2009 (11) TMI 866 - HC - VAT and Sales Tax

Best judgment assessment - Non production of relevant documents - Held that - In the present case, only on the ground that the relevant documents were not produced, the respondent-Department proceeded to finalise the assessment on the basis of the best judgment method. The failure to grant sufficient time and opportunity to produce records is a clear violation of principles of natural justice and the assessment orders passed without considering the relevant statutory records and documents will amount to denial of sufficient opportunity and will amount to violation of principles of natural justice. The assessment order has been passed, without considering the relevant factors and therefore, the orders suffer from vice of non-application of mind to relevant factors and therefore, deserve to be set aside. In the result, the orders of assessment in both the cases, which are challenged, are set aside on the ground of violation of principles of natural justice and since no opportunity was given to produce records, the matters are remitted back to the Commercial Tax Officer/respondent for reconsideration on the merits. The petitioner will be entitled to produce all records and materials that may be available for the purpose of effectively concluding the assessment proceeding.

Issues Involved:

1. Jurisdiction and validity of assessment orders.
2. Violation of principles of natural justice.
3. Adequacy of time granted to produce records.
4. Application of the best judgment method of assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction and Validity of Assessment Orders:
The petitioner contested the assessment orders issued under section 12 of the Tamil Nadu General Sales Tax Act, 1959, and section 9(2) of the Central Sales Tax Act, 1956. The petitioner argued that the orders were contrary to the provisions of the Act and Rules, and thus, without jurisdiction. The court noted that the petitioner had returned a total turnover of Rs. 1,43,71,106.29 and taxable turnover at Rs. 1,38,07,547.73, which the respondent-Department challenged.

2. Violation of Principles of Natural Justice:
The petitioner claimed that the assessment proceedings violated the principles of natural justice, asserting that they were not given sufficient and reasonable opportunity to provide records, including statutory records, to substantiate their plea. The court observed that the petitioner had repeatedly requested additional time to produce the necessary documents, which the respondent-Department did not adequately grant. The failure to provide sufficient time and opportunity to produce records was deemed a clear violation of natural justice principles.

3. Adequacy of Time Granted to Produce Records:
The petitioner requested additional time on multiple occasions, citing reasons such as the centralized accounting system and the need for records held at the Mumbai head office. Despite these requests, the respondent-Department issued notices in quick succession and did not provide ample time for the petitioner to gather and present the required documents. The court highlighted that the respondent-Department's refusal to grant sufficient time caused significant hardship and prejudice to the petitioner, who had shown a bona fide intention to comply.

4. Application of the Best Judgment Method of Assessment:
The respondent-Department resorted to the best judgment method of assessment due to the non-submission of relevant records by the petitioner. The court found that the petitioner had provided a justified and bona fide reason for the delay in producing records. The assessment based on the best judgment method, without considering the petitioner's plea and the relevant statutory records, was deemed inappropriate. The court emphasized that the respondent-Department should have granted reasonable time for the petitioner to produce the records, especially when the petitioner had cooperated by producing certain available documents.

Conclusion:
The court concluded that the assessment orders were passed in haste, without granting sufficient opportunity to the petitioner and without considering relevant records. This amounted to a violation of the principles of natural justice. Consequently, the assessment orders were set aside, and the matters were remitted back to the Commercial Tax Officer/respondent for reconsideration on the merits. The petitioner was granted the right to produce all necessary records and materials for effectively concluding the assessment proceedings. Both writ petitions were ordered accordingly, with no order as to costs.

← Previous Next →