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Supreme Court Decision

Nathu Ram Ramesh Kumar vs Commissioner of Delhi Value Added Tax [2014 VIL 09 SC]

Revenue Authorities justified in estimating total taxable turnover on the basis of piecemeal facts presented to them.

The taxpayer was a manufacturer of sweets, namkeen and other eatables. During the relevant period, the Commissioner of Sales Tax visited the business premises of the taxpayers and checked the total cash inflow on those days. It was found that the accounts of the taxpayer were not maintained properly and all the sales effected during a day were not recorded. Upon observation of the information provided to the Commissioner, he estimated the taxable turnover by extrapolating the figures available to him and passed the assessment order. The taxpayer opposed the assessment order on the basis that no notices were issued to the taxpayer before passing the order and therefore the taxpayer had no chance to explain his case to the Revenue Authorities.

The matter reached the SC which held in favor of the Revenue Authorities. The SC stated that the Revenue Authorities did not jump to a conclusion and had called upon the taxpayer to explain the difference in the recorded and estimated revenue in his books of accounts. However, no such explanation was provided by the taxpayer to the Revenue Authorities, following which they passed the orders in question. The SC further stated that there was no doubt that the books of accounts were not maintained properly and were not reflecting each and every transaction and therefore the Assessing officer had rightly come to a conclusion that total possible sale was much higher and the conclusion so arrived at was based on sound reasons. The SC further observed there was a presence of an oblique motive on part of the taxpayer to do the same. Accordingly it was held that demand of sales tax along with penalty was justified.