TMI Blog2013 (7) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... in the facts and circumstances of the case. Law is well settled that the AO has to apply his own mind for making the assessment on the basis of the books of account maintained and any material in his possession after confronting the same to the assessee. He should not mechanically complete the assessment and abdicate and surrender to the report of any higher authority. Perusal of the impugned order clearly reveals that the Assessing Officer after applying his mind and being satisfied that the alleged turnover had escaped from assessment, initiated the reassessment proceeding. See Indure Limited v. Commissioner of Sales tax, Orissa 15,000/- had been written.In the instant case, the Vigilance Officer discovered the said slip from the business premises of the petitioner-dealer and the Assessing Officer drew certain inferences from the noting made on the slip, but failed to establish such inferences. Thus Law is well settled that no demand can be raised in an assessment on suspicion and conjecture. Therefore, before utilizing the said slip against the petitioner, the AO has to prove that through the said noting in the slip, the petitioner has sold materials worth of 12,15,922/- which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was also issued fixing the date to 7.2.2011 for appearance and production of books of account. The order of assessment reveals that opposite party no.2 had issued the above two separate notices in Form VAT-307(Annexures-1 & 2) under Section 43 of the OVAT Act in view of two tax evasion reports; one received from the Sales Tax Officer, Vigilance, Bhubaneswar Division, Bhubaneswar for the period 2006-07 and another from the Deputy Commissioner, Sales Tax, Vigilance, Bhubaneswar Division, Bhubaneswar for the period 2006-07 to 2009-10. Pursuant to said notices, the petitioner appeared before opposite party no.2 through its authorized representative on four different dates. In course of assessment proceeding though the petitioner was confronted with the contents of two vigilance reports, the copy of the vigilance report was not supplied to the petitioner for giving effective reply. However, the petitioner denied the allegations made in the said two reports. Opposite party no.2 passed the impugned assessment order under Section 43 of the OVAT Act for the period from 1.4.2006 to 31.3.2010 raising a tax demand of ₹ 6,25,02,224.00. Hence, the present writ petition. 3. Mr. S.C. Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dministrative instructions, which are not backed by any authority of law, is unreasonable and is contrary to Article 265 of the Constitution. In the instant case, since the assessment has been done on the basis of direction of the Special Commissioner as well as the report of the Dean of NIT, Rourkela adopting the SION method, the same does not have statutory support as the same constitutes arbitrary exercise of power and is hit by Articles 14 & 265 of the Constitution of India. The petitioner was not allowed to produce expert opinion with regard to the SION formula. The vigilance report is based on the direction given by Special Commissioner of Commercial Taxes (Enforcement) dated 31.10.2009 for adopting the norms prescribed in the said letter while investigating into the business activities of sponge iron units. Report of the Vigilance officials and its conclusion having been based on the hypothetical formula prescribed by the Special Commissioner of Commercial Taxes (Enforcement), the same is not at all reliable for determining the actual production and sale figures of the petitioner. The entire assessment with regard to the alleged sale suppression of sponge iron is based on im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the tune of ₹ 7,19,733/-, it was argued that it does not have any transaction with M/s.Jai Maa Bhawani and the petitioner does not receive any cash from any buyer and all transactions are carried on by cheques and drafts. Therefore, if there is any entry in the books of account of a stranger, namely, M/s. Jai Maa Bhawani, same cannot be utilized against the petitioner. 6. Due to non-supply of copies of the Vigilance report to the petitioner containing adverse materials against the petitioner which have been relied upon by opposite party no.2 for completing the assessment and raising huge tax demand even after production of books of account amounts to violation of principles of natural justice. In support of his contention, learned counsel relied upon the judgment of this Court in Lakhiram Jain v. STO, (2009) 21 VST 280. Opposite party no.2 having completed the audit assessment for the period 2006-07 and being fully satisfied with the books of account relating to purchase of raw materials and sales of finished products, the re-opening of the assessment on the basis of vigilance reports amounts to change of opinion and no assessment is permissible by changing the opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer, Cuttack-I East Circle, Cuttack in W.P.(c) No.14234 of 2009 disposed of on 16.3.2012, held that assessment by change of opinion means, in respect of a particular income/transaction if the Assessing Officer after application of mind, takes a view that the particular goods or income is not liable to tax and accordingly completed the assessment, subsequently reopening of said assessment is not permissible by mere change of opinion of the Assessing Officer to levy tax on such goods or income. As stated above, in earlier assessment order, the adverse material utilized against the petitioner in impugned assessment order had not been utilized. Hence, the question of change of opinion of Assessing Officer does not arise in the facts and circumstances of the case. 10. In view of the above, the first ground of challenge that the competed assessment has been reopened under Section 43 of the OVAT Act by mere change of opinion fails, the same being misconceived. 