1984 (1) TMI 275 - HC - VAT and Sales Tax

Summary

Issues:
- Addition of suppressed turnover based on information from a third party without proper disclosure to the assessee.
- Validity of relying on material collected from a third party in assessment proceedings.
- Compliance with principles of natural justice in assessment proceedings.

Analysis:
1. The petitioner, a dealer and commission agent, disputed the addition of purchase turnover of groundnuts and a penalty in the assessment for the year ending 31st March, 1973. The disputed turnover of Rs. 3,18,600 represented groundnuts decorticated by the assessee but not accounted for in his books.

2. The assessing authority relied on information from the Assistant Commercial Tax Officer (Vigilance) obtained during a raid on a third party, M/s. Jai Bharath Rice and Oil Mills. The assessing officer issued a proposition notice to the assessee based on this information, proposing the addition of the unaccounted turnover and a penalty.

3. The petitioner contended that the notice did not provide sufficient particulars for an effective reply and that information from a third party should not be used in assessment proceedings without disclosure and opportunity for the assessee to respond.

4. The department argued that the assessee's failure to reply to the proposition notice implied acceptance of the proposed turnover addition. However, the Court held that the assessing officer must follow due process and disclose any material obtained from a third party to the assessee for a fair assessment.

5. Citing precedents, the Court emphasized the importance of affording the assessee an opportunity to cross-examine and respond to any material gathered from third parties before using it in assessment proceedings.

6. The Court found that the assessing officer did not comply with the principles of natural justice by relying on entries from a katcha book seized during the raid without bringing it on record or providing full particulars to the assessee.

7. Consequently, the Court set aside the addition of the suppressed turnover and remitted the matter to the assessing officer for a fresh assessment, emphasizing the need to adhere to legal procedures and principles of natural justice in assessment proceedings.

8. The Court upheld the assessment in other respects but directed the assessee to appear before the assessing officer for further proceedings in accordance with the order.