2016 (7) TMI 1193 - HC - VAT and Sales Tax

Denial of input tax credit - Validity of assessment order - demand based on defects pointed out by the Enforcement Wing and prepared statement got signed - abdication of the powers of an Assessing Officer and on the principles of violation of natural justice and non application of mind - Held that - Two things emanate from the observations. Firstly, the Assessing Officer came to the conclusion that there was an admission of the defects, which are seriously disputed by the petitioner. The second is that the Assessing Officer was of the opinion that he is duty bound to accept and implement the audit report. These observations are totally erroneous in the light of the settled legal principles as to how the Assessing Officer has to conduct himself. A report from the Enforcement Wing may be a starting point for issuance of a notice. But, the Assessing Officer, being a Statutory Authority, on issuance of notice proposing revision of assessment, is required to call for objections from the dealer and if the dealer places objections, then the Assessing Officer is duty bound to decide the matter on merits independently unbiased and uninfluenced by any other factor. Therefore, the observation made by the respondent in the impugned orders that he is duty bound to implement the audit report is a perverse observation and deserves to be set aside. Secondly, the admission of guilt, if held to be the sole basis for rejecting the dealer s case, the settled legal principle is that the admission should be candid and unequivocal. In the instant case, the petitioner has not only stated that the pre-prepared statement was compelled to be signed, but also stated that they gave their objections on 5.3.2015 for correction of the statement, which was recorded on 17.2.2015. Writ petitions allowed - order set aside - Matter remanded back. - Decided in favor of petitioner.

Summary

Issues:
Challenge to assessment orders based on abdication of powers of Assessing Officer, violation of natural justice, and non-application of mind.

Detailed Analysis:

Assessment Years 2012-13 to 2014-15:
- Petitioner engaged in gold, silver, diamond trading.
- Show cause notices issued for defects in returns, proposed penalty.
- Petitioner's reply sought personal hearing, submitted explanation.
- Acknowledgment proves receipt of explanation by respondent.
- Orders passed without considering petitioner's objections, incorrect statement by respondent.
- Orders challenged in Writ Petitions 19007 to 19009 found untenable.

Assessment Years 2011-12 to 2014-15:
- Pre-assessment notices issued based on Enforcement Wing's report.
- Petitioner disputed pre-prepared statement, requested correction.
- Petitioner's objections not considered, no personal hearing granted.
- Assessment orders passed without independent scrutiny, influenced by report.
- Respondent's duty to assess independently, not influenced by external factors.
- Observations by respondent erroneous, not in line with legal principles.

Legal Precedents and Principles:
- Assessing Officer's duty to assess independently, quasi-judicial nature of proceedings.
- Importance of personal hearing when adverse findings proposed.
- Necessity for Assessing Officer to consider dealer's objections independently.
- Error in not granting personal hearing, incorrect reliance on external reports.
- Orders set aside, matters remitted for fresh consideration with personal hearing.
- Respondent directed to decide independently without influence from external reports.

This judgment highlights the importance of procedural fairness, independent assessment by the Assessing Officer, and the need for personal hearings in tax assessment matters. The court emphasized the duty of the Assessing Officer to consider objections, conduct assessments independently, and not be unduly influenced by external reports. The judgment sets aside the impugned orders and remits the matters for fresh consideration with a directive to grant a personal hearing to the petitioner.