11. Question no. (ii) is as to whether opposite party no.2 has passed the impugned assessment order on the dictate of his higher authority i.e. Special Commissioner as well as on the report of the Dean, NIT prescribing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot of incriminating evidence has been unearthed by them during their raids in the premises of M/s. Prinik Steels Pvt. Ltd. on 22.8.2006. As per the said report, M/s. Prinik Steels Pvt. Ltd. had been maintaining two separate accounts; one in the name of M/s. Prinik Steels Pvt. Ltd. which was its own regular books of account and another, in the name of M/s Jai Maa Bhawani which was its clandestine and undisclosed account. Mr. Ghanashyam Das Agarwal, the shareholder and the constituted Attorney of M/s. Prinik Steels Pvt. Ltd. in his statement dated 22.8.2006 admitted that all the documents recovered from the premises related to M/s. Prinik Steels Pvt. Ltd. and no excise duty had been paid on the sales that were effected in the name of M/s Jai Maa Bhawani and finally agreed for payment of Central Excise duty on that score. M/s. Prinik Steels Pvt. Ltd. had effected unaccounted purchases from M/s. K.J. Ispat Ltd. in the name of M/s Jai Maa Bhawani during the year 2006-07 showing therein details of purchases of sponge iron and payments made thereto. Subsequently, M/s. K.J. Ispat Ltd. was noticed by the Vigilance officials to verify as to whether the unaccounted purchases of M/s. Prinik S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... av Alloys Limited with whom the petitioner has sale transactions on different occasions from 10.04.2009 to 17.04.2009 through Mr. Sunil Kumar Agarwal for which he had received a commission of ₹ 15,000/-. In absence of any satisfactory explanation, the Vigilance Officials treated the said transactions as sales suppression by the petitioner. 16. On being confronted the authorized representative of the dealer-petitioner stated that they did not know anyone in the name of Sunil Kumar Agarwal, who had received payment of ₹ 15,000/- as commission. Further, it was stated that the slip in question was not seized from the factory premises which might have been fetched from Cuttack Office during the visit of the vigilance officials on 04.05.2010. The case of the Assessing Officer is that irrespective of the place of seizure since the slip in question belongs to the assessee-petitioner which was seized by the vigilance officials with the signature of MD of M/s. K.J. Ispat Ltd. on it at the time of recovery, the assessee is duty bound to explain the said slip. Finally, the assessee appeared on 25.06.2011 along with Advocate Sri Raj Kishore Chapolia and filed hazira praying therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that the petitioner was present along with its advocate and its books of account in response to the said notice issued by opposite party no.2. In the said letter it is further stated that "in the interest of justice, kindly allow confrontation to 3rd party involved in the allegation and issue summons to them for appearance and allow us for cross examination". 20. Law is well settled that if any dealer is likely to be affected by the use of any material collected by the revenue against him in the assessment proceedings, those are to be brought to his notice for refutal. This is the requirement of the natural justice. The principle of natural justice is based on two basic pillars, i.e, nobody shall be condemned unheard (audi alteram partem), nobody shall be judge of his own cause (nemo debet esse judex in propria sua causa). 21. The Hon'ble Supreme Court in C. Vasantlal and Co. v. Commissioner of Income-tax, Bombay City [1962] 45 ITR 206 observed as follows: "… The Income Tax Officer is not bound by any technical rules of the law of evidence. It is open to him to collect materials to facilitate assessment even by private enquiry. But if he desires to use the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being taken does not exclude hearing -- it may be implied from the nature of the power -- particularly when the right of a party is affected adversely. The justification for reading such a requirement is that the Court merely supplies omission of the Legislature. 26. This Court in J.S. Refineries Ltd. V. Commissioner of Sales Tax, (1998) 109 STC 16 held that any material sought to be utilized against the dealer has to be brought to his notice. 27. This Court in Mitra Trading Company (OJC No.252 of 1968 dated November 9, 1971 -- Orissa High Court) held as follows: "4. The main question for consideration is whether the petitioner should be given opportunity to take copy of the seized account book. The answer to such a question would depend upon whether principle of natural justice would be violated unless such opportunity is given. It is well-settled that principle of natural justice cannot be confined within close jackets. What would be the principle in a particular case would depend on the facts and circumstances of that case. One thing, however, is certain that in an assessment proceeding if any particular material is used against an assessee then the assessee must be given ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To come to such conclusion, opposite party No.2- Assessing Officer relied on the formula of SION adopted by the Dean of NIT, Rourkela. In course of the assessment, since the dealer-assessee is not technical person, they wanted to produce a technical person to examine the correctness of formula of SION which was not allowed to the petitioner. Before utilizing the aforesaid two allegations against the petitioner, principle of natural justice demands that the 3rd party must be summoned and confronted with the petitioner and in case the petitioner demands for cross-examination of third party, he must be allowed to do so. 31. This Court in the case of Murlimohan Prabhudayal vs. State of Orissa, [1970] 26 STC 22, held that it cannot be said that ample and reasonable opportunity to be given to the assessee would not include within its sweep the right of cross-examination. An assessee would have the right of cross-examination if the facts and circumstances so justify. 32. This Court in the case of Dredging Corporation of India vs. State of Orissa, (1995) 97 STC 10, held that although the provisions of the Evidence Act, 1872 are not strictly applicable to proceedings under taxing statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om M/s. K.J. Ispat Limited. Further the Vigilance Officials concluded that 'Sourav' appearing in the slip stands for M/s.Sourav Alloys Limited and the instant-dealer assessee had sale transactions with M/s. Sourav Alloys Ltd. on different occasions from 10.04.2009 to 17.04.2009 through Mr. Sunil Kumar Agarwal for which he had received commission of ₹ 15,000/-. On confrontation of the said slip, the authorized person of the company stated that he does not know any person in the name of Sunil Kumar Agarwal. 36. Since the slip was recovered from the petitioner-assessee's premises, the initial burden is on the assessee to explain the slip and prove that the said slip does not relate to any purchase or sale transaction of the dealer-petitioner. However, where the dealer disowns the slip, unless it is established by the revenue that noting made in the slip relates to unaccounted business transaction of dealer no adverse inference can be drawn. 37. In the instant case, the Vigilance Officer discovered the said slip from the business premises of the petitioner-dealer and the Assessing Officer drew certain inferences from the noting made on the slip, but failed to establish such inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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