2020 (9) TMI 4 - HC - VAT and Sales Tax

Validity of assessment order - principles of natural justice - request for cross-examination of the Customs Broker as well as bank officials denied - High value imports - bank accounts of petitioner or not - rectification order - section 84 of TNVAT Act - HELD THAT - According to the petitioner, the other banks were also visited by the Deputy Director, who had come to the same conclusion with respect to those banks as well and thereafter, the proceedings were dropped by the Income Tax Department. This assumption is drawn from the fact that nothing transpired after 2015 in this regard - This assumption does not appear to be correct in the light of the report of the Assistant Director of Income Tax Department (Investigation) dated 16.08.2017 issued after the orders of this Court. Clearly, the proceedings before the Income Tax Department are still at large. The result of the same or any progress in that regard is unknown as the Income tax Department is not a party to the writ petitions and neither has the petitioner placed on record any other document in this regard post August 2017 - No counters have been filed by the respondents, despite sufficient opportunities having been extended to them. This matter cannot be adjourned but to be proceeded on the basis of the facts available on record. A perusal of the impugned orders indicates that the directions of this Court in the first round of litigation have not been taken into account in proper perspective in finalizing the assessments - This Court had specifically directed that a proper enquiry be made by the Assessing Officer, which would not only include examination of all materials procured from the Customs and the Income Tax Department, but also on an independent application of mind of those materials and a proper and effective opportunity being extended to the petitioner to substantiate his repeated contention that he is unconnected with the import transactions. The impugned assessments have not been framed in a proper manner - the impugned assessments are set aside and the Assessing Officer directed to redo the same denovo after hearing the petitioner, supplying the documents sought for by him and extending an opportunity of cross examination to him. This exercise shall be completed within a period of eight (8) weeks from date of uploading of this order. Petition allowed.

Summary

Issues Involved:
1. Rejection of rectification applications by the Assessing Officer.
2. Ex-parte assessments based on audit slips.
3. Alleged misuse of the petitioner’s TIN and PAN numbers.
4. Non-compliance with the High Court’s directions for a thorough enquiry.
5. Denial of opportunity for cross-examination.

Detailed Analysis:

Rejection of Rectification Applications:
The petitioner, a proprietor of Tvl.S.R.S. Traders, was assessed for the periods 2010-11 and 2011-12 under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) on 21.03.2013. The petitioner filed applications for rectification of errors in the assessment orders, which were rejected on 21.11.2016. These rejections were challenged before the High Court, which found the case peculiar as the very basis of the assessment was challenged by the petitioner.

Ex-parte Assessments Based on Audit Slips:
An audit inspection at the petitioner’s premises resulted in audit slips issued in November 2012 and June 2013, indicating high-value transactions related to imports of mobile phones. The Assessing Officer commenced proceedings alleging no returns were filed for the reported turnover. Due to the petitioner’s non-response, the assessments were completed ex-parte. The petitioner later sought information under the Right to Information Act and filed applications under Section 84 of the TNVAT Act for rectification, claiming misuse of their TIN and PAN numbers by a third party.

Alleged Misuse of TIN and PAN Numbers:
The petitioner contended that their TIN and PAN numbers were misused by a third party to open bank accounts and conduct transactions. The Income Tax Department conducted enquiries with various banks and exonerated the petitioner, as the bank accounts did not relate to them. Despite detailed submissions, the Assessing Officer rejected the Section 84 applications, leading to the first round of litigation in W.P.Nos.42574 and 42575 of 2017.

Non-compliance with High Court’s Directions:
The High Court had previously set aside the orders of rectification and the ex-parte assessment orders, directing the Assessing Officer to conduct necessary enquiries with the Customs Department, Income Tax Department, and the banks involved. The Assessing Officer was to issue fresh show cause notices after receiving requisite information. However, the Assessing Officer failed to properly consider the High Court’s directions and relied on the same materials already on record without conducting a thorough enquiry.

Denial of Opportunity for Cross-examination:
The petitioner requested details from the pre-assessment notices and an opportunity to cross-examine officials who allegedly visited the business premises and the customs broker. The Assessing Officer did not address these requests, leading to the conclusion that the assessments were completed in a cursory and arbitrary manner.

Conclusion:
The High Court found that the impugned assessments were not framed properly and directed the Assessing Officer to redo the assessments de novo. The Assessing Officer was instructed to hear the petitioner, supply the requested documents, and extend an opportunity for cross-examination. This exercise was to be completed within eight weeks from the date of the order. The writ petitions were allowed, and connected miscellaneous petitions were closed with no costs.