2011 (3) TMI 1519 - HC - VAT and Sales Tax

Whether on the face of several sale invoices due by the assessee, which were recovered from the possession of M/s. Prasad Properties and Investments Pvt. Ltd., and their group of companies, is there not legal burden on the assessee to show that despite those sale invoices, yet no sale at all took place by producing legally accepted material? Would the final report filed by the CBI against the purchasercompany and their group that those invoices have been utilised for raising loans from the bank and thereby defrauding the bank, would amount to a legal material to be made use of by the assessee to escape the provisions of sales tax law to contend that those invoices do not reflect any sale transactions ? Held that - It is no doubt true that the assessment order speaks about the conduct of the assessee in not filing the objection before the assessing authority. Whatever be the conduct adopted by the assessee before assessment, in the appeal filed by the Revenue, the assessee had established its case on the loan transaction as well as on other turnover pertaining to lease. The Appellate Assistant Commissioner and the Tribunal considered the materials produced by the assessee. On satisfaction of the explanation offered by the assessee, the Tribunal remanded the matter for de novo consideration. Going by the reasoning of the Tribunal, we do not find any merits in the revision to set aside the order passed by the Tribunal. In these circumstances, we find no ground to accept the plea of the Revenue and accordingly, the tax case revision is dismissed.

Summary

Issues:
1. Assessment of suppressed turnover based on alleged sales of raw films.
2. Disputed transactions with Asian Films (P) Ltd. and other entities.
3. Validity of charge sheet filed by the CBI against the purchaser company.
4. Taxability of hire charges and remand for further verification.

Issue 1: Assessment of Suppressed Turnover
The case involved an assessee, a dealer in cine films, who was alleged to have not filed returns or paid taxes for the assessment year. The assessing officer determined a suppressed turnover, treating certain sales as first sales of raw films, leading to tax liability under the Tamil Nadu General Sales Tax Act, 1959. However, the Appellate Assistant Commissioner overturned this assessment, finding the transactions to be loan transactions supported by records and affidavits. The Tribunal further held that the sales were not genuine, as no goods were actually produced for sale, resulting in the order being set aside.

Issue 2: Disputed Transactions with Asian Films (P) Ltd. and Other Entities
The Tribunal found transactions between the assessee and Asian Films (P) Ltd. to be bogus, with forged documents used to obtain benefits through Indian Bank, leading to CBI charge-sheeting bank officials. The Tribunal concurred with the Appellate Assistant Commissioner that these transactions did not constitute sales assessable under the Act. The matter was remanded back for further assessment on other turnover related to hire charges with specific instructions for verification.

Issue 3: Validity of CBI Charge Sheet
Despite the Revenue's argument that a mere charge sheet should not set aside the assessment, the Court upheld the Tribunal's decision based on findings supported by CBI proceedings. The absence of materials from the Revenue to treat the transactions as sales under the Act led to the dismissal of the Revenue's plea.

Issue 4: Taxability of Hire Charges and Remand for Verification
The Tribunal correctly remitted the matter of assessing hire charges back for verification, emphasizing the need for a thorough examination of records and agreements between the parties. The Court found no grounds to interfere with the Tribunal's decision, as the explanation provided by the assessee regarding the transactions was deemed satisfactory, leading to the dismissal of the tax case revision filed by the Revenue.