2017 (1) TMI 200 - HC - VAT and Sales Tax

Imposition of penalty u/s 65 of the Act - suppression of facts - inter State sale - reopening of assessment - Held that - the reopening of the assessment by the AO appears to be well reasoned taking into consideration that new facts and material came on record at the time of survey and originally the AO accepted the contention, on examining the books of account and once a new material has come on record, the Revenue can always reopen the cases and it cannot be said that it is change of opinion. Insofar as the levy of tax is concerned, the view of the Tax Board appears to be just and proper inasmuch as it was for the assessee to prove by acceptable evidence that it had sold the goods sales tax paid and nowhere it has been proved that even for said turnover the assessee was able to prove that it was sales tax paid. Insofar as the penalty is concerned, in my view, the same is not sustainable for the reason that it is a case of reassessment and admittedly the original assessment was also passed by the AO after examining books of account and other material and it cannot be said that the original assessment was completed without examining the books of account and other material. Admittedly it is not a case of self assessment u/s 23 without calling the assessee but was a scrutiny assessment after examining books of account and the same material has been used against the assessee. Petition allowed - decided partly in favor of petitioner.

Summary

Issues:
1. Reopening of assessment based on new facts and material discovered during a survey.
2. Classification of sales as inter-state sales and imposition of Central Sales Tax (CST).
3. Dispute regarding penalty under section 65 of the Act.

Analysis:

1. The first issue revolves around the reopening of the assessment by the Assessing Officer (AO) based on new facts and material discovered during a survey. The petitioner argued that the original assessment was completed after analyzing the books of account and no discrepancy was found. It was contended that the burden was on the Revenue to prove that the goods were sold outside the State of Rajasthan. The petitioner further emphasized that the AO's decision to reopen the assessment was merely a change of opinion, which is impermissible under the Act. However, the court held that the reopening of the assessment was justified as new material had come to light during the survey, and it was not a mere change of opinion.

2. The second issue pertains to the classification of sales as inter-state sales and the imposition of Central Sales Tax (CST). The Tax Board upheld the AO's decision to levy CST on the sales made by the assessee. The petitioner argued that the burden was on the AO to prove that the goods were sold from one State to another under section 3(a) of the CST Act. It was contended that no inquiry was conducted from the buyers to establish the inter-state nature of the sales. However, the court found that the AO's decision to levy tax at 4% was justified as the assessee failed to prove that the goods were sales tax paid, leading to the imposition of CST. The court upheld the Tax Board's decision in this regard.

3. The final issue concerns the dispute regarding the imposition of penalty under section 65 of the Act. The Revenue contended that the penalty was justified due to the assessee filing wrong particulars during the original assessment. On the other hand, the petitioner argued that the penalty was not sustainable as the original assessment was completed after examining the books of account. The court held that since the original assessment was not a case of self-assessment and was conducted after scrutinizing the books of account, the penalty was not sustainable in this case. The court referred to previous judgments to support the decision to delete the penalty imposed on the assessee.

In conclusion, the court partially allowed the petitions filed by the assessee, upholding the reopening of the assessment based on new material, the imposition of CST on the sales, but directing the deletion of the penalty imposed under section 65 of the Act.