2017 (1) TMI 964 - HC - VAT and Sales Tax

Validity of assessment order u/s 39 of the Act - notice has been issued without forming any opinion as to the turnover escaping assessment as required under sub-section (1) of section 43 - whether before issue of notice u/s 43 of the Act, assessment can be completed u/s 39? - natural justice - whether the impugned order is passed arbitrarily, without jurisdiction and against the principles of law so as to quash the same? - Held that - the best judgment procedure adopted by the assessing authority must be related to some evidence or material and must be more than their suspicion. It appears none of the material or evidence has been produced or relied upon by the opposite party to come to a conclusion that average business of the petitioner comes to ₹ 15,000. Moreover, when the petitioner is engaged in selling of some low cost tiffin, and some rasgola at no stretch of imagination the daily business would reach to such an amount. It is a fact that he has engaged six persons including himself and his brother. The best judgment assessment as required to be followed under law to make assessment u/s 43(1) of the Act being not followed by the opposite party, the impugned order is illegal, bad in law, vulnerable and liable to be quashed - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to assessment order under section 43 of the Odisha Value Added Tax Act, 2004 without prior assessment under sections 39, 40, 42, or 44 of the Act and without forming an opinion on turnover escaped from assessment.

Detailed Analysis:

Assessment Order Challenge:
The petitioner challenged the assessment order under section 43 of the Act, alleging that no prior assessment under sections 39, 40, 42, or 44 was conducted. The petitioner contended that the assessment order was passed without forming an "opinion" on the turnover escaped from assessment, as required by law.

Factual Background:
The petitioner, a registered dealer engaged in selling various food items, filed statutory returns but did not receive an assessment order under section 39. Instead, a notice was issued under section 43 for assessing escaped turnover. The impugned assessment order was passed without providing proper opportunity or serving any report to the petitioner.

Legal Arguments:
The petitioner's counsel argued that the assessment order was illegal, arbitrary, and against natural justice principles. Referring to precedents, the counsel emphasized that the assessing authority must not mechanically reopen assessments without proper reasoning or forming an opinion. The petitioner contended that the best judgment assessment was arbitrary, unfair, and lacked supporting material.

Opposing Views:
The Revenue's counsel acknowledged deficiencies in the assessment process and suggested remitting the matter for reassessment. The Revenue's assessment under section 43(1)(a) lacked clarity on the items escaped from assessment, indicating procedural lapses.

Judicial Analysis:
The court scrutinized the assessment order's basis for determining the daily average business at ?15,000, contrasting with the petitioner's reported sales of ?2,000. Citing legal principles, the court stressed that best judgment assessments must be reasonable, supported by evidence, and not arbitrary. The court found the assessment lacking material evidence to justify the inflated turnover calculations.

Legal Precedents:
Referring to legal precedents, the court highlighted that best judgment assessments must be grounded in evidence, not mere suspicion. The court emphasized that the assessing authority's estimate should be fair and based on relevant materials, which was absent in this case.

Judgment:
Concluding that the assessment order was illegal, arbitrary, and failed to meet legal standards, the court quashed the impugned order. The court upheld the petitioner's challenge, emphasizing the necessity for proper assessment procedures as mandated by law.

Outcome:
The writ petition was allowed, and the impugned order was quashed, aligning with legal principles and precedents cited during the proceedings. Both judges concurred on the decision to set aside the assessment order.