2019 (11) TMI 1129 - HC - VAT and Sales Tax

Voluntary disclosure crucial for tax assessments: Court emphasizes burden of proof on kiln closure

M/s Jai Ma Vishnav Brickfield Asai-Ka-Purwa Versus Commissioner Of Commercial Taxes U.P. Lucknow

The court upheld the importance of voluntary disclosure by brick kiln owners to prevent tax liabilities, even though there is no mandatory legal ... Estimation of turnover - Intimation regarding starting or closure of firing (Phukai) - Whether there is any requirement under U.P. Trade Tax Act or Rules framed thereunder which makes it mandatory for a brick kiln owner to inform the department about the starting or closure of firing (Phukai)? - HELD THAT:- No doubt none of the counsel for the contesting parties could point out any such provision in the Act, 1948 mandatorily requiring the assessee to inform the Assessing Officer about the closure of Brick Kiln, however, the Court finds merit in the submission of Mr. Shukla that any prudent businessman would, in order to avoid tax liability, give such intimation to the Assessing Officer. Whether in the absence of any such provision making it mandatory for Brick Kiln owner to inform the Department about the stopping of firing (Phukai) the findings recorded by the Department and the Tribunal regarding the period for which the Brick Kiln was run, is sustainable in law or perverse? - HELD THAT:- It is not out of place to mention that even if there is no requirement in the Act, 1948 for the assessee to intimate the Assessing Officer about the closure of Brick Kiln as already stated in the context of Question No. 1 any prudent person would inform the Assessing Officer in this regard to avoid tax liability. Furthermore, if, he does not do so then the burden is upon him to show that the Brick Kiln was not functional after the alleged date of closure. No such evidence was led by the revisionist whose accounts were rejected which has not been put to challenge - the Court does not find any error in the findings of the Assessing Officer as affirmed by the Tribunal. The findings of the First Appellate Authority were clearly perverse based on conjecture and surmises. The Tribunal's order does not suffer from any error. Revision dismissed. Issues:1. Requirement for brick kiln owner to inform department about starting or closure of firing.2. Sustainability of findings regarding period of brick kiln operation.Issue 1: Requirement for brick kiln owner to inform department about starting or closure of firing:The revisionist argued that the U.P. Trade Tax Act does not mandate informing the department about brick kiln closure, citing a previous judgment. The revisionist contested the period of kiln operation determined by the Assessing Officer, claiming it was operational for a shorter duration. Conversely, the State's counsel emphasized that prudent businessmen would inform authorities to avoid tax liability, even without a specific legal requirement. The court acknowledged no mandatory provision for such intimation but upheld the importance of voluntary disclosure to prevent tax liabilities.Issue 2: Sustainability of findings regarding period of brick kiln operation:Upon review, the court noted that the revisionist failed to inform the Assessing Authority about the kiln closure during registration, which weakened their case. The Assessing Officer rejected the revisionist's claim of personal use for bricks found during a survey due to lack of evidence. Despite no legal obligation to report kiln closure, the court stressed the burden on the revisionist to prove non-functionality post-closure. The Assessing Officer's best judgment assessment of 38 operational days was upheld, supported by reasons and evidence like the presence of bricks in process. The court found the Tribunal's decision sound, dismissing the revision based on the lack of errors in the assessment.In conclusion, the court ruled against the revisionist, emphasizing the importance of voluntary disclosure for tax purposes and upholding the Assessing Officer's assessment of the period of brick kiln operation. The judgment highlighted the need for evidence and justification in tax assessments, even in the absence of explicit legal requirements for intimation.