2020 (6) TMI 684 - HC - VAT and Sales Tax

Principles of Natural Justice - non-service of notice but assessment order served - suppression of sales turnover on the basis of electricity consumed during the assessment year in question - case of petitioner is that the respondent before making revised assessment, has not provided reasonable opportunity to the petitioner to furnish the books of accounts maintained for the relevant year - HELD THAT - It is also an undisputed fact that the respondent, while passing the revised assessment order, has not verified the books of accounts maintained by the petitioner for the relevant year - It is well settled that the electricity consumption cannot be adopted as the sole basis for rejecting the accounts of the assessee and for making an estimate of the taxable turnover of the assessee. The matter is remanded back to the respondent for fresh consideration. Though it is stated that the petitioner already filed a detailed objections on 23.01.2013, it is open to them to file their objections afresh, along with the required documents viz., books of accounts maintained by them, etc., within a period of two weeks from the date of receipt of a copy of this order - Appeal allowed by way of remand.

Summary

Issues:
Challenging a revised assessment order for the assessment year 2004-05 based on electricity consumption as the sole basis for rejecting income tax returns and estimating taxable turnover, violation of principles of natural justice, and the need for providing a reasonable opportunity to produce books of accounts.

Analysis:
1. The petitioner, a manufacturer of sago and starch, challenged a revised assessment order for the assessment year 2004-05, claiming exemption on a reported turnover of ?76,07,110. The respondent alleged suppression of sales turnover based on electricity consumption, leading to a revised assessment order without due notice or opportunity for the petitioner to produce relevant documents.

2. The respondent contended that the revised assessment was based on the best judgment due to the petitioner's failure to produce books of accounts for verification. The petitioner argued against using electricity consumption as the sole basis for assessment, citing legal precedents like Kalyani Oil Mills v. State of Madras, emphasizing the need for proper verification and consideration of objections before passing revised orders.

3. The Court noted that the revised assessment solely based on electricity consumption without verifying the petitioner's books of accounts was arbitrary and against the principles of natural justice. Referring to legal principles from Kalyani Oil Mills and Madurai Soft Drinks (Private) Limited v. State of Tamil Nadu, the Court emphasized the importance of material doubt in account entries, actual test checks, and comparable data for estimation, highlighting the arbitrariness of using arbitrary figures for best judgment assessments.

4. Considering the legal position and admitted facts, the Court set aside the impugned revised order and remanded the matter back to the respondent for fresh consideration. The petitioner was given the opportunity to file objections afresh along with necessary documents within two weeks, with the respondent directed to pass appropriate orders within four weeks after affording a personal hearing to the petitioner.

5. The writ petition was allowed, no costs were imposed, and the connected miscellaneous petition was closed, concluding the judgment regarding the challenges to the revised assessment order for the assessment year 2004-05 based on electricity consumption and the violation of principles of natural justice.