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TMI Blog2016 (9) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... essment in accordance with law, after affording an opportunity of personal hearing and adopt any one of the modes for verification of the data/records in terms of the observations contained in this order - petition allowed - decided in favor of petitioner. - W.P.Nos.28818 & 28819 of 2014 - - - Dated:- 29-8-2016 - T. S. Sivagnanam, J. For the Petitioner : Mr. N. Sri Prakash For the Respondent : Mr. Manohar Sundaram AGP ORDER The petitioner is a registered dealer on the file of the first respondent under the provisions of the Tamil Nadu Value Added Tax Act, 2006, (TNVAT Act), and the Central Sales Tax Act, 1956, (CST Act), stated to be engaged in the business of FMCG products such as detergents, soaps, cosmetics, toothpaste, coffee, tea, etc., having their factory at Hosur and at Chennai. Besides their factory, the petitioner states that they have depots/branches located in Chennai, Dindugal and Coimbatore from which they effect sales both inside the State of Tamil Nadu as well as inter-state from the State of Tamil Nadu. They are stated to undertake periodical stock-transfers of their goods to their depots/branches within and outside the State of Tamil Nadu for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to a proposal to treat a sum of ₹ 136,93,17,498/- as taxable turnover was proposed to be tax at 12.5%. 4. The petitioner's case is that since the notice was bereft of reasons, it was clear that the first respondent was acting on the dictat of the second respondent, thus abdicating his powers and jurisdiction. The petitioner submitted their objections vide their letter dated 02.05.2011 and requested for a personal hearing to make further submissions. After about two years, the petitioner received another notice dated 28.03.2013, in which a new issue in addition to the proposals contained in the notice dated 14.12.2010, was mentioned. Thereafter, another notice dated 06.12.2013 was issued. The petitioner furnished a Chartered Accountant certified trading account for the State of Tamil Nadu on 30.07.2014. On 22.09.2014, the first respondent called for production of books of accounts from the petitioner though the books of accounts were thoroughly verified by the audit officials which fact was also accepted in the notice, dated 06.12.2013, the petitioner submitted their objections vide letter dated 30.09.2014 along with that, they furnished statements prepared from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has totally ignored the objections given by the petitioner dated 30.09.2000, and therefore, there is a gross violation of principles of natural justice. Referring to the notice, dated 14.12.2010, and commenting upon the manner in which, notice was issued, it is submitted that the first respondent accepted that he has received the proposal from the Enforcement officials for implementation of the same. Reference was made to Section 65 of the TNVAT Act deals with 'powers to order production of accounts and powers of entry, inspection etc.,' and in terms of sub-section (2), all accounts, registers, records and other documents maintained by a dealer in the course of his business, the goods in his possession, and his offices, shops, godowns, vessels or vehicles shall be open to inspection, at all reasonable times, by such officer. Sub-section (3) empowers the officer to seize the accounts, registers, records, etc., if he has reason to suspect that any dealer is attempting to evade payment of any tax, fee, or other amount due from him under the Act. Sub-section (4) empowers the officer to enter upon the office, shop etc., belonging to any other dealer, if he has reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed himself by not posing the correct questions, failing to take into consideration relevant factors and taking into consideration irrelevant facts, reliance was placed on the observations of the Hon'ble Supreme Court in paragraph 34 of the judgment in Cholan Roadways Ltd., vs. G.Thirugnanasambandam reported in (2005) 3 SCC 241. 7. Mr.Manohar Sundaram, learned Additional Government Pleader after elaborately reiterating about the inspection conducted by the enforcement wing of the department in the place of business of the petitioner referred to the show cause notices issued and submitted that the second respondent (enforcement) had called for further details relating to the defects observed during the course of audit and the second respondent was not convinced with the details furnished by the petitioner and therefore, forwarded the report of the VAT audit to the first respondent. It is submitted that the Assessing Officer cannot be expected to go and sit in the office of the dealer and therefore, the submission of the petitioner that the first respondent ought to have inspected their accounts in their office, is not feasible of acceptance. Regarding the offer to produce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent on the face of the record, then it would be a case, where the matter has to be remanded back to the authority for proper consideration. 11. For about 15 days, the officials of the enforcement wing, namely, the second respondent, were in the place of business of the petitioner collecting data, verifying records, materials, recording the statements etc. The process appears to have been completed during November-December 2010. On 14.12.2010, pre-revision notice was issued by the first respondent. Among other things, it contained a proposal to treat a sum of ₹ 136,93,17,498/- as taxable turnover with the proposal to tax the sum at 12.5%. Objections were given by the petitioner on 02.05.2011, and there appears to have been no action taken thereafter for nearly two years, after which the petitioner received another notice dated 28.03.2013. This notice was restricted only with respect of the sales turnover of a particular product and there were no reference to the earlier notice dated 14.12.2010, nor the petitioner's reply dated 02.05.2011. Thus, the petitioner apparently was led to believe that the explanation given by the petitioner on 02.05.2011, was found acceptable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order, this is sufficient to hold that there is violation of principles of natural justice. 15. This reply is very crucial because after the explanation dated 02.05.2011, a show cause notice dated 06.12.2013, was issued purportedly, superseding the earlier notices, dated 14.12.2010 and 28.03.2013. However, it is not clear whether it is in supersession as the notice dated 06.12.2016 states that for the sake of clarity and convenience fresh notice comprising of the proposals already made is issued afresh. Therefore, for all practical purposes, the show cause, which would be relevant, is the notice dated 06.12.2013. Thus, the explanation given by the petitioner dated 30.09.2014, is a vital document and that could not have been brushed aside. The counter affidavit is full of inconsistencies that is to say inconsistency in what has been pleaded in various paragraphs in the counter affidavit and inconsistent with the findings recorded in the impugned order. The respondent in their counter affidavit has stated that the petitioner has produced the Chartered Accountant's certificate alone and that could not obviate, the need for production of accounts, in the preceding paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary. Explaining what is best of his judgment , the Hon'ble Supreme Court pointed out that:- Judgment is a faculty to decide matters with wisdom truly and legally judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guess-work in a best judgment assessment . It shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case. Though sub-section (2) of section 12 of the Act provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously without regard for the available material. 18. If the impugned order is teste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em and Senior Executives wellversed with the data will be present in the office of the first respondent to assist the first respondent in clarifying any doubts that may be arise in the process of verification. 20. Undoubtedly the impugned assessment is a very complicated issue and this is all the more established from the fact that the enforcement officials namely, the second respondent had spent 15 days in the place of business of the petitioner gathering details and information. Therefore, there is absolutely no reason for the first respondent to complete the assessment in the manner done in the impugned order. He is required to take into consideration relevant factors and should not proceed to decide the matter based on irrelevant considerations, which are not germane for determining the disputed issues. Above all failure to consider the petitioner's explanation dated 30.09.2014, amounts to serious violation of principles of natural justice. Thus, for all the above reasons, this Court has no hesitation to hold that the impugned assessment orders require interference. 21. In the result, the Writ Petitions are allowed and the impugned orders are set aside and the first r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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