2017 (3) TMI 1009 - HC - VAT and Sales Tax

Input tax credit - penalty - demand on the ground that end dealers i.e., the sellers, have not reported the sales transactions entered into between them and the petitioner - Held that - The respondent i.e., Assessing Officer, could have only come to a conclusion that the subject transactions were bogus, based on substantive material, and not that because objections were not filed by the petitioner, the assertions made in the pre-assessment notice would have to be deemed to be correct. Furthermore, if, material was available with respondent to come to the conclusion that the transaction were bogus, adequate opportunity had to be given to the petitioner to meet the charge. The impugned order shows that there is no discussion on this aspect of the matter - impugned order set aside - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to order reversing Input Tax Credit and imposing penalty based on non-reporting of sales transactions by end dealers.

Analysis:
The writ petition challenged an order reversing Input Tax Credit (ITC) and imposing a penalty due to non-reporting of sales transactions by the end dealers. The petitioner argued that the reversal of ITC solely based on the end dealers not reporting transactions was unjustified. The petitioner contended that no material was provided with the pre-assessment notice, and objections were not filed. The court noted that the respondent, the Assessing Officer, should have based the decision on substantive material rather than solely on non-filing of objections. The court emphasized that the Assessing Officer should have provided the petitioner with an opportunity to address the allegations and should not have confirmed the proposal without proper discussion or giving a chance to respond.

The petitioner relied on previous judgments to support their case, highlighting the need for substantive material to declare transactions as bogus. The court agreed with the petitioner's argument, emphasizing that the Assessing Officer's conclusion of bogus transactions should be based on concrete evidence, not just the absence of objections. The court found fault with the Assessing Officer's approach of confirming the proposal without proper discussion or allowing the petitioner to address the allegations. Consequently, the court set aside the impugned order and granted liberty to the respondent to redo the assessment, providing the petitioner with the material and an opportunity to respond. The court directed the assessing officer to pass a detailed order considering the observations made during the proceedings.

In conclusion, the writ petition was disposed of with the impugned order set aside. The respondent was given the opportunity to redo the assessment after presenting the material to the petitioner and allowing them to respond. The court emphasized the importance of providing a fair opportunity to the assessee to address the allegations and directed the assessing officer to pass a detailed order considering the observations made during the proceedings.