2016 (7) TMI 855 - HC - VAT and Sales Tax

Demand of VAT - higher turnover shown in the Income Tax Return - When the proprietor of the petitioner was questioned and the statement was recorded, it came to light that the returns indicating higher turnover were filed before the Income Tax Authorities only with an intention to receive a bank loan and that they did not represent the actual turnover of the petitioner for the relevant assessment years. - Held that - the morality and intention of an assessee does not enter into the field of adjudication in taxing law and that if an assessee can, by a process, which is acceptable in law, avoid or evade taxation, he can do so. In the light of the above, the petitioner s right to establish before the Assessing Officer by producing records to show that there was no sales suppression, cannot be foreclosed merely on the ground that he had reported higher turnover in the income tax returns. Considering the facts and circumstances of the case, this Court is inclined to give one more opportunity to the petitioner to produce necessary records before the respondent to establish the actual sales. - Matter remanded back.

Summary

Issues:
Challenge to assessment orders for the years 2007-08 to 2010-11 based on lack of opportunity to file objections and absence of documentary evidence to support inflated turnover reported in income tax returns for bank loan purposes.

Analysis:
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act and Central Sales Tax Act, challenged assessment orders for 2007-08 to 2010-11 due to lack of opportunity to object to proposed revisions and penalty notices issued by the respondent. The Enforcement Wing officials seized income tax assessment files from the petitioner's premises, revealing that reported turnover was inflated for bank loan purposes. The petitioner contended that the higher turnover was shown to secure a bank loan and fund business operations during financial strain, denying any sales suppression or stock variation. Despite objections and requests for a personal hearing to present evidence, the Assessing Officer passed assessment orders solely based on the lack of documentary evidence supporting the inflated turnover claim.

The petitioner, claiming illiteracy and lack of awareness regarding required documents, sought another opportunity to produce evidence demonstrating no sales suppression. The petitioner highlighted that the bank loan had been repaid, supported by a certificate from the bank, and argued that electricity consumption data validated the reported sales statistics. Referring to a previous judgment, the court emphasized the importance of independently considering records apart from what was reported to the Income Tax Authorities. Additionally, a precedent was cited stating that an assessee's morality and intentions do not impact tax adjudication, allowing legal means to avoid or evade taxation.

The court, considering the petitioner's right to establish the actual sales figures, set aside the assessment orders and remitted the matters back to the respondent for fresh consideration. The respondent was directed to conduct a personal hearing for the petitioner to present documents supporting the inflated turnover claim for bank loan purposes. The assessment was to be completed based on the evidence provided during the hearing, ensuring compliance with the law. The court granted the petitioner another opportunity to substantiate their position and ordered no costs for the proceedings, closing the related matters.