2007 (10) TMI 596 - HC - VAT and Sales Tax

Assessment challenged - supression - Held that - As noted the seizure was made in presence of the proprietor of the petitioner-company. Pursuant to the seizure so made, the petitioner was called and it verified the relevant records including the report of the Inspector of Taxes. There is no mention in the writ petition about the show-cause notice and the reply of the petitioner thereto. Such suppression on the part of the petitioner stares on the face of it. W.P. dismissed.

Issues Involved:
1. Legality of search and seizure.
2. Alleged suppression of sales.
3. Opportunity of being heard and principles of natural justice.
4. Reliance on the Inspector's report for assessment.
5. Composition of the offense and advance tax payment.
6. Issuance of show-cause notice and procedural fairness.

Detailed Analysis:

1. Legality of Search and Seizure:
The petitioner contended that the search and seizure conducted on January 6, 1997, by the Inspector of Taxes was illegal. Despite this, due to pressure from the respondents, the petitioner compounded the case by paying Rs. 1,000 and an additional Rs. 50,000 as advance tax for the months of December 1996 to March 1997. The seized documents were released on April 9, 1997.

2. Alleged Suppression of Sales:
The assessment orders dated March 31, 1999, determined that the petitioner suppressed sales amounting to Rs. 2,46,626 for 1995-96 and Rs. 9,25,791 for 1996-97. These amounts were taxed at 14% per annum, leading to demand notices for Rs. 49,279 and Rs. 1,38,596 respectively.

3. Opportunity of Being Heard and Principles of Natural Justice:
The petitioner argued that the assessing officer violated the principles of natural justice by relying solely on the Inspector's report without giving the petitioner an opportunity to contest the findings. The petitioner claimed that it was not provided with a copy of the Inspector's report and was not informed about its submission during the assessment.

4. Reliance on the Inspector's Report for Assessment:
The appellate authority confirmed the assessment orders, noting that the assessing officer relied on the Inspector's report without verifying the seized books himself. The appellate authority indicated that the seized books were released before the completion of the assessment, making it impossible to conclusively ascertain any suppressed sales.

5. Composition of the Offense and Advance Tax Payment:
The petitioner compounded the offense by paying Rs. 1,000 and deposited Rs. 50,000 as advance tax. The appellate authority observed that the assessing officer did not insist on the deposition of the entire evaded tax before compounding the offense and releasing the books. This supported the petitioner's contention that the seized documents were regular sale bills/vouchers.

6. Issuance of Show-Cause Notice and Procedural Fairness:
The petitioner claimed that no show-cause notice was issued during the prosecution proceedings. However, records showed that a show-cause notice dated April 4, 1997, was issued, to which the petitioner responded by offering to deposit Rs. 50,000 as advance tax and submit a revised return if necessary. The appellate authority noted that the petitioner did not raise any issues regarding the violation of natural justice during the proceedings.

Conclusion:
The court dismissed the writ petition, finding no merit in the petitioner's arguments. The court held that the petitioner was provided with ample opportunity to present its case and had access to the documents relied upon by the assessing authority. The assessment orders were based on evidence and were not arbitrary. The petitioner's suppression of the show-cause notice and its reply thereto further weakened its case. The decision of the appellate authority to reject the appeal was upheld.

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