Heard Sri Suyash Agarwal, learned counsel for the applicant and Sri B.K. Pandey, learned standing counsel for the respondent.
The above noted revisions are admitted on the following questions of law:
(i) Whether the Tribunal rightly set aside the finding of the appellate authority without assigning any reasons when a copy of the repairing and job work and repairing work supported with the repair charges bills/vouchers maintained and reflected in the ledger and payment received, it correctly restored the Assessment order?
(ii) Whether the Tribunal was justified in assessing evaded extra purchases Rs.25,00,000/- and evaded extra sale of Rs.15,00,000/- when the basis of rejection of accounts pertains to job work and repairing charges only?
(iii) Whether the Tribunal rightly restored the evaded sale at Rs. 25,00,000/- and evaded purchase Rs.15,00,000/- without setting aside the finding of the Appellate Authority and without considering Assessment order of A.Y. 2007-08 and A.Y. 2009-10.
With the consent of learned counsel for the parties both the revisions are being finally heard together.
Briefly stated facts of the present case are that according to the Assessee it is engaged in trading, job work and repair of furniture. During the assessment proceeding for Assessment Year in question i.e. A.Y. 2008-09 (U.P.), the Assessing Officer issued a show cause notice on eight points and also required the Assessee to produce the books of accounts and evidences in support of his reply to the show cause notice. In his reply the Assessee admitted its activity to be manufacture of furniture and sale thereof but contended that profit of Rs.2,50,482/- shown by him is from job work and repairing. However, in support of his stand with regard to job work he did not produce job work receipts, proof of payment to labourers and transportation challan etc. Certain other discrepancies were also found. The Assessing Authority did not accept the explanation of the Assessee with regard to trading, job work and repair. Consequently he made best judgment assessment determining the evaded turnover of furniture at Rs.25 lacs and evaded purchases of ply wood, Board, mica, fevicoal and timber etc. at Rs.15 lacs. Thus by Assessment Order dated 10.5.2012 a demand of Rs.4,14,724.00 was raised against the Assessee. The Assessee preferred First Appeal No. 282/14 before the Additional Commissioner, Grade-2 (Appeal)-I, Commercial Tax, Agra, which was partly allowed and the demand raised against the Assessee was reduced by Rs.300690/- by order dated 1.7.2014.
Aggrieved with the order of the First Appellate Authority, the Assessee as well as The Commissioner, Commercial Tax, U.P. Preferred Second Appeal being Second Appeal No.369 of 2014 and 422 of 2014 respectively under Section 57 of the U.P. VAT Act 2008 (hereinafter referred to as "the Act"). By order dated 23.6.2016 the Second Appeal of the respondent was allowed and the appeal of the Assessee was dismissed by the Member Commercial Tax Tribunal, Bench-II, Agra.
Aggrieved with aforesaid order of the Tribunal allowing the appeal of the respondent and dismissing the appeal of the Assessee, the Assessee has filed these two revisions.
Learned counsel for the applicant Assessee admits best judgment assessment but submits that there was no basis for determination of unaccounted purchases of Rs.15 lacs and evaded sales turnover of Rs.25 lacs on account of profit from job work and repair which included the receipts for repair from UCO Bank and I.T.A.T. for Rs.9,900/-. It is submitted that the repair charges from both aforesaid two departments were received by cheque and thus there was no occasion to doubt these receipts. It is further submitted that if the Assessing Authority or the Tribunal had any doubts about the genuineness of the aforesaid repairs, it was open to them to inquire about it from both the aforesaid departments. He, further submits that determination of turnover with regard to repair and job charges is not based on any material but the same is the result of arbitrary exercises of power by the Assessing Authority.
Learned standing counsel supports the impugned order of the Tribunal.
I have carefully considered submission of learned counsel for the parties.
The findings of manufacture of furniture and sales thereof is supported by concurrent findings of fact recorded by the authorities based on material on record. That apart the Assessee, in his reply to the show cause notice, has himself admitted the nature of his business activity to be manufacture, repair and job work. However, he could not prove job work. Thus the findings of the Tribunal that the Assessee is engaged in the manufacture and sales of furniture, does not require any interference.
