2016 (2) TMI 1018 - HC - VAT and Sales Tax

Validity of assessment order - no concrete evidence to substantiate any sales suppression - whether the assessment order and Revenue s contention valid on the ground that assessee is a Government sector and thus no evidence was required? - Held that - the contention of Revenue was not acceptable, for the reasons more than one. Firstly; that an assessee is from the Government sector, by itself does not add any credibility to its books of accounts, unless, of course, it is subjected to a compulsory statutory audit which audit by itself will result in a report of evidentiary value in terms of relevant statute laws. Secondly and more importantly, the provision in sub-rule 4 of Rule 38 of the Rules whereby the appellate authority authorizes the assessing authority to put up a report for consideration, necessarily pre-supposes that such report will have to be placed only after verification of records, documents and other evidences - such report having been placed by the assessing authority before the appellate authority and that report having been acted upon on the basis of the submission of the assessing authority that there is no concrete evidence to substantiate any sales suppression. Revision application dismissed - decided against Revenue.

Summary

Issues:
Assessment of a dealer with different branches transferring goods, application of Rule 38(4) of the Kerala General Sales Tax Rules, 1963, credibility of accounts of a Government concern, statutory audit impact on evidentiary value, authority of assessing authority's report in appellate proceedings.

Analysis:
The judgment pertains to a revision under Section 41 of the Kerala General Sales Tax Act, 1963, where the Revenue challenged the decisions of the first appellate authority and the Tribunal regarding the assessment of a dealer with multiple branches transferring goods. The first appellate authority invoked Rule 38(4) of the Rules, requesting a report from the assessing authority. The assessing authority, after verification, concluded that there was no concrete evidence of sales suppression, citing a relevant court decision. The Tribunal upheld this view, leading to the Revenue's appeal.

The Senior Government Pleader contended that the first appellate authority and the Tribunal should have assessed the records and accounts of the assessee before reaching a decision. Reference was made to a previous case involving a Government concern where accounts were considered. However, the Court found this argument unconvincing for multiple reasons. Firstly, being a Government entity does not automatically validate the accounts unless subjected to statutory audit. Secondly, Rule 38(4) mandates that the assessing authority's report, based on verification of records and evidence, be given due consideration by the appellate authority.

The Court emphasized the importance of the statutory report prepared by the assessing authority under Rule 38(4), which must be considered by the appellate authority unless challenged. In this case, since the assessing authority's report found no evidence of sales suppression and was accepted by the appellate authority, the Court concluded that no legal errors were made by the Tribunal. Consequently, the revision was dismissed, affirming the decisions of the lower authorities.

In conclusion, the judgment highlights the significance of following statutory procedures, such as Rule 38(4), in tax assessment matters. It underscores the need for thorough verification of records and evidence before reaching conclusions, emphasizing the authority of the assessing authority's report in appellate proceedings. The judgment serves as a reminder of the legal principles governing tax assessments and the importance of adhering to established rules and procedures in such cases.