2018 (12) TMI 1230 - HC - VAT and Sales Tax

Validity of re-assessment done - reassessment done on mere suspicion when there was misclassification of turnover on taxable and exempted goods - deletion of assessment in the absence of valid records in respect of heavy profit under exempted sales and heavy loss under taxable goods - Held that - The Revision of assessment was done by the Assessing Officer invoking his power under Section 16(1) of the TNGST Act. The question would be as to whether the said power could have been invoked in the facts and circumstances of the case. The First Appellate Authority found that the Assessing Officer had revised the assessment based on his working that there was shortage of taxable turnover to the extent of ₹ 36,87,078/- and excess accounting of sales tax under exempted goods to an extent of ₹ 37,07,091/-. The First Appellate Authority rightly held that there can be no two best judgement, assessment for the same dealer for the same year. Next, the First Appellate Authority considered whether the Assessing Officer could have invoked Section 36 of the TNGST Act and after examining the facts found that the Revision of assessment itself was the case of change of opinion and no finding has been recorded that there has been any suppression on the part of the dealer. The orders passed by the First Appellate Authority as confirmed by the Tribunal are perfectly legal and valid - Tax Case Revision is dismissed.

Summary

Issues:
1. Whether re-assessment can be made based on misclassification of turnover on taxable and exempted goods?
2. Whether the Tribunal was correct in deleting the assessment due to the absence of valid records regarding profit and loss under taxable and exempted goods?

Analysis:
1. The Tax Case Revision was filed by the State under Section 38 of the TNGST Act against the order of the Tamil Nadu Sales Tax Appellate Tribunal. The State challenged the Tribunal's decision regarding re-assessment based on misclassification of turnover. The Appellate Deputy Commissioner had set aside the Assessing Officer's order for the assessment year 2001-02. The First Appellate Authority found a shortage of taxable turnover and excess accounting of sales tax under exempted goods. The Tribunal dismissed the State's appeal, upholding the First Appellate Authority's reasoned order.

2. The First Appellate Authority's decision was supported by the High Court, stating that the Assessing Officer's revision of assessment lacked legal basis. The Assessing Officer's working showed discrepancies in taxable and exempted turnover. The First Appellate Authority correctly pointed out that the Assessing Officer's revision was not justified as there was no evidence of suppression by the dealer. The Tribunal affirmed the First Appellate Authority's order, citing the legal principles regarding the grounds for invoking Section 16 of the TNGST Act. The Tribunal referred to a Supreme Court decision emphasizing the need for reasonable grounds to believe in escaped assessment for invoking Section 16.

3. The High Court concluded that the orders passed by the First Appellate Authority and affirmed by the Tribunal were legally valid. The Court dismissed the Tax Case Revision, answering the substantial questions of law against the petitioner/Revenue. The judgment highlighted the importance of valid grounds for re-assessment and the necessity of evidence to support such actions under the TNGST Act.