2014 (9) TMI 565 - HC - VAT and Sales Tax

Levy of penalty under Section 27(3) - wilful non- disclosure of assessment turnover - Held that - Order of assessment does not deal with the objections raised by the petitioners item-wise. While issuing pre-revision notice for all the six assessment years, each assessment year contains a different allegation or more than two allegations. The petitioners have submitted their objections in respect of all the pre-assessment notices specifically raising a contention in respect of each of the allegation in the notice. Therefore, the assessing authority bound to consider the objections item-wise and accept or reject the same or partially accept the same. However, by a three paragraphs order, the order of assessment has been finalized and the proposal in the pre-revision notice has been confirmed. Petitioners did not produce the records before the audit party. Nevertheless, a show notice has been issued by the Assessing Officer, in which, the petitioners should be given an opportunity to show-cause as to why the assessment should not be revised and while showing cause, it is always open to the petitioners to produce the records to substantiate the same. If there are no records available, then the petitioners can substantiate their stand by raising objections. In such circumstances, there is a duty enjoined upon the Assessing Officer to consider the objections and passes speaking order rejecting the same. These aspects which are primarily necessary to be followed while finalizing an order of assessment, especially a revision of assessment has been given a go by by the assessing officer. The petitioners in respect of the pre-revision notices, for two assessment years specifically requested for an opportunity of personal hearing. This opportunity has not been rejected nor granted. Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Challenge to assessment orders for the years 2006-07 to 2011-12, levy of penalty under Section 27(3) of TN VAT Act, objections raised by the petitioner, violation of principles of natural justice, maintainability of writ petitions.

Analysis:

1. Challenge to Assessment Orders: The petitioner, a cotton yarn dealer, contested assessment orders for the years 2006-07 to 2011-12 due to various discrepancies noted during an audit by the Enforcement Wing. Allegations included unproduced purchase bills for building materials, non-payment of tax on leased machinery use, and penalty proposals under Section 27(3) of the TN VAT Act. The petitioner objected to these claims, citing the production of purchase bills and lease agreements, arguing against the arbitrary revision of turnover.

2. Levy of Penalty: The petitioner argued against the automatic imposition of penalties under Section 27(3) of the Act, claiming no willful non-disclosure of turnover. Similar objections were raised for other assessment years regarding dyeing charges and incorrect ITC claims. The petitioner relied on legal precedents emphasizing the necessity of concrete evidence for tax revisions.

3. Violation of Principles of Natural Justice: The assessment orders failed to consider objections item-wise, disregarded requests for document copies and personal hearings, and did not address objections satisfactorily. The court noted that the assessing authority must consider objections thoroughly and provide a fair opportunity for the petitioner to present their case, as mandated by principles of natural justice.

4. Maintainability of Writ Petitions: The respondent argued that the writ petitions were not maintainable as the petitioners had the option to appeal under Section 51 of the TN VAT Act. However, the court found merit in the petitioner's contentions regarding the violation of natural justice principles and ordered a fresh consideration by the respondent, emphasizing the importance of affording a personal hearing and addressing objections comprehensively.

In conclusion, the High Court of Madras allowed the writ petitions, setting aside the impugned orders and remanding the matter for fresh consideration by the respondent. The court directed the respondent to provide a personal hearing to the petitioner, address objections, and issue new orders in compliance with the law within a specified timeframe, highlighting the significance of upholding principles of natural justice in assessment proceedings.