R.R RASTOGI, J. - (1.) THE assessee is a manufacturer of glasswares. For the asst. yr. 1961-62, gross sales were shown at Rs. 5,24,911.39 inclusive of UP sales amounting to Rs. 1,67,645.61. The STO did not accept the disclosed sales and estimated UP sales at Rs. 2,40,000.00 The reasons given by the STO for rejecting the disclosed version were that the purchases were not fully vouched, that in the returns there was a difference of Rs. 2,799 in gross sales and Rs. 60 in net sales when compared with the figures disclosed in the accounts at the time of assessment; that soda ash consumption was shown at 14 seers as against the standard consumption of 16 seers and consumption of coal was shown at 3 maunds 11 seers as against the standard consumption of 2 maunds 22 seers. The last reason given was that 2 tons and 10 Cwts soda ash purchased on 8th April, 1961 was not entered in the stock register or in the Rokar. When the matter came in appeal before the Asst. CST (Judicial), an attempt was made by the assessee to explain these defects and it was claimed that in the earlier years the accounts had always been accepted. The Asstt. CST found that out of total purchases of raw materials amounting to Rs. 2,87,982, only purchases worth Rs. 1,909 were not vouched and because of that no adverse inference could be drawn. He also observed that the account books of the assessee, which in the earlier years had been maintained in similar fashion, had always been accepted in sales-tax proceedings. They had also been accepted in income-tax proceedings. As for the difference in the returns as well, the explanation given was accepted. As for soda ash and coal consumption as well, the explanation was accepted as it was supported by the report of the Asstt. Glass Technologist. It was held that the consumption of soda ash was not low and the consumption of coal as shown was quite correct. On the last objection, from the stock register it was found that here was an entry made on 8th April, 1961 that this particular quantity of soda ash had been taken on loan from the assessee's sister concern and on 22nd April, 1961 it was returned back. Entries of the receipt and the return were duly made in the stock register. Besides this there were affidavits of Sri Radha Raman Gupta, the main partner of the sister concern and his son Suresh Chandra Gupta, on of the partners of the assessee concern. According to the Asstt. CST if corresponding entries were not made in the books of Satya Narain Glass Works, from whom this quantity of soda ash had been taken on loan, an adverse inference, if at all, could be drawn against that party. There was absolutely no basis for presuming that the assessee was maintaining any duplicate set of accounts. Thus the Asstt. CST held that most of the objections raised by the STO had been satisfactorily explained. But even then the book version could not be accepted in toto. In the result he reduced UP sales of Rs. 1,85,000.
(2.) IT appears that cross revisions were filed before the Addl. Judge (Revisions) Sales-tax Agra. The learned revising authority held that the assessee had fully explained the objections that purchases were not fully vouched and that there was some difference in the sales as disclosed in the returns and as ultimately found at the time of assessment. The explanation of the assessee in regard to the consumption of soda ash and coal was accepted. However the assessee's explanation in regard to 2 tons 10 Cwts soda ash was not accepted. The assessee's explanation regarding consumption of sand for 'Dhalai' and frosting was also not accepted as convincing. In the result the rejection of the accounts was upheld and the estimate of UP sales as sustained by the Asstt. CST as well was confirmed. The following question of law has been referred to us under S. 11(4) of the UP ST Act :-- "Whether on the facts and in the circumstances of the case the assessee's account books have been validly rejected ?"
(3.) WE have heard the learned counsel for the assessee as also the learned Standing Counsel and in our opinion the rejection of the account books was without any sufficient reason. We have already mentioned above that certain reasons were given by the STO for rejecting the book version. In appeal the Asstt. CST accepted the assessee's explanation in regard to all those objections and even then he confirmed the finding of the STO that the book version was not liable to be accepted in toto. This finding was without any basis whatsoever because no specific defect remained in the books. The books had all along been accepted in the previous year and they were maintained in the year under consideration in the same fashion as before. Thus there remained no justification whatsoever for rejecting the book version. In our opinion, the learned revising authority was not justified in rejecting the assessee's explanation about the consumption of sand. Merely because the consumption of sand was mentioned in lump quantity at the end of the month it could not be inferred that the consumption shown was not correct. We do not think that anything can be produced merely from sand. It could not be said, therefore, that any production had been concealed, particularly when coal consumption was regarded as properly explained. As regards 2 tons 10 Cwts soda ash proper entries were found in the assessee's stock register and in the Rokar on 8th April, 1961 This particular quantity had been taken on loan from the sister concern and it was returned back on 22nd April, 1961. There was an entry of the return as well in the stock register. Even if the affidavits were to be disbelieved, there was no material to hold that merely because in the books of the sister concern, a corresponding entry was not to be found, the books of the assessee were not reliable. We are, therefore, of the opinion that the assessee's books have not been validly rejected.;