2014 (7) TMI 1095 - HC - VAT and Sales Tax

Karnataka Court Upholds Tribunal's Decision on Tax Claims, Emphasizes Need for Thorough Investigation

The Court upheld the Karnataka Appellate Tribunal's decision to remand the matter for re-examination of input tax claims from three dealers under the ... Claim of input tax on the purchases from the three dealers - Held that:- Assessee has claimed deduction of input tax on the basis of three invoices showing purchase of go ods from three dealers. Admittedly, these dealers have not remitted the tax recovered from the assessee. Their whereab outs are not known. As rightly pointed out by the Tribunal, mere existence of invoices is no proof that under the said invoices, materials are purchased and tax is paid. The Assessing Authority was not justified in drawing the inferenc e that the said three dealers are bogus merely on this fact. He should have made an enquiry to find out the genuineness of the transaction as set out by the Tribunal. It is only after such enquiry if the Assessing Authority is satisfied that the transaction in question is genuine one, the assessee has paid the money, he has received the goods and necessary entries are made in the books of accounts of the assessee, then merely because of the dealer has not remitted the tax would not enable the Assessing Authority to deny the benefit to the assessee. As the said exercise had not been done, after setting aside the order, the Tribunal was justified in directing the Assessing Authority to undertake that exercise as suggested by the Tribunal. In the facts and circum stances of this case, we are satisfied that the approach of the Tribunal is just and proper and is in accordance with law. - Decided against assessee. Issues:Challenge to order remanding matter for re-examination of input tax claim from three dealers.Analysis:The case involves revision petitions challenging the Karnataka Appellate Tribunal's order remanding the matter to the Assessing Authority for re-examining the input tax claim from three dealers. The assessee, a dealer under the Karnataka Value Added Tax Act, purchased plywood from various dealers, including three who did not file returns or pay taxes for sales to the assessee. The Assessing Authority considered these dealers bogus and denied input tax deduction. The assessee's appeals to the Joint Commissioner and then to the Tribunal were based on the lack of necessary investigations by the Assessing Authority to ascertain the genuineness of the transactions. The Tribunal found the Assessing Authority's conclusions unsustainable due to insufficient investigation and directed a thorough examination to verify the transactions and transportation details before denying input tax benefits.The Tribunal emphasized the need for proper investigation into the genuineness of transactions, including verifying freight charges, vehicle registrations, and delivery of goods to the assessee. It criticized the Assessing Authority for not adequately assessing the facts, genuineness of tax invoices, and potential connivance between the assessee and dealers. The Tribunal set aside the Assessing Authority's order and instructed a comprehensive investigation before concluding the assessment afresh in accordance with the law. The revision petitioner argued against remand due to the time elapsed and evidence availability concerns, but the Court found no merit in this contention.Regarding the input tax claim, the Tribunal highlighted that the mere existence of invoices does not prove genuine transactions or tax payments. The Assessing Authority erred in assuming the dealers were bogus solely based on non-remittance of tax without verifying the transactions' authenticity. The Tribunal's direction for a detailed inquiry into the transactions, payment verification, and book entries was deemed appropriate. The Court upheld the Tribunal's approach as just and lawful, dismissing the revision petitions. The judgment underscores the importance of thorough investigations to establish the legitimacy of transactions and ensure fair application of tax laws.