Statutory declaration for sales deduction stands unless genuine falsity is proved with relevant evidence

Production of the statutory declaration under section 5(2)(a)(ii) read with rule 26 creates prima facie proof that sales were made to registered dealers, so deduction cannot be denied unless the revenue brings legally relevant evidence showing the transactions were not genuine. The authorities' reliance on cash payments, inability to produce the purchasing dealers, doubts about their financial capacity, and refusal to enforce process against a dealer was treated as irrelevant. A quasi-judicial assessment based partly on relevant and partly on irrelevant considerations is vitiated, and the deduction could not be disallowed on the grounds invoked by the authorities.

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Issues: Whether deductions claimed under section 5(2)(a)(ii) of the Punjab General Sales Tax Act could be disallowed on the basis of the circumstances relied upon by the authorities, namely cash payments, inability to produce the purchasing dealers, doubts about their financial capacity, and rejection of supporting witnesses.

Analysis: Production of the statutory declaration under section 5(2)(a)(ii) read with rule 26 of the Punjab General Sales Tax Rules, 1949, is prima facie proof that the sales were made to registered dealers. The authorities could disallow the deduction only on legally relevant evidence showing that the transactions were not genuine. In the present case, the Assessing Authority relied on matters that were held to be irrelevant, including the cash nature of the payments, the assessee's inability to produce the purchasers, the alleged financial weakness of the purchasers, and the refusal to enforce process against the concerned dealer. Where a quasi-judicial decision rests partly on relevant and partly on irrelevant considerations, the decision is vitiated.

Conclusion: The deductions could not be disallowed on the grounds relied upon by the authorities, and the questions referred were answered in favour of the assessee and against the revenue.

Ratio Decidendi: A deduction for sales to registered dealers cannot be refused where the statutory declaration is produced, unless the revenue establishes by legally relevant evidence that the transactions were not genuine; reliance on irrelevant or extraneous considerations vitiates the assessment.

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