1977 (7) TMI 74 - Tri - VAT and Sales Tax

Issues Involved:
1. Reopening of assessment under Section 12(8) for the years 1971-72 and 1972-73.
2. Validity of deductions claimed by the appellant for sales to registered dealers.
3. Burden of proof regarding the genuineness of the purchasing dealers and their transactions.
4. Compliance with principles of natural justice by the Assessing Officer (AO).

Detailed Analysis:

1. Reopening of Assessment under Section 12(8) for the Years 1971-72 and 1972-73:
The appellant argued that the assessments for the years 1971-72 and 1972-73 were completed under Section 12(4) and the AO had no jurisdiction to reopen them under Section 12(8). The Tribunal referred to the case of Arjan Radio House vs. Assessing Authority (31 STC 49), where it was held that reassessment can be framed if new information comes to light that could prevent loss of revenue. The Tribunal concluded that the reopening of assessments under Section 12(8) was justified and the objection raised by the appellant was rejected.

2. Validity of Deductions Claimed by the Appellant for Sales to Registered Dealers:
The AO disallowed deductions claimed by the appellant for sales to various registered dealers on the grounds that some dealers did not exist, some denied making purchases, and some had invalid registration numbers. The Tribunal analyzed each dealer's case for the assessment years 1971-72, 1972-73, and 1973-74.

Assessment Year 1971-72:
- Allowed Deductions:
- Alok Pratisthan: Rs. 5,72,920.53
- Alaka Bhandar: Rs. 6,55,613.78
- Ganesh Store: Rs. 5,44,973.29
- Bayalish Mouza Store: Rs. 15,987.82
- Madhabananda Das: Rs. 37,079.06

- Disallowed Deductions:
- Nilamani Rout: Rs. 47,500.50 (No valid registration number)

- Remanded for Further Investigation:
- Anam Charan Mohanty: Rs. 31,884.05 (Further investigation required)

Assessment Year 1972-73:
- Allowed Deductions:
- Trinath Bhandar: Rs. 7,29,417.63
- Alok Pratisthan: Rs. 4,01,793.45
- Shankar Store: Rs. 13,19,937.50
- Balaram Behera: Rs. 11,95,193.43
- Ganesh Store: Rs. 6,81,625.95
- Alaka Bhandar: Rs. 5,88,303.30

- Disallowed Deductions:
- Biswanath Sen: Rs. 32,318.75 (Business closed since 1966)

Assessment Year 1973-74:
- Allowed Deductions:
- Trinath Bhandar: Rs. 22,94,848.07
- Binapani Store: Rs. 12,51,667.03
- Shankar Store: Rs. 9,34,320.39
- Jharendra Das: Rs. 3,02,293.79

- Disallowed Deductions:
- Epari Laxman Patra: Rs. 1,694.35 (No valid registration number)
- Kalpana Store: Rs. 39,283.15 (No valid registration number)

- Remanded for Further Investigation:
- Balajee Traders: Rs. 18,73,497.69 (Further investigation required)
- Shrikant Bhandar: Rs. 10,203.35 (Further investigation required)

- Additional Amount:
- Majid Store: Rs. 25,000 (Sale suppression)

3. Burden of Proof Regarding the Genuineness of the Purchasing Dealers and Their Transactions:
The Tribunal emphasized that the selling dealer is only obliged to prove that the purchaser is a registered dealer and the goods purchased are specified in the purchaser's registration certificate. The burden then shifts to the Department to prove that the registration certificates were obtained fraudulently or that the purchasing dealers did not exist. The Tribunal cited several cases, including The State of Madras vs. Radio Electricals (18 STC 222) and Nowranglal Agarwalla vs. State of Orissa (17 STC 271), to support this principle.

4. Compliance with Principles of Natural Justice by the AO:
The Tribunal found that the AO did not comply with the principles of natural justice in several instances. The AO failed to provide the appellant with copies of statements and other evidence collected during the investigation. The Tribunal emphasized that the Department must supply such evidence to the assessee and provide an opportunity for rebuttal. The Tribunal cited cases such as Chand & Sons vs. The State of Punjab (30 STC 211) and Phanindra Nath Manna & Co. vs. CTC & Ors. (33 STC 292) to support this requirement.

Conclusion:
The Tribunal allowed the appeals in part, confirming some deductions, disallowing others, and remanding certain issues for further investigation. The AO was directed to complete the assessments according to law, considering the principles of natural justice and the burden of proof as outlined in the judgment. The imposition of tax and penalties was annulled for the present, with instructions for recalculation based on the Tribunal's findings.

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