2013 (3) TMI 521 - HC - VAT and Sales Tax

Tax Evasion - block assessment as the petitioner submitted incomplete tax statements for the period 1.4.2006 to 6.8.2008 - Anti Evasion Bureau investigated the transaction - revisional authority raised the demand - Held that - As decided in Girdhari Lal Nannelal Versus Sales Tax Commissioner, M. P. 1976 (3) TMI 51 - SUPREME COURT the payment of income tax in respect of the unexplained income may not hold good in sale tax case because in sales tax case the authority has to hold the actual amount of sale, which has been concealed by the assessee. But in the present case, the authority has relied on the assessment in fixing the amount of sale of the tax fixed by the income tax department for the year 2006-07, 2007-08 and 2008-09. Similarly, the authority has relied on the report of New Dixit Transport Commission Agent. The petitioner specifically requested to summon the witnesses and permit the petitioner to cross examine the witness of the transport authority, but the authority has not examined the aforesaid witness. It has simply relied the statement of the transport agent before the Anti Evasion Bureau, which were the part of the report of Anti Tax Evasion Bureau. From the perusal of the orders passed by the authority it is clear that the authority has fixed the amount of sale, which was escaped from income, on the basis of the report submitted by the Anti Evasion Bureau. However, the authority was performing the quasi judicial function. Hence, it was obligatory on the part of the authority to arrive on its own findings and the authority was obliged to adopt the procedure, which is known to the law. Thus the procedure adopted by the authority is against the law and perverse. The authority relied on the Income Tax returns and the findings of the enquiry report of New Dixit Transport Commission Agent without assessing the contents independently. The arguments advanced by the petitioner that the assessment is beyond the power of authority and beyond the period of limitation could not be accepted because in the present case, the assessment is for block period, which is in accordance with Section 55-A of the VAT Act and it was introduced vide amendment of Act No.26/2007 that for the purpose of this section the expression block period shall mean the period comprising of six years preceding the year in which the requisition was made or the inspection was conducted and shall include the period upto the date of requisition or inspection.In such circumstances, vide notification dt.6.4.2011 (Annexure P/10) filed by the petitioner alongwtih the petition the government has power to extend the period of limitation because at that time, the period of limitation was not expired. Hence, the contention of the petitioner in this regard is hereby rejected. The impugned orders of revisionary authority are hereby quashed, however, it is hereby clarified that the authorities are at liberty to make assessment of the petitioner in accordance with law after following the procedure as mentioned in the order.

Summary

Issues Involved:
1. Jurisdiction and power of the authority to pass the order.
2. Basis and validity of the findings of the authority.
3. Violation of principles of natural justice.
4. Period of limitation for assessment.
5. Maintainability of the writ petition due to availability of alternative remedy.

Issue-wise Detailed Analysis:

1. Jurisdiction and Power of the Authority to Pass the Order:
The petitioner contended that the authority lacked the jurisdiction and power to pass the impugned orders as they were beyond the period of limitation, and the government had no power to extend the period. The court rejected this argument, stating that the assessment was for a block period under Section 55-A of the VAT Act, introduced by Act No.26/2007. The block period comprises six years preceding the year of requisition or inspection, and the government had the power to extend the limitation period via notification dated 6.4.2011.

2. Basis and Validity of the Findings of the Authority:
The findings of the authority were based on the enquiry report of the Anti Evasion Bureau and the assessment of the Income Tax Department. The authority relied on bank statements and other documents without independent verification. The court found this approach to be perverse and against the law, emphasizing that the authority must independently assess the contents and not solely rely on external reports.

3. Violation of Principles of Natural Justice:
The petitioner argued that there was a violation of natural justice as they were not allowed to cross-examine the transport agents whose statements were used against them. The court upheld this argument, citing the Supreme Court's ruling that the burden of proof in tax evasion cases lies with the state, and the assessee must be given the opportunity to cross-examine witnesses to prove the correctness of their returns.

4. Period of Limitation for Assessment:
The court clarified that the assessment was for a block period and was within the limitation period as per Section 55-A of the VAT Act. The government had the authority to extend the limitation period, which was done before the period expired.

5. Maintainability of the Writ Petition Due to Availability of Alternative Remedy:
The court addressed the preliminary objection regarding the maintainability of the petition due to the availability of an alternative remedy. It held that the writ petition was maintainable as there was a violation of natural justice and the proceedings were against well-settled legal principles. The court cited the Supreme Court's judgment in Harbanslal Sahnia v. Indian Oil Corpn. Ltd., which allows writ jurisdiction in cases of violation of fundamental rights, failure of natural justice, or proceedings without jurisdiction.

Conclusion:
The court quashed the impugned orders dated 24.12.2011 (Annexures P/1 & P/2) and directed the authorities to reassess the petitioner in accordance with the law, following proper procedures. The petition was disposed of with no order as to costs.