1976 (1) TMI 160 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of demanding production of declarations after three years.
2. Obligation to preserve documents under rule 41-A and section 12A(3).
3. Initiation of assessment proceedings.
4. Consequences of failing to produce evidence for deductions.

Detailed Analysis:

1. Validity of demanding production of declarations after three years:
The primary issue was whether the Tribunal was correct in holding that the lower authorities were not justified in demanding the production of declarations under rule 26(2) of the Bombay Sales Tax Rules, 1946, after a lapse of three years from 31st March, 1950. The Tribunal concluded that the sales tax authorities were not justified in demanding the production of certificates, referred to as "declarations," after three years from 31st March, 1950, and thus accepted the respondents' claim under rule 1(ii)(a) to section 6(3) for the period from 1st April, 1948, to 31st March, 1950.

2. Obligation to preserve documents under rule 41-A and section 12A(3):
The respondents contended that under rule 41-A, they were not bound to preserve documents for more than three years after the expiry of the year to which they related. Section 12A(3) required preserving documents for not less than two years, while rule 41-A extended this to three years. The Court noted that both provisions cast an obligation to preserve documents for a specified period, but no obligation to destroy them after this period. If a dealer did not preserve documents beyond the statutory period, they faced no penal consequences. However, failing to produce necessary evidence for deductions could result in the claim being disallowed.

3. Initiation of assessment proceedings:
The respondents argued that assessment proceedings were initiated only when the notice dated 12th December, 1954, was served, which was more than three years after the relevant period. The Court disagreed, stating that assessment proceedings commenced when the returns were filed. The Supreme Court's decision in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur, supported this view, holding that assessment proceedings start with the filing of returns or issuance of a notice under relevant sections.

4. Consequences of failing to produce evidence for deductions:
The Court emphasized that it is the assessee's responsibility to satisfy the assessing authority of their entitlement to deductions. If statutory documents are required and the assessee voluntarily destroys them, they cannot complain if their claim is rejected. The Court clarified that dealers should preserve documents until assessment proceedings are concluded, including any appeals, revisions, or references. However, once deductions or exemptions are granted, there is no obligation to preserve documents beyond the statutory period for potential suo motu revision or reassessment proceedings.

Conclusion:
The Court answered the question in the negative, indicating that the Tribunal erred in its judgment. Each party was ordered to bear their own costs of the reference, considering the department's delay in issuing notices of hearing.