1971 (9) TMI 177 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax based on alleged collusion between the petitioner-firm and seven registered dealers.

Analysis:
The case involved M/s. Devinder Kumar Kewal Kumar, registered dealers in Ludhiana, assessed for sales tax for the year 1955-56. The assessing authority disallowed deductions claimed for sales made to seven registered dealers, suspecting collusion. The evidence against the genuineness of these sales included: non-existence of the purchasing firms, lack of proof of goods transportation, inability to produce purchasers or account books, and the financial incapacity of alleged purchasers to make large cash payments. The assessing authority allowed deductions of a portion of the claimed amount but disallowed the rest due to suspicions regarding the transactions.

The High Court analyzed the evidence presented by the Tribunal and emphasized that suspicions or personal knowledge of the assessing authority cannot substitute legal proof. The court highlighted that the mere cancellation of registration certificates of purchasing dealers post-transaction does not prove non-existence of the dealers during the sales. Referring to previous judgments, the court held that the evidence provided by the assessing authority was insufficient to establish collusion between the petitioner-firm and the registered dealers. The court reiterated that the production of declarations under the relevant Act prima facie proves sales to registered dealers, and other pieces of evidence lacked legal value to support the claim of collusion.

In conclusion, the High Court answered the reference in the negative, ruling in favor of the assessee and against the department. The court found no substantial evidence to prove collusion between the petitioner-firm and the registered dealers. The parties were directed to bear their own costs, and the reference was closed with a decision against the department.