2022 (6) TMI 973 - HC - VAT and Sales Tax

Recomputation of tax and imposition of penalty - whether alleged loan transaction of the Assessee was in fact an instance of suppression of purchases or not? - HELD THAT - It is seen from the impugned order of the Tribunal that a letter was produced from Mr. Sikaria and placed before the Tribunal in which the statement of the account of the Assessee as appearing in the books of Mr. Sikaria was enclosed. It is further seen that on the part of the Assessee, material was placed to substantiate the contentions that the transaction was in fact a loan transaction. In MITTAL COMPANY VERSUS COMMISSIONER OF SALES TAX, UP., LUCKNOW 1987 (8) TMI 420 - ALLAHABAD HIGH COURT , it was rightly pointed out that although the initial onus was on the Assessee to show that no sale was made, the question arose as to how the Assessee is expected to discharge that onus - Since in that case the Revenue failed to disprove the Assessee s contention, the addition made to the taxable turnover presuming sales, was set aside. As far as the present case is concerned again, the Assessee cannot be expected to negatively prove that there was no purchase suppression. The Assessee in fact placed materials to show that the transaction was a loan transaction. If the Department was to doubt it, it had the onus then shifted to the Department to show that there was in fact the transaction which mimicked purchase suppression. With the Department not having discharged the onus, the authorities below including the Tribunal, the ACST and the STO were in error in proceeding on a presumption that it was a case of purchase suppression. The Court answers the question framed in favour of the Assessee and against the Department and sets aside the impugned orders of the Tribunal, the ACST and the STO - revision petition allowed.

Summary

Issues:
Assessment under Section 12(8) of the Orissa Sales Tax Act, 1947 for the accounting year 2001-02 based on alleged purchase suppression.

Analysis:
The revision petition stemmed from an order by the Orissa Sales Tax Tribunal confirming an assessment under Section 12(8) of the Orissa Sales Tax Act, 1947, raising a demand and penalty against the Assessee. The original assessment was reopened based on a fraud case report alleging purchase suppression, specifically regarding goods procured from a party but not reflected in the purchase register. The Assessee explained the discrepancy as a loan transaction, but the Assessing Officer rejected this explanation, leading to an increase in the gross taxable turnover and imposition of penalties.

The Assessee's appeals before the Assistant Commissioner of Sales Tax and the Tribunal were both unsuccessful. The main question of law for consideration was whether the authorities were justified in treating the alleged loan transaction as purchase suppression. The Tribunal limited the enhancement to the actual alleged suppression amount in its order.

During the hearing, the Assessee's Senior Advocate cited relevant case laws to argue that without concrete evidence, a loan transaction should not be presumed as purchase suppression. The Department's Standing Counsel supported the authorities' decisions, emphasizing the lack of authorization for the Assessee to engage in loan transactions.

The Court noted that both parties presented materials supporting their contentions, including a letter from the party involved in the transaction. Drawing from legal precedents, the Court highlighted that the initial burden was on the Assessee to refute the allegation, but the onus shifted to the Department to disprove the Assessee's claims. Since the Department failed to meet this burden, the Court found the authorities erred in presuming purchase suppression without sufficient evidence.

Consequently, the Court ruled in favor of the Assessee, setting aside the orders of the Tribunal, Assistant Commissioner of Sales Tax, and Sales Tax Officer. The revision petition was allowed, with no costs imposed.