Suppression of Purchases and Sales cannot be based on ‘Eye Estimation’ of Stock: Orissa HC Quashes VAT Assessment [Read Order]

The Orissa High Court (HC) while quashing the VAT assessment held that the suppression of purchases and Sales cannot be based on ‘Eye Estimation’ of Stock.

Subham Marbles, the petitioner questioned whether the Odisha Sales Tax Tribunal is right in law to hold the petitioner was involved in the suppression of purchase and sales, due to a discrepancy of stock, when the stock-taking was made approximately on eye estimation, without having any other iota of evidence of suppression of purchase and sales, based on a confessional statement, which has been retracted subsequently at the stage of assessment.

The Assessing Officer had undertaken a physical verification of stocks. The Court emphasized that there cannot be an automatic enhancement of taxable turnover based on eye estimation by the Assessing Officer.In order to check the accuracy of the calculation of tax liability, mitigate tax evasion, to prevent genuine taxpayers from tax evaders, the officers have to keep an eye over the taxpayers.

In Mahabir Rice Mill v. State of Orissa, it was held that “in the absence of any material to establish the goods found short have been sold, it is not possible to the Department to simply enhance the taxable turnover based on ‘eye estimation’.”

Justice M S Raman held that the court was not satisfied with the Department which has been able to show the materials based on which it could conclude that there has been suppression of purchase and sales leading to enhancement of the taxable turnover of the Petitioner-dealer. 

Further, the question framed is answered in favour of the dealer and against the Department. The impugned order of the Tribunal and the corresponding orders of the 1st Appellate Authority and Assessing Officer is set aside.  

To Read the full text of the Order CLICK HERE

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