B G R ENTERPRISES Vs. STATE OF KERALA

JUDGEMENT

(1.) THESE two revisions are filed against the common order in t. A. Nos. 666 and 667 of 1998. They relate to the assessment years 1988-89 and 1989-90. Assessee is M/s. B. G. R. Enterprises. It is running a vegetarian hotel at Ernakulam. For the year 1988-89, the petitioner conceded a taxable turnover of Rs. 50, 55, 429, 90. The assessing authority rejected the accounts and issued a pre-assessment notice proposing to complete the assessment to the best of his judgment on a taxable turnover of Rs. 61, 62, 570 by adding 10 per cent of the conceded turnover. For the year 1989-90, the petitioner conceded a taxable turnover of Rs. 54, 30, 482. 15. The accounts were rejected and the petitioner was assessed for a taxable turnover of Rs. 62, 44, 960 by adding 5 per cent to the conceded turnover. The reasons on the basis of which the accounts were rejected are as follows : " (1) Sales turnover conceded for 1988-89 is much less than that for the previous year even when there is increase in purchase of raw materials and stationery when compared to the purchase for 1987-88. No satisfactory explanation has been offered for the steep fall in turnover even when there is considerable increase in purchase of raw materials. (2) Monthly sales turnover returned has no nexus with the monthly purchase of rice. (3) No stock register is kept. The closing stock and opening stock conceded are devoid of quantitative details. The absence of stock register and stock inventory renders it impossible to ascertain the day today consumption of raw materials, (4) An amount of Rs. 2, 73, 768. 25 is accounted towards 'miscellaneous income'. This includes Rs. 1, 41, 189. 80 being 'extra' charged at Rs. 1. 50 per head for a. C. Restaurant. This amount forms part of turnover and is taxable at the rate of 10 per cent. (5) Purchase of pappadam for Rs. 27, 056. 50 is not supported by bills. This attracts tax under section 5a. (6) Water charges paid Rs. 4, 972. 30 forms part of turnover and hence attracts tax. (7) Hire charges received forms part of turnover taxable at 5 per cent. Hence, the amount received Rs. 16, 949. 40 is proposed to be assessed to tax at 5 per cent. (8) Sales turnover of empties has not been conceded. This is proposed to be estimated at Rs. 12, 000 and assessed to tax at 8 per cent".

(2.) WHEN the petitioner received notice, it gave a reply, which is as follows : "1. The comparison between purchase in the previous year and the assessment year is made without taking into account the opening or closing stock. Moreover we are dealing in cooked food which is a perishable article and any unsold stock remaining at the end of the day cannot be preserved. The prices of commodities are increasing year by year and hence any increase in the amount of purchases cannot be an indication of the corresponding increases in the volume of business. . . . . . . . 2. The comparison of the quantity of rice purchased monthly with the turnover of the corresponding month is bound to be misleading. The rice purchased every month may not be completely used in the same month. Without considering the stock at the close of the every month the comparison is bound to be incorrect. . . . . . . . . . 3. It is not practicable to maintain daily stock register in this line of business. We maintained inventories for the opening and closing stock and from the value shown under different items the quantity could be worked out. . . . . . . . . . 4. We submit that the charges collected for taking food in the A/c restaurant cannot form part of the turnover. Sale as defined in the Act is transfer of property in goods by one person to another for cash or other valuable consideration. . . . . . . . . . 5. Purchase of pappadam could be subjected to tax under section 5a only if frying of pappadam could be termed as manufacture. . . . . . . . . . 6. Water charges are paid to the Corporation. The Corporation when it supplies water to the persons having water connection is not subjected to tax. After exempting the corporation from paying from sales tax on the sale of water to the residents of the Corporation the purchase of such water by any person or institution cannot be subjected to tax. . . . . . . . . . 7. The hire charges accounted by us represent the charges collected for using of furniture and other facilities during parties. These charges cannot be termed as charges for transfer of right to use goods within the meaning of Explanation (3b) of clause (xxi) of section 2. . . . . . . . . 8. Empties are not sold by us, these are used for various purposes in the establishment". The assessing officer rejected these contentions. Against that appeals were filed. The appeals were heard together. The appellate authority held that in completing the assessment, the assessing authority has found that several reasons were given for the rejection of accounts. Against the above order, appeals were preferred before the Appellate Tribunal.

(3.) THE assessee admittedly is a very big hotel. So that always stocks of food are to be there, so that there may not be any deficiency when food is required. Hence, we are of the view that merely on the basis of the variation in the turnover of cooked food it cannot be said that there has been suppression. We are also of the view that so far as the charges for A/c room are concerned, that is charged separately. It is not the price of goods. Hence, higher charges for A/c cannot be included. So far as purchase of pappadam is concerned, the Tribunal rejected this on the ground that it was not supported by vouchers. Pappadam can be obtained from small entrepreneurs without issuing any bill or voucher. If the reasoning of the assessing authority is accepted, the receipts may be required even for purchase of plantain leaves.