Judgment:
V.V. Kamat, J.
1. In as many as three tax revision cases (T.R.C. Nos. 50, 62 and 65 Reported as Southern Metal Rolling Mills (P) Ltd. v. Slate of Kerala [1997] 104 STC 566 (Ker) of 1994) decided on September 27, 1996, we have, in detail, considered to bear in mind the distinction between what is generally known as a question of fact as against what could be understood as a question of law, relying on the decision of the apex Court in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax : [1957]31ITR28(SC) illustratively, precisely quoting the settled fourfold aspects of the question therein.
2. This was in the context of the situation that accepting the entire factual matrix without adding or subtracting anything therefrom revealing the situation that from first step of rejection of accounts consequently leading to the situation to resort to estimation is wholly unjustifiable, the result would be the ultimate inevitable reflection in regard thereto.
3. Further debate relating to the consequence of the resort to estimation entirely depends on this jurisdictional situation. In other words, the jurisdiction to reject accounts and consequently to take resort to estimation is only dependent on the factual justification relating to the rejection of accounts. In the proceedings where there is haste to avoid prosecution, mitigated by the compounding process, all becoming in the nature of a blockade thereafter, this jurisdictional conclusion requires examination. It is established and well-known that the authorities under the Kerala General Sales Tax Act, 1963 right up to the Appellate Tribunal get jurisdiction of rejection of accounts on the basis of the factual matrix. If the factual matrix, is altogether wholly insufficient to justify the resort, the inevitable resort to rejection of accounts and proceed to estimate gets completely shattered. This very jurisdictional nature of material on record compels the court to exercise jurisdiction under Section 41 of the Kerala General Sales Tax Act, 1963.
4. If the court finds, as stated above, that accepting everything that is on record, rejection becomes wholly unjustified, this being the jurisdictional error, whether the appellate authorities have proceeded on the foundation of compounding and payment of penalty becomes a situation of insignificance. We have already observed, relying on the earlier decision of this Court in Velimparambil Hardwares v. State of Kerala [1994] 92 STC 98 : 1993 KLJ (TC) 421 that compounding is only one of the relevant factors and not the be all and end all of the situation completely closing the situation as against the assessee.
5. In this situation, we have to examine the admitted and undisturbed factual matrix in the proceedings before us and the consequent resort to rejection of accounts by the authorities below.
6. The assessment year is 1990-91. The assessee returned total turnover of Rs. 15,77,892.85 and taxable turnover of Rs. 15,126.25. The particulars in regard thereto are as follows :
Non-taxable Taxable
'Opening stock ... Rs. 1,50,984.25 13,688.75
Purchases ... Rs. 14,38,278.92 20,856.88
Sales ... Rs. 15,62,766.60 15,126.25
Closing stock ... Rs. 1,24,212.75 16,753.00.'
For rejection of the accounts, the sole reliance is on the surprise inspection report dated August 28, 1990 resulting into total turnover suppressed at Rs. 1,849 only. There is no other material showing any pattern as such except the total suppressed turnover of Rs. 1,849.
7. It is on this material, Section 17(3) notice proposing addition for probable omissions and suppressions at 20 per cent amounting to Rs. 3,42,910 was issued and on the basis thereof, total tax was assessed at Rs. 26,077.80. According to the assessment order (annexure C), balance due is shown at Rs. 31,347 with surcharge at Rs. 2,013.
8. All that was considered by the first appellate authority--the Appellate Assistant Commissioner of Agricultural Income-tax and Sales Tax, Vandanmedu--was the reduction reducing the addition at Rs. 1,57,800 holding that the conceded total turnover will be more just and reasonable in the appellant's case and the order was modified. Reading the judgment, it is emphasised that the suppression detected is Rs. 1,849 only. Not only that, but it is further specified that no other clear case of suppression either in the purchase or in the sales has been detected. The position is made severe by a further observation that on a closer scrutiny of the assessment records, it can be seen that the other defects pointed out are only technical in nature. However, seeing the real situation, this aspect has been considered wholly with reference to the question of determining the addition.
9. The first appellate authority has seen the position as concluded as a result of the subsequent admission of the offence of non-maintenance of correct and complete account by payment of compounding fee of Rs. 330, consequently taking the situation as a closed door matter only to consider and record a finding that the addition made by the assessing authority is really excessive in the appellant's case.
10. The Appellate Tribunal has also mechanically proceeded in the same manner, especially in paragraph 5 containing the reasoning by observing that the main case is that the estimated addition is excessive.
11. The learned Government Pleader strenuously urged that before the Appellate Tribunal, as is specifically recorded, the chartered accountant challenged only the excessive character of the estimate by contending that the suppression which ultimately centred round the figure 1849 has resulted inasmuch as 84 times thereof.
12. We find that the admitted and undisturbed situation shows that resort to rejection of accounts is referable to a solitary situation with regard to Rs. 1,849 and that too for a period of four months from April 1, 1990 up to August 28, 1990.
13. In our judgment, this is a jurisdictional error going to the root of the matter and the assessee cannot be posed in an event, if from the perusal of the judgment of the Tribunal, the aspect has not been agitated and also in the light of the situation that the two lower authorities have proceeded on the basis of there being compounding concluding the situation. In our judgment, even if submissions before the appellate authorities being narrowed down, this Court would always be of concern in such jurisdictional situations. When resort to rejection of accounts becomes wholly unjustified by reason of its being due to variation of a microscopic amount in comparison and that too on a single surprise visit, such a resort is impermissible. We have already given our reasons in regard to the situation. The present proceedings bring before us a situation of an event where before the Appellate Tribunal the aspect does not appear to have been contended specifically. In our judgment that would not alter the situation.
14. For the above reasons, the orders of all the three authorities are quashed and set aside and the Additional Sales Tax Officer, Thodupuzha, is directed to proceed with the assessment for the year 1990-91 on the basis of the amount shown in form No. 8 by the assessee.
Order on C.M.P. No. 2886 of 1994 in T.R.C. No. 223 of 1994 dismissed.