2017 (3) TMI 1646 - HC - VAT and Sales Tax

Jurisdiction - power of State authorities to proceed with reassessment exercise - burden of proof - Held that - this Court finds that for reassessment proceedings, once the basis to discard the figures disclosed by the assessee had not been accepted by the department itself, the authorities were not justified in relying upon disclosure made by M/s Bhawani Brick Field, Daurala, after its stand was specifically disbelieved by the department itself - it is settled that in reassessment proceedings, the onus to establish that the disclosure was incorrect, was upon the department, and it could not have been shifted upon the assessee. The onus was otherwise not discharged by the department. The order passed by the Tribunal in reassessment proceeding is not liable to be sustained - revision allowed in favor of assessee.

Summary

Issues:
Assessment of tax for the year 2002-2003, reassessment proceedings initiated based on suspicion, burden of proof in reassessment proceedings, validity of seller's disclosure as a basis for reassessment, shifting of burden of proof onto the assessee, compliance with the order sanctioning reassessment, justification of relying on the seller's disclosure after rejection by the department.

Assessment of Tax:
The assessee, a registered works contractor, was assessed to tax for the year 2002-2003 under the U.P. Trade Tax Act. The assessing authority allowed a benefit for purchases of bricks valued at ?26,73,000, but only to the extent of ?23 lacs. The assessee appealed, and the remaining amount was granted. Subsequently, reassessment proceedings were initiated after 4 years due to suspicions regarding the purchase of bricks worth ?20,25,000, which were deemed not genuine.

Burden of Proof in Reassessment:
The counsel for the assessee argued that the reassessment exercise lacked a basis as it was solely based on suspicion, and the burden of proof in reassessment proceedings lay with the department, which was not discharged. The stand of the seller, M/s Bhawani Brick Field, Daurala, was not accepted by the assessing authority, raising doubts on the validity of initiating reassessment based on the seller's denial of selling the bricks.

Validity of Seller's Disclosure for Reassessment:
The seller's disclosure that no bricks were sold after 30.9.2002 formed the basis for initiating reassessment proceedings as the assessee had claimed purchases on 18.10.2002. However, the assessing authority's assessment order against the seller for the same year contradicted the seller's claim, stating that bricks were sold post 30.9.2002, casting doubt on the seller's disclosure.

Shifting of Burden of Proof:
The Tribunal shifted the burden of proof onto the assessee to establish the purchase of bricks, which was not discharged according to the findings. However, the Court held that the burden to prove the incorrectness of the disclosure should have remained with the department in reassessment proceedings and not shifted onto the assessee.

Compliance with Reassessment Order:
The order sanctioning reassessment after 4 years was not fully complied with, raising questions about the validity of the reassessment proceedings. The Court found that the authorities were not justified in relying on the seller's disclosure after it was rejected by the department itself, emphasizing that the burden of proof should not have been placed on the assessee.

Conclusion:
The Court held that the reassessment order by the Tribunal was not sustainable, especially since the department failed to prove that tax had escaped assessment. The burden of proof could not have been shifted onto the assessee, and relying on the seller's disclosure post-rejection was unjustified. The revision was disposed of in favor of the assessee, highlighting the flaws in the reassessment proceedings.