1995 (11) TMI 385 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction to Reassess under Section 14(4)(cc) of the Act.
2. Burden of Proof under Section 7A of the Act.
3. Validity of Affidavits and Evidence Provided by Appellants.
4. Role of the Purchasing Dealer's Non-Accountal of Transactions.
5. Requirement for Cross-Examination of the Purchasing Dealer.
6. Verification of Bank Drafts and Financial Transactions.
7. Remanding the Matter for Fresh Assessment.

Detailed Analysis:

1. Jurisdiction to Reassess under Section 14(4)(cc) of the Act:
The court rejected the contention that the assessing authority had no jurisdiction to reassess under Section 14(4)(cc). It was held that reassessment was justified based on new information received from departmental enquiries indicating that the purchasing dealer did not account for the transactions. This constituted sufficient grounds for reopening the assessments, and it was not merely a case of change of opinion.

2. Burden of Proof under Section 7A of the Act:
The burden of proof lies on the dealer to demonstrate that a sale or purchase is not liable to tax. The appellants were required to prove that the sales were made to other dealers in the State. The court noted that once the dealer furnishes relevant material and primary facts, the duty cast on him must be deemed to have been discharged. The burden does not rest on the dealer throughout the process.

3. Validity of Affidavits and Evidence Provided by Appellants:
The affidavits from the proprietor of M/s. Sudhakar Oil Mills and the brokers were scrutinized. The appellate authority found that the signatures on some affidavits matched those on undisputed transactions, suggesting that the affidavits could not be dismissed outright. The Commissioner, however, found the affidavits insufficient to discharge the burden of proof, citing inconsistencies and lack of conclusive evidence.

4. Role of the Purchasing Dealer's Non-Accountal of Transactions:
The non-accountal of transactions by M/s. Sudhakar Oil Mills was a central issue. The court held that the liability to pay tax does not shift to the appellants merely because the purchasing dealer did not disclose the transactions. The non-accountal could raise doubts but does not automatically invalidate the appellants' claims. The appellate authority believed that the non-accountal was likely a tactic by the purchasing dealer to evade tax.

5. Requirement for Cross-Examination of the Purchasing Dealer:
The appellate authority criticized the Commercial Tax Officer for not allowing the appellants to cross-examine the proprietor of M/s. Sudhakar Oil Mills. The Commissioner found no illegality in refusing the cross-examination request. The court highlighted the importance of cross-examination in verifying the genuineness of the transactions.

6. Verification of Bank Drafts and Financial Transactions:
The appellants provided details of bank drafts as evidence of payments received. The Commissioner dismissed this evidence, citing the dates of the drafts and lack of direct correlation to the transactions. The court found this reasoning untenable, noting that credit sales and delayed payments are common in business. The court emphasized the need for the assessing authority to verify the bank drafts and the source of funds.

7. Remanding the Matter for Fresh Assessment:
The court set aside the revisional and appellate orders as well as the reassessment orders. It directed the assessing authority to pass fresh orders after examining the appellants' accounts. The assessing authority was instructed to verify if the disputed transactions were accounted for and if payments were received through the bank drafts. The court allowed the assessing authority to check for commission payments to brokers and draw inferences accordingly.

Conclusion:
The special appeals were allowed to the extent indicated, with no order as to costs. The matter was remanded to the assessing authority for a limited scrutiny of the appellants' accounts and verification of the disputed transactions.