1988 (8) TMI 407 - HC - VAT and Sales Tax

Summary

Issues:
1. Quashing of notice for production of records related to stock transfers.
2. Disallowance of rebate and levy of sales tax on sales to unregistered dealers.
3. Jurisdiction of assessing authority to issue notice for production of books of account.
4. Compliance with appellate authority's direction.
5. Validity of notice under section 19 of the Finance Act.

Analysis:
The petitioner sought to quash a notice issued by respondent No. 3 for the production of records regarding stock transfers. The assessment for the year 1976-77 was completed earlier, and the petitioner had appealed against certain aspects of the assessment order, particularly concerning rebate disallowance and sales tax levy on sales to unregistered dealers. The appellate authority, in its order dated May 25, 1985, allowed the rebate and remanded the matter for a fresh order. However, instead of complying with the appellate authority's direction, respondent No. 3 issued the impugned notice on April 21, 1987, enlarging the scope of the enquiry beyond the appellate order's purview.

The petitioner contended that respondent No. 3 was obligated to pass a final order in line with the appellate authority's direction and lacked the jurisdiction to expand the enquiry. Additionally, the petitioner argued that if there were concerns regarding escaped assessment, the assessing authority could have reopened the matter under section 19 of the Finance Act within a specified timeframe. The respondents, on the other hand, asserted that there was no limitation for issuing a notice under section 33 for the production of books of account, either before or after assessment.

Following the receipt of the notice, the petitioner filed an application questioning the purpose of the books' requirement, citing the absence of a direction for further enquiry by the appellate authority. The application was rejected, and the subsequent notices did not specify the provision under which the assessing authority sought the books of account. The counter-affidavit alleged that the assessing officer was misled due to the petitioner's concealment of facts, resulting in revenue loss.

The court determined that the assessing authority, by issuing the impugned notice, was acting under section 19 of the Finance Act. However, since the notice was not served within the stipulated timeframe, respondent No. 3 lacked jurisdiction to reopen the matter under section 19, thereby invalidating the request for book production under section 33. Consequently, the court held that respondent No. 3 was obligated to adhere to the appellate authority's direction, leading to the quashing of the notice in favor of the petitioner.

In conclusion, the writ petition was allowed, and the impugned notice was quashed, emphasizing the importance of jurisdictional limitations and compliance with appellate directives in assessment proceedings.