessments made on the basis of the dealers’ accounts and those made on best judgments basis are totally different types of assessment. Equal addition, being a guesswork based on an estimate, unless, there is a material, it is not warranted. The fact that stocks are not supported by purchase bills cannot be a ground for equal addition. Rejection of the dealer’s explanation as regards unaccounted purchases, which are subsequently accounted for would not justify equal addition.”