TaxTMI 
TaxTMI 
2008 (7) TMI 859
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the claim of the petitioner that it is not liable to tax and file "nil" return for the reason that in terms of the judgment of the Supreme Court in the case of K. Raheja Development Corporation v. State of Karnataka reported in [2005] 141 STC 298, such activities are also activities attracting the tax liability under the corresponding earlier law, namely, Karnataka Sales Tax Act, 1957. The background leading to this development was that the officials of the commercial taxes department had issued a notice dated January 19, 2007 under section 38(1) of the Act (copy at annexure C) apprising the petitioner-trust that the case of the petitioner has been selected for audit visit and calling upon the petitioner to make available the books of account pertaining to the business transactions for the period from April 2005 up to date. It transpires that at this stage, the petitioner came to know that the petitioner may be made liable for payment of tax on the basis of the law declared by the Supreme Court in Raheja's case [2005] 141 STC 298. The petitioner being not very sure of the applicability of the ruling of the Supreme Court in Raheja's case [2005] 141 STC 298 to their case, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be final and not subject to any appeal; and (d) may be enforced in the same manner as a decree of a court for the payment of the amount stated in the order. (4) When the prescribed authority compounds an offence under this section, the dealer concerned shall not be liable to prosecution in respect of such offence or to any further penalty under this section and such dealer shall not appeal against the said proceedings." that a dealer is relieved of any possibility of being prosecuted before the criminal court. Though the communication at annexure E dated April 9, 2007 is termed as a show-cause notice and the petitioner is given an opportunity to show cause as to why charge sheet should not be filed against the petitioner, instead of showing cause the petitioner has approached this court raising various legal contentions. On issue of notice, Smt. Niloufer Akbar, learned Additional Government Advocate has entered appearance for the respondents and statement of objections has also been filed. With consent of learned counsel for the parties, the matter is taken up for disposal. Heard Smt. Vani, learned counsel for the petitioner and Smt. Niloufer Akbar, learned Additional Govern....
X X X X Extracts X X X X
X X X X Extracts X X X X
....once the petitioner concedes that the facts of the present case are similar to the case of Larsen & Toubro Limited [2008] 17 VST 457 (Karn) and when this court has opined that in such cases the ruling of the Supreme Court in Raheja's case [2005] 141 STC 298 does apply, it is not possible for the petitioner to make a distinction yet again in this case; that no useful purpose will be served by retaining this petition before this court as even the division Bench had observed that such is not an exercise which can be undertaken by this court and if at all the petitioner can urge anything with regard to the ruling of the Supreme Court, it can be done only before the Supreme Court as the ruling binds this court. The third submission is that the clarification being one sought by the petitioner and having been rightly given does not call for any interference by this court. Last submission is that the notice under annexure E issued under section 79 read with section 82 of the Act is a valid notice for the reason that though there is no assessment order determining the tax liability to be Rs. 82,34,299, it is only tentative determination to impress upon the extent of evasion and the ki....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sioner has notified the dealer of the requirement of production of accounts before the prescribed authority in support of the return filed for any period and the authority on the basis of such books of account produced may proceed to assess such dealer. The only way of correcting that is by having recourse to section 39 of the Act. Section 39 of the Act provides for reassessment proceedings and contemplates the proposition notice, opportunity and then quantification. With the assessee having filed "nil" return and action in terms of section 38(1) of the Act having not been pursued, it is inevitable that it is taken to be a deemed assessment of "nil" return and therefore the only way that it can be varied thereafter is by having recourse to section 39 of the Act. The so-called tentative determination while issuing show-cause notice quoting either section 79 or section 82 of the Act is not the proper way of determining that liability which should have been determined in terms of section 39 of the Act by the competent authority. If the authority who has issued the notice under section 79 or section 82 of the Act also happens to be the very authority who can pass reassessment order, ev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent evasion of tax as an offence and provides for penalty as well as imprisonment, a prosecution proceeding being a serious proceeding needs to be resorted not casually but only when it is really warranted and when the authorities are fully satisfied that it is a definite case of fraudulent evasion. In fact, there is a safeguard provided under the Act even for this as prosecution can be launched only with the sanction of the Commissioner. It is no doubt true that in the present case, the petitioner also could have approached the Commissioner to impress upon the Commissioner that it is not a fit case for prosecution and it should not be permitted, etc., but that does not come in the way of the petitioner seeking relief in writ jurisdiction as the proposed action on the part of the third respondent-officer is an instance of mala fide exercise of authority. In the present set of facts and circumstances, I am of the view that annexure E proposition notice is definitely not tenable in law for the reason that in the guise of a proposition notice which in fact is not warranted in terms of section 79 of the Act, the so-called notice seeks to plant information with regard to the liability....