2019 (5) TMI 909 - HC - VAT and Sales Tax

Levy of purchase tax - purchases made from unregistered dealers - assessment on the sales suppression - Whether the sales turnover arrived at by the Appellants on the purchases from registered dealers and also from unregistered dealers and tax paid on the sales turnover by arriving at Gross Profit to the purchases. Hence levying tax again on the purchases is correct? HELD THAT - It is no doubt true that the petitioner did not appear before the Tribunal. Yet the legal requirement is that the correct turnover has to be taxed and by default, the State cannot be permitted to tax a dealer on the turnover which is not taxable. Therefore, we have to examine as to whether the decision of the Tribunal is justified or not. The Tribunal held that so far as the levy of purchase tax under Section 12 of the TNVAT Act is concerned, the use of the word otherwise in Section 12(1)(a) of the TNVAT Act would bring the transaction under the said provision and resultantly, the value of goods purchased from unregistered dealer or from unknown sources would attract tax - However, there is a factual finding recorded by the first appellate authority holding that if purchase tax is demanded from the petitioner, it would amount to double taxation. When the petitioner responded to the revision notice by their reply dated 02.11.2015, they took a specific stand that the deemed sale value is arrived taking into account the purchases made from registered and unregistered dealers plus gross profit thereon. However, the Assessing Officer did not deal with the said contention presumably because, the petitioner did not cooperate in the revision of assessment proceedings, as the Assessing Officer has recorded that despite an opportunity of personal hearing granted to the petitioner/dealer, he did not avail the same. The Tribunal in the impugned order has not dealt with this issue, which revolves on the factual aspect - The order of the assessing authority is not clear as to whether the first appellate authority undertook a verification exercise or not whereas, the Assessing Officer revised the assessment pointing out discrepancies in Statement No.12 - thus the records need to be verified before the demand is issued to the petitioner. The matter is remanded to the Assessing Officer for fresh consideration to direct the petitioner to produce the entire books of accounts and all records based on which Form-WW was filed and after making a thorough scrutiny, redo the assessment in accordance with law - tax case revision allowed by way of remand.

Summary

Issues:
1. Assessment of purchase tax from unregistered dealers
2. Assessment of sales suppression
3. Levying tax on purchases from registered and unregistered dealers

Analysis:
1. The petitioner challenged the assessment under the TNVAT Act for the year 2013-14, specifically regarding the levy of purchase tax on purchases from unregistered dealers amounting to ?57,59,968. The Assessing Officer proposed to revise the assessment based on discrepancies in the petitioner's Form-WW and P & L account. The petitioner contended that tax was paid based on deemed sale value, including purchases from registered and unregistered dealers. The first appellate authority set aside the assessment, but the State's appeal to the Tribunal was allowed. The High Court observed that the Tribunal's decision on the levy of purchase tax under Section 12 of the TNVAT Act raised concerns of double taxation, as noted by the first appellate authority. The matter was remanded to the Assessing Officer for fresh consideration to verify the records before issuing any demand to the petitioner.

2. The assessment also involved sales suppression issues amounting to ?1,73,06,528, which were set aside by the first appellate authority. The petitioner argued that the deemed sale value reported in the returns included purchases from unregistered dealers, as verified by the Annexure-1 filed with VAT returns and audit reports. The High Court noted discrepancies in the assessment records and directed the Assessing Officer to conduct a thorough scrutiny of the petitioner's books of accounts before reassessing the matter.

3. The Tribunal's decision was set aside, along with the first appellate authority's order, and the assessment order dated 17.11.2015 was remanded for fresh consideration. The High Court emphasized the need for proper verification of records before issuing any tax demands to avoid double taxation. The Assessing Officer was instructed to reevaluate the assessment in accordance with the law, directing the petitioner to produce all necessary books of accounts and records for scrutiny. The questions of law raised in the case were left open, and no costs were awarded in the judgment.