YASHWANT VARMA,J. - (1.) Heard learned Standing Counsel.
(2.) This revision has been preferred against the judgment and order of the Tribunal dated 22 September 2007 which has affirmed the view taken by the assessing authority which had proceeded to reject the books of account and undertake a consequential best judgment assessment. As the Court reads the order of the assessing authority, it is evident that the said authority took into consideration the fact that in the relevant assessment year penalties of Rs. 3,225/- and Rs. 4,500/- had come to be imposed upon the assessee for violation of Section 15A(1)(o). It is not disputed before the Court that the penalty of Rs. 3225/- has since been set aside. The Court also notes that during the course of a survey of the business premises of the assessee undertaken on 23 March 1999, no adverse material was found. On the basis of the above facts however the assessing authority proceeded to reject the books of account and undertook a best judgment assessment. Insofar as the enhancement of turnover is concerned, the sole ground on which this was undertaken was the participation of the assessee in an Amnesty Scheme under the Excise Act for the years 1995-96, 1996-97 and 1997-98. On account of the disclosures made therein the Assessing Authority proceeded to enhance the turnover for the relevant assessment year i.e. 1998-99. The First Appellate Authority in terms of its order dated 5 March 2003, and in the opinion of this Court correctly proceeded to set aside this part of the order of the Assessing Authority noting that the disclosures made under the Amnesty Scheme were not for the year 1998-99. This view taken by the First Appellate Authority has been interfered with by the Tribunal and the view taken by the Assessing Authority affirmed.
(3.) The Court finds itself unable to sustain either the rejection of books or the enhancement of turnover for reasons which are set forth hereinafter. A levy of penalty under Section 15A(1)(o) would by itself not form a ground for rejection of books of account. A rejection of books of account must necessarily be undertaken upon the Assessing Authority forming the opinion that transactions are not being duly and correctly set forth and accounted for in the books. It is only upon the Assessing Authority being satisfied that the assessee as a course of conduct is not faithfully and correctly recording all his transactions in his books that he may be constrained to reject the books. This power conferred could also be exercised where adverse material is found, which enables the Assessing Authority to form an opinion that purchases or sales are not being truly and faithfully disclosed. A penalty under Section 15A(1) and more particularly Clause (o) comes to be levied against the assessee in a case where he imports or attempts to import or transport goods in contravention of the provisions of Section 28A. Section 28A, it is relevant to note, relates to the import declarations which must accompany goods when they enter the State. An infraction of this provision alone cannot possibly lead to a conclusion that the books of account merit rejection. This, more so, when there was no independent material before the Assessing Authority to be satisfied that the transactions of purchases or sales were not being duly and correctly recorded. In the facts of the present case, the Court additionally notes that the penalties in question apart from being wholly minuscule, at least, one penalty had been set aside by the time matter reached the board of the Tribunal. Accordingly and for all the aforesaid reasons, the Court finds that there was no sufficient material before the Assessing Authority which would have merited rejection of the books.;