2020 (9) TMI 220 - HC - VAT and Sales Tax

Maintainability of petition - availability of alternative remedy of appeal - income from undisclosed sale transactions - HELD THAT - The respondent after finding the petitioner's explanation to be unsatisfactory had straight away assumed that the said sum represents income from undisclosed sale transactions. I am afraid that this approach is clearly not sustainable in law - In fact when the matter was taken up for hearing, the petitioner's counsel produced a copy of the certificate issued by the Indian Bank as well as the City Union Bank to show that the transactions in question are between the Directors of the Company and the assessee themselves. The second aspect of the matter pertains to reliance on the stock details report dated 13.02.2020. In this case, personal hearing was held on 31.01.2020. It is quite possible that the petitioner themselves requested the Assessing Authority to conduct an inspection. In fact, on the last occasion when the Assessing Officer was also heard through the Video Conference, she strongly submitted that the report dated 13.02.2020 was obtained based on the inspection that was undertaken at the instance of the petitioner themselves. It may be so - It is obvious that the Assessing Officer had relied on a report dated 13.02.2020 before passing the impugned order. But the said report was not made available to the petitioner herein. The matter is remitted to the file of the second respondent and after the petitioner remits the sum of ₹ 5,00,000/- as undertaken before this Court, the second respondent will issue a hearing notice to the petitioner - Petition allowed by way of remand.

Summary

Issues involved: Challenge to assessment order for the assessment year 2019-2020 based on two grounds: 1. Assumption of bank remittances as income from sale transactions without proper consideration of evidence. 2. Reliance on stock details report without providing a copy to the assessee for explanation.

Analysis:

Issue 1: Assumption of bank remittances as income from sale transactions
The petitioner, engaged in manufacturing tobacco products, challenged the assessment order primarily on the grounds that the respondent assumed certain remittances in the bank account as income from undisclosed sale transactions without proper consideration. The petitioner contended that the remittances were actually personal loans advanced by the Directors to the Company for capital infusion, supported by a certificate from a Chartered Accountant. The court referred to a Supreme Court judgment stating that the inability to show the source of remittances in a bank account does not automatically imply it represents the assessee's income from undisclosed transactions. The court found the respondent's approach unsustainable as the petitioner provided evidence showing the transactions were between the Directors and the Company, not from sale transactions.

Issue 2: Reliance on stock details report without providing a copy
The second aspect of the challenge pertained to the reliance on a stock details report dated 13.02.2020 without providing a copy to the assessee for explanation. The court noted that although a personal hearing was held earlier, the report was not shared with the petitioner, which was crucial as it was adverse to their interest. The court emphasized that when such reports are relied upon, the assessee should be given an opportunity to respond. As the report was not made available to the petitioner, the court quashed the impugned order and remitted the matter back to the assessing authority for fresh consideration. The court directed the petitioner to remit a sum of ?5,00,000/- as undertaken, after which a new hearing will be conducted, allowing the petitioner to offer explanations based on the report. The court emphasized the importance of providing a fair opportunity for the assessee to respond before passing any fresh orders.

In conclusion, the High Court allowed the writ petition, quashed the impugned order, and remitted the matter back to the assessing authority for fresh consideration, emphasizing the need for proper evaluation of evidence and providing the assessee with a fair opportunity to respond.