2016 (3) TMI 1032 - HC - VAT and Sales Tax

Re-assessment of tax turn over - Escaped assessment - Section 12(8) of Odisha Sales Tax Act, 1947 - Assessing officer did re-assessment solely on the basis of Audit report without providing opportunity of personal hearing - Held that - the Sales Tax Officer has to form his objective opinion by taking the evidence of the opposite party into consideration. But here, no enquiry, independent of the report filed against the opposite party by the Income Tax Department, has been considered. By relying on the decision of Hon ble Apex Court in the case of Mahadayal Premchandra v. Commercial Tax Officer, Calcutta and another 1958 (4) TMI 73 - SUPREME COURT OF INDIA , followed in the case of Orient Paper Mills Ltd. v. Union of India 1968 (5) TMI 15 - SUPREME COURT OF INDIA and again followed by this Court in the case of Indure Limited v. Commissioner of Sales Tax, Cuttack 2006 (7) TMI 572 - ORISSA HIGH COURT with the provisions of law, the learned Tribunal has rightly observed that the conclusion arrived about escaped assessment, is based on suspicion and no opportunity has been given. Therefore, as no reasonable opportunity has been given to the opposite party to pass order under section 12(8) of the Act, the Tribunal s order is valid. - Decided against the appellant

Issues Involved:
1. Legality of the reassessment under Section 12(8) of the Odisha Sales Tax Act, 1947.
2. Adequacy of the opportunity given to the dealer for presenting their case.
3. Validity of the conclusions drawn by the Assessing Authority and First Appellate Authority based on audit reports.
4. Compliance with principles of natural justice by the Assessing Authority.

Detailed Analysis:

1. Legality of the reassessment under Section 12(8) of the Odisha Sales Tax Act, 1947:
The petitioner challenged the order of the Orissa Sales Tax Tribunal, which annulled the reassessment orders for the years 1995-96 to 1998-99. The Tribunal held that the Assessing Authority should have formed an independent opinion regarding the escaped sales tax. It noted that the reassessment under Section 12(8) without assigning any reason is unlawful, citing Indure Limited v. Commissioner of Sales Tax, Cuttack. The Tribunal found no material evidence showing suppression of tax turnover, thus deeming the reassessment orders as legally flawed.

2. Adequacy of the opportunity given to the dealer for presenting their case:
The opposite party argued that they submitted self-assessed returns and had already paid the tax. They claimed that the reassessment was conducted without reasonable opportunity, resulting in harassment. The Tribunal observed that the original records of escaped assessment were not available, and the Assessing Authority's order did not disclose any material from the opposite party, indicating a lack of reasonable opportunity. The Tribunal emphasized that tax turnover cannot be enhanced merely on suspicion, reinforcing the need for legal proof.

3. Validity of the conclusions drawn by the Assessing Authority and First Appellate Authority based on audit reports:
The Assessing Authority relied on an audit report indicating suppression of sales and taxable purchases. However, the Tribunal found that the reassessment was based on the Income Tax Department's stock report without independent verification by the Assessing Authority. The First Appellate Authority also failed to provide evidence of independent inquiry, merely confirming the Assessing Authority's order based on the audit report. The Tribunal criticized this approach, highlighting the necessity for the Assessing Authority to form an independent opinion and not solely rely on audit reports.

4. Compliance with principles of natural justice by the Assessing Authority:
The Tribunal cited precedents emphasizing the importance of natural justice and independent judgment by quasi-judicial authorities. It referred to Mahadayal Premchandra v. Commercial Tax Officer and Orient Paper Mills Ltd. v. Union of India, where the Supreme Court underscored the need for fair procedures and independent decision-making by administrative officers performing quasi-judicial functions. The Tribunal concluded that the Assessing Authority's procedure was contrary to natural justice principles, as it mechanically followed the audit report without giving the dealer a fair opportunity to present their case.

Conclusion:
The Tribunal's order was upheld, emphasizing the need for independent inquiry and adherence to natural justice principles in reassessment proceedings. The Assessing Authority was directed to reassess the suppression of turnover, if any, for the relevant years, after providing the dealer with a reasonable opportunity to be heard, in compliance with Section 12(5) of the Act. The revision was disposed of accordingly.

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