2014 (5) TMI 722 - HC - VAT and Sales Tax

High Court overturns Sales Tax Tribunal decision due to lack of evidence & procedural fairness in reassessment

The High Court overturned the Sales Tax Appellate Tribunal's decision in a case involving the denial of procedural fairness in the reassessment process. ... Shaky Reassessment - Assessment proceedings in violation of natural justice – No opportunity of cross examination when cash bill books cheque books etc were stolen away – Jurisdiction u/s 16 of the Tamil Nadu General Sales Tax Act, 1959 – Held that:- It is no doubt true that the assessee had not produced books of accounts before the Officer, for which, the assessee had given valid reason that because of his ill health, he could not appear on 07.12.1991 in respect of the notice dated 19.11.1991 regarding reassessment - Without even a verification and considering the prayer for adjournment, the reassessment order seems to have been made on 10.12.1991, which itself is a violation of principles of natural justice. When the appeal before the First Appellate Authority related to 1989-90, we do not understand the relevance of 1986-87 for reopening of the assessment of the year 1989-90 - Tribunal confirmed this order - None of the authorities had discussed as to the source of these bills and how the said bills were related to the assessee - Merely because there were certain notes carrying the name of the assessee, per se, without any enquiry or material, AO could justifiably assume jurisdiction u/s 16 of the Tamil Nadu General Sales Tax Act, 1959. The AO did not say in his reassessment order about the materials not considered while making the original assessment - Thus, the source of getting the materials relied on by the AO for reassessment remaining unanswered and unexplained, we do not find any ground to upheld the order of the Tribunal - Although, Tribunal is a final fact finding authority, yet without any material, it confirmed the reassessment order and the reasoning does not rest on any material - Therefore, the basis of the re-assessment itself being very shaky, in the absence of materials disclosed as to whether the reassessment was based on account of inspection or based on third party's information and opportunity not being granted to the assessee, No ground found for sustaining the order of assessment – Therefore, the Revision stands allowed - The order of the Tribunal is set aside – Decided in Favour of assessee. Issues:1. Denial of opportunity for cross-examination of third party purchasers during reassessment proceedings.2. Confirmation of eleven times addition in the assessment.Issue 1: Denial of opportunity for cross-examination of third party purchasers during reassessment proceedings:The assessee challenged the re-assessment made by the Sales Tax Appellate Tribunal, alleging a violation of natural justice principles and questioning the denial of the opportunity for cross-examination of third party purchasers. The assessee contended that the denial was unjustified, especially considering that an employee had stolen cash and bill books, leading to a police complaint and notification to a bank. The Tribunal's decision to deny this opportunity was a key point of contention raised by the assessee.Issue 2: Confirmation of eleven times addition in the assessment:The assessment involved a re-opening based on the alleged sale of MS Scrap commercial scraps and Casting Scraps to a specific entity. The Assessing Officer, in the absence of produced books of accounts, made an 11 times addition to the sales for one month, estimating the turnover at Rs.12,31,500 taxable at 4%. The assessee's plea for time due to health reasons was rejected, leading to the confirmation of the assessment and the imposition of a penalty. The Appellate Authorities upheld this decision, prompting the assessee to appeal further.The First Appellate Authority noted the assessee's history of issuing duplicate bills for old iron sales, further strengthening the case for the assessment. However, the Sales Tax Appellate Tribunal's confirmation of the assessment was contested by the assessee, citing an employee's misconduct in taking and running away with the books of accounts. The Tribunal's view that the assessee was avoiding the production of books was a pivotal factor in confirming the assessment, leading to the subsequent appeal to the High Court.The High Court scrutinized the reassessment order and criticized the lack of substantial evidence or inspection supporting the reopening of the assessment. The Court highlighted the absence of a valid basis for the reassessment, emphasizing the violation of natural justice principles due to the rushed decision-making process. Moreover, the Court questioned the relevance of past assessments in justifying the current reassessment, pointing out the lack of proper explanation regarding the source of the bills used in the assessment process. Ultimately, the Court allowed the Tax Case Revision, setting aside the Sales Tax Appellate Tribunal's order due to the shaky foundation of the reassessment and the absence of disclosed materials justifying the reassessment.In conclusion, the High Court's judgment focused on the denial of procedural fairness in the reassessment process and the lack of substantial evidence supporting the significant additions made to the assessment, leading to the decision to overturn the Tribunal's order.