2024 (3) TMI 444 - HC - VAT and Sales Tax

Validity of assessment orders in respect of assessment years 2007-08 to 2014-15 - freight not reported and goods sold with under value - petitioner contended that the computation in respect of freight charges in the notice under reply is not based on any material evidence, but entirely based on assumptions and presumptions - Whether proceedings relating to assessment years 2007-08 to 2010-11 are barred by limitation? - HELD THAT - Under Section 27(1) of the TNVAT Act, the limitation period in respect of escaped assessment is six years from the date of assessment. Section 22(2) deals with deemed assessment. The principal clause prescribes that there will be deemed assessment on the 31st October of the succeeding year to the relevant assessment year - Admittedly, assessment orders were not issued in these cases pursuant to returns being filed. Since the proviso applies to these cases, as regards assessment years 2007-08 to 2010-11, limitation should be computed from 01.07.2012. If so computed, the assessments relating to the above mentioned orders are within the six year period of limitation because re-assessment proceedings were initiated pursuant to notice dated 12.08.2016. In the impugned assessment orders, the assessing officer has applied a flat rate per consignment based on the State from which the consignments were delivered to the petitioner. For instance, as regards the State of Gujarat, the freight charges per consignment was fixed at Rs. 1,00,000/-. As regards the State of Rajasthan, it was fixed at Rs. 80,000/-. The assessment orders also record the petitioner's contention that about 13 consignments from Gujarat were of the value below Rs. 50,000/- per consignment. Effectively, the freight charges determined by the assessing officer were twice the value of the consignment as regards those 13 consignments. Similarly, the petitioner has pointed out that six consignments were below the value of Rs. 1,00,000/-. Once again, the freight charges determined by the assessing officer is slightly more than the value of consignment as regards these six consignments. These illustrations demonstrate that the assessing officer did not determine the alleged suppressed freight charges on a rational basis. Hence, the assessment orders as regards assessment years 2007-08 to 2013-14 warrant interference. With regard to this assessment year, the petitioner had filed a rectification petition which was disposed of by order dated 05.06.2020. In the notice dated 12.08.2016, the suppressed turnover with regard to freight was specified as Rs. 89,31,520/-. As against this, in the rectification order, the assessing officer has determined the suppressed freight charges as Rs. 13,17,651/- and computed tax on that basis. It also appears that some additional factors were taken into consideration in the rectification order. The impugned assessment orders are quashed and these matters are remanded for re-consideration - petition disposed of by way of remand.

Summary

Issues involved:
The challenge to assessment orders under the Tamil Nadu Value Added Tax Act, 2006 for assessment years 2007-08 to 2014-15.

Limitation Issue (Assessment Years 2007-08 to 2010-11):
The limitation period for escaped assessment is six years from the date of assessment. Deemed assessment under Section 22(2) occurred on 30.06.2012 for assessment years 2006-07 to 2010-11. As assessment orders were not issued, the proviso to sub-section 2 of Section 22 applies, and the limitation should be computed from 01.07.2012. Since re-assessment proceedings were initiated pursuant to notice dated 12.08.2016, assessments for the mentioned years fall within the six-year limitation period.

Merits Challenge - Alleged Suppression of Freight Charges:
The petitioner contended that the assessing officer unreasonably determined suppressed freight charges based on flat rates per consignment, which were significantly higher than the actual consignment values. The petitioner had paid freight charges through account payee cheques, duly reflected in their books of accounts. The assessment orders lacked a rational basis for determining alleged suppressed freight charges for assessment years 2007-08 to 2013-14.

Separate Discussion for Assessment Year 2014-15:
For assessment year 2014-15, a rectification petition was filed and disposed of on 05.06.2020. The suppressed turnover with regard to freight was specified as Rs. 89,31,520/- in the notice dated 12.08.2016, reduced to Rs. 13,17,651/- in the rectification order. The assessing officer relied on information from the Internet, without specifying its nature or relevance to other transportation companies. The assessment and rectification orders for this year also lacked a credible basis for determining suppressed freight charges.

Judgment Outcome:
The impugned assessment orders were quashed, and the matters were remanded for re-consideration. The assessing officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue fresh assessment orders within three months from the date of receipt of the order. Connected miscellaneous petitions were closed without costs.