G. Sivarajan, J.
1. The matter arises under the Kerala General Sales Tax Act, 1963, for short, 'the Act'. The assessee is the revision-petitioner. The State is the respondent. The assessment year concerned is 1993-94. The assessee is engaged in the retail business in ready-made garments in the name and style of 'Designs' at Attukkal Shopping Complex, East Fort, Thiruvananthapuram. For the assessment year 1993-94, the assessee filed a return disclosing a total and taxable turnover of Rs. 14,57,409 and Rs. 13,74,500, respectively claiming exemption on a turnover of Rs. 82,908. There was an inspection of the business premises of the assessee on May 28, 1993 and a shop inspection report was prepared. Subsequent verification of the books of account with the shop inspection report showed that there was stock variation to the tune of Rs. 73,488. The assessee had admitted the offence before the Intelligence Officer and remitted a sum of Rs. 4,500 as compounding fee. Based on these materials, the assessing authority proposed to reject the books of account and return filed by the assessee. He accordingly issued a pre-assessment notice. The assessee filed objection to the said notice, wherein, the assessee had contended that there is no stock variation at all and that all the account books and other books were written up to May 27, 1993 which were available at the time of inspection on May 28, 1993. The assessee had also explained that the stock variation is due to exchange of goods sold according to the desire of the customers and similar other situations, and that the stock cannot be tallied with accuracy. It was also stated that the offence was admitted before the Intelligence Officer only because of the pressure and threat put on the assessee by the said officer. The assessing authority considered the said objection and observed that the assessee has no evidence to prove the said arguments, and further there was shortage of 466 Nos. of different items amounting to Rs. 57,080 and excess and short of 139 Nos. on different items amounting to Rs. 16,408. On these basis, the assessing authority stated that this itself is sufficient to show that the variation is not the result of exchange of sold goods. The assessing authority had accordingly made an addition of 25 per cent to the taxable turnover for probable omissions and suppressions. Being aggrieved by the said order, the assessee filed appeal before the Appellate Assistant Commissioner (Agricultural Income-tax and Sales Tax), Thiruvananthapuram. The appellate authority noted the findings of the assessing authority and after perusal of the records, she also formed an opinion that the assessee had effected unaccounted sales evidenced by sale bills found in the record. The appellate authority also noted that on perusal of the records, it is seen that the Intelligence Officer took physical stock of 17 items and on verification of this stock ascertained with the books of accounts, stock variation in 14 items were detected and the suppression detected comes to Rs. 73,488. The appellate authority also noted that as per the monthly return filed, the taxable sales accounted up to May 31, 1993 comes to Rs. 3,64,964.65, and the unaccounted sales detected up to May 28, 1993 comes to Rs. 73,488. He found that the suppression detected comes to more than 20 per cent of the taxable sales conceded. He also noted that though there will be substantial sales during festival seasons like Onam, X-mas, Ramzan, etc., the records reveal no increase in the turnover, and therefore, she formed the opinion that the addition of 25 per cent to the taxable turnover is just and reasonable. The Tribunal has also considered the materials gathered in the inspection, the stock variation found and the compounding of the offence made by the assessee. On that basis, the Tribunal held that the rejection of the accounts was justified. On the question of addition, the Tribunal had simply stated that the addition of 25 per cent made amounting to Rs. 3,43,625 cannot in any way be held to be high or unreasonable.
2. We have heard Dr. K.B. Muhamed Kutty, the learned Counsel appearing for the petitioner, and Sri Georgekutty Mathew, the learned Government Pleader appearing for the respondent. We have also perused the orders of the assessing authority and the two appellate authorities and also perused the reply to the pre-assessment notice filed, and also the various assessment orders for the years 1992-93 and 1994-95 to 1999-2000, produced by the assessee along with this revision. Though the counsel for the assessee canvassed for acceptance of the accounts, we are unable to agree with him. Admittedly, there was an inspection of the business premises of the assessee on May 28, 1993. Stock variation to the tune of Rs. 73,488 was found on subsequent verification of the accounts with the Site Inspection Report. The assessee had compounded the offence by paying a compounding fee of Rs. 4,500. Though the assessee contended that the books of account were written up to date and that it reflects all the transactions which had been effected, the assessing authority has clearly found stock variation on certain items. This has been accepted by the two appellate authorities also. In these circumstances, we also confirm the rejection of the accounts.
3. However, coming to the question that estimation of turnover by making additions to the returned turnover, we find that the materials available before the assessing authority was mainly the details gathered in the inspection conducted on May 28, 1993, and the compounding of the offence by the assessee. That apart, the first appellate authority has also noted that though certain sales are depicted in the sale bills, the same has not been entered in the books of account. It is also noted by the first appellate authority that the Intelligence Officer had verified 17 items of ready-made garments, in which stock variation was found in respect of 14 items, which came to Rs. 73,488. Admittedly, the unaccounted transactions is only to the tune of Rs. 73,488. Now the addition made comes to Rs. 3,45,625. Considering the explanation offered by the assessee that the stock variation may be probably due to the unsatisfactory way of conducting the physical verification of the stock during business hours and due to exchange of ready-made garments by the parties, and other circumstances, we are of the view that the addition of 25 per cent sustained by the assessing authority and upheld by the two authorities does not appear to be reasonable having nexus with the actual suppression found. Here, it is relevant to note that the assessee's case is that he is an honest dealer, that he had not effected any unaccounted transactions, that he had written the accounts up to date till May 27, 1993, that is the date previous to the inspection, and that for the immediate preceding year and for all subsequent years up to 1999-2000, his books of account were accepted by the assessing authority evidenced by annexure D and annexures F to J. Though the acceptance of the books for the immediate previous years and subsequent years may be a relevant consideration, having regard to the fact that there was an inspection during this year, and the assessee had admitted the offence of not maintaining true and correct accounts of its business, certainly a different consideration is required for this year. Taking into account all the circumstances, we are of the view that the addition must be limited to 15 per cent of the returned turnover. We accordingly modify the orders of the three authorities and direct the assessing authority to modify the assessment by making an addition of 15 per cent to the returned turnover.
This T.R.C. is allowed to the above extent.