So far as the repair is concerned, the Assesee has clearly stated and produced sufficient material before the Assessing Authority, the First Appellate Authority and the Tribunal with regard to receipt of amount on account of repairs from two agencies, namely, UCO Bank and the I.T.A.T. which comes to Rs.9,900. The Assessing Authority has not made any inquiry from the aforesaid UCO Bank and I.T.A.T. with regard to the genuineness of repairing disclosed by the Assessee. Thus the receipt of repairing charges from the aforesaid two persons can not be doubted and the addition in the turnover on the basis of receipt of repairing from these two persons is wholly unjustified. Rest of the amount of receipts from repairs could not be proved by the Assessee.
So far as the determination of turnover on the basis of gross profit shown by the Assessee from job work and remaining alleged repairs is concerned, I find that neither before the assessing officer nor before the Tribunal the Assessee could produce relevant documents to establish it despite pointed query made by the Assessing Officer.
The gross profit rate adopted by the Tribunal to determine the evaded sales turnover of the Assessee on the basis of the profit shown by the Assessee allegedly from job work and rest of the repairs, can not be said to be arbitrary. The Tribunal has recorded its findings of fact with regard to job work in paragraph 8 of the impugned order that although in the repairing account receipts have partially been shown in cash and partially by cheque but the entire receipts from job work have been shown in cash and particulars of parties for whom the alleged job work was undertaken as well as the nature of job work have not been given by the Assessee either before the Assessing Authority or before the First Appellate Authority and the Tribunal. In the absence disclosure of any particulars by the Assessee with regard to the alleged job work, it can not be accepted. Thus the Tribunal has not committed any error of law in determining turnover of sales on the basis of gross profit shown by the Assessee from job work treating it to be profit from sales of furnitures.
So far as the determination of unaccounted purchase of Rs.10 lacs and Rs. 5 lacs total Rs.15 lacs by the Assessing Authority as upheld by the Tribunal is concerned, I find substance in the submission of the learned counsel for the Assessee. It is not the case of the department that apart from the material shown by the Assessee which have been used in the alleged repair in job work, any other material was used by the Assessee in the manufacture determined by the Assessing Officer. There is no material on record that the Assessee has made any unaccounted purchased. Thus those material which were shown to have been used in job work and repair by the Assessee became basis for determination of manufacture of furniture and evaded sales turnover thereof by the Assessing Authority. The Assessing Authority himself recorded findings in the Assessment Order on point No.1 of the show cause notice that there is very little possibility of sales of the materials purchased which are usable in manufacture of furniture. On point No.6 of the show cause notice he recorded findings that the disclosed job work is in fact income of the Assessee from manufacture and sale of furniture because the Assessee himself has accepted in his explanation that remaining material has been used in job work and repairing. Thus use of material available with the Assessee in the manufacture is undisputed. The dispute was only on the point whether it has been used in the job work and repair as alleged by the Assessee or it was used in the manufacture of furnitures and sales thereof. The stand taken by the Assessee regarding job work and repairs (except repairs for Rs.9,900/-) have been rejected. Consequently, there was no justification to determine further unaccounted purchases. Under the circumstances, the determination of unaccounted purchase by the Assessing Officer as upheld by the Tribunal, is based on no material and, therefore, it can not be sustained. In view of the above discussion, unaccounted purchase of Rs.15 lacs and tax levied thereon by the Assessing Authority as upheld by the Tribunal are set aside.
Since the profit shown from repairing has been proved by the Assessee to the extent of Rs.9,900/- hence proportionate addition in sales turnover deserves to be reduced. Consequently, the sales turnover, applying the gross profit rate of 10% as adopted by the Tribunal, is reduced by Rs. 1 lac and the evaded sales turnover is fixed at Rs.24 lacs.
In view of the above discussions, the Revisions are partly allowed to the extent indicated above. The addition in sales turnover of furniture is reduced by Rs. one lac and the unaccounted purchases subjected to tax is deleted.
Questions of law as framed above are accordingly answered.
Order Date :- 4.11.2016/vkg