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TMI Blog2023 (5) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... lly postulates that prescribed authority shall record his reason before initiating the proceedings and no order shall be passed under this sub section without giving the dealer an opportunity to be heard. Section 40(1) provides for Assessment in cases where turnover has escaped assessment on account of reasons indicated under Clause (a) to (e). In cases of concealment or failure to disclose willfully etc. the penal provisions under proviso to 40(1) provide imposition of three times the amount of additional tax assessed. Section 35(7) contemplates of such a proceeding against an assessee regarding whom the Assessing Officer is satisfied that he has resorted to selling of goods at a higher price than shown in his invoices - the proviso to Section 35 (7) of the JVAT Act firstly stipulates that the reasons must be recorded by the prescribed authority for initiating the proceeding and secondly, the principles of natural justice should be followed. Though in the instant case the second ingredient of the proviso has been fulfilled; however, there is no document to suggest that the assessing officer has recorded his reason before initiating the proceeding. It is reiterated that recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications, as such the relevant facts of W.P.(T) No. 3282 of 2022 are referred which will suffice to dispose of the issue involved in these cases. 2. The brief facts of the case as pleaded by the petitioner are that the petitioner is having merchant mines of iron ore, located at Thakurpari, Noamundi Block and Manoharpur Block. Iron ore extracted from mines is known as Run of Mines (ROM) which requires further processing and screening. Petitioner s premise does not have processing and screening facility and thus, only ROM was being sold by the petitioner. ROM includes Fines Lumps and the grade of minerals found in petitioner s premises was between 52-65% Fe content, which would be evident from survey report as contained in Annexure-1. Before assessment proceeding of the petitioner was completed wherein, in alleged exercise of power u/s 35(7) r/w Section 40(2) of the JVAT Act, tax and interest imposed upon the petitioner on the alleged ground that petitioner has concealed its Gross Turn Over (for short GTO). The assessing officer despite taking actual figure of sale price, has taken the value of goods sold on the basis of average IBM rate prevalent for the said month as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Learned counsel for the petitioner has taken us through the relevant provisions of JVAT Act, 2005, Section 2 (xlvii) Sale and 2 (xlviii) sale price definition, in particular Section 35(7) and Section 40 relating to turn over escaping assessment. Learned counsel for the petitioner has, inter alia, questioned the impugned findings on two-fold legal issues: Whether sale price of the petitioner company can be determined on the basis of average sale price of I.B.M. as the average sale price of I.B.M. is only for the purpose of determining royalty payable on minerals and the same cannot be the basis of determination of sale price? Whether imposition of penalty under Section 40 (1) of the JVAT Act, 2005 is sustainable in the eye of law, especially when the original proceedings were initiated under Section 40 (2) of the JVAT Act, 2005? In support of the legal issues, the following submissions have been made: (a) Average sale price determined by the IBM is the sole basis on which GTO of the petitioner has been enhanced and consequently tax and penalty have been imposed upon the petitioner, despite the fact that price notified by the IBM was only for the purpose of det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o details of such enquiry has been mentioned in the revised order. The lower court records itself demonstrates that no such enquiry whatsoever was conducted by the assessing officer to conclude under-pricing done by the petitioner. (f) The quantity of goods sold has not been disputed either by the assessing officer or the learned appellate court or by the Tribunal. Further, nowhere the returns of the petitioner have been disputed by the Tax authorities or by the learned Tribunal. In fact, the remand order passed by the learned appellate court was limited remand order and the revised order should have only confined to the facts that whether petitioner has sold its goods at a higher price than shown in invoice. But the assessing officer has exceeded its jurisdiction and has held that the instant case relates to under-pricing of goods sold by the petitioner. (g) Apart from the aforesaid contentions; learned counsel further contended that prior to amendment carried out in Section 40(2) vide notification bearing no. LG18/2013-08/LJ dated 02.07.2014, only interest was leviable on the alleged concealed turnover. In fact, at the time of original assessment order, the learned assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be assessed on the basis of market price of goods sold by the said dealer. 7. Learned AAG-II has argued on behalf of the State. A counter affidavit has been filed in the matter contending that ROM consists of less ferrous content of iron, while Iron Ore consists of higher quantity of Ferrous content. This is the reason that there is no mention of ROM in the rate of IBM. Based on the records showing the sale of iron ore filed by the petitioner, it is argued that the petitioner had been producing/raising iron ore as lumps which are more valuable than ROM and fines. It is also pointed out from these invoices that the rate of iron ore lump (ROM) and fines, ferrous wise mentioned in Tax invoices is lower rate than the ferrous wise, grade wise mentioned rate of IBM. The basis for initiation of the proceedings by the assessing officer was this satisfaction that the petitioner has sold the iron ore at a higher price than shown by him in these invoices. Thus, the ingredients of Section 35 (7) of the JVAT Act were satisfied for proceeding against him in terms of Section 40 (1) of the JVAT Act. Pursuant thereto; notices were issued under Section 40 (1) and 40 (2) upon the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is not there and on the basis of enquiry conducted by the assessing officer, he was satisfied that the goods have been underpriced, then a case under Section 35 (7) is made out. 8. Learned counsel for the State has placed reliance on the decisions of the Hon ble Apex Court in the case of M/s VEENA THEATRE, PATNA versus THE STATE OF BIHAR reported in 1970 (3) SCC 79, Para 9 and THE COMMISSIONER OF SALES TAX, MADHYA PRADESH versus M/S H.M. ESUFALI, H.M. ABDULALI, SIYAGANJ, MAIN ROAD, INDORE reported in (1973) 2 SCC 137, Para 8 and 11 in support of his submission that in a case where the invoices and books of accounts of the petitioner were not believable the assessing officer had no other option than to make a best judgment/assessment by making an estimate of the sale price relying upon the I.B.M. rates. He lastly submits that the revised assessment order does not suffer from any illegality or error. The impugned orders passed by the learned tribunal upholding the same, therefore, needs no interference. Learned counsel for the petitioner in reply has sought to distinguish these decisions on facts and they relate to case of best judgment assessment when the Books of Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered dealer or a dealer liable to be registered under this Act shall be assessed in the manner hereinafter provided, for the Tax Period during which the dealer is so liable as prescribed. Notwithstanding anything contained in this Section, if a registered dealer has failed to furnish return or returns under sub-Section (1) of Section 29 in respect of any tax period or periods, the prescribed authority shall proceed to make provisional assessment under Section 36. Where a registered dealer having turnover upto 1 (one) crore per annum other than the registered dealer referred to under sub-section 5 has furnished:- All the returns for any tax period. Revised returns and annual returns in respect of any tax period within the prescribed time and in the prescribed manner. Has paid the tax payable according to such returns or revised returns as also interest payable if any. Has furnished the Audit report within the prescribed time if required and in the prescribed manner. The returns so filed are found to be in order shall be accepted as self - assessment in the prescribed manner subject to adjustment of any arithmetical errors apparent on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of claims of tax payments and refund adjustment not verified or otherwise not admissible; and withdrawal of claim of tax credit including carry forward of tax credit not admissible under the Act; and levying of interest applicable under this Act. Provided, notwithstanding anything contained in Section 36 if registered dealer fails to comply with the terms of the notice under this sub-section or accounts and other evidence produced by him are, in the opinion of the prescribed authority incorrect, incomplete or unreliable either wholly or partly the said authority shall assess, to the best of its judgment, the amount of tax and interest due from the dealer which have come on records and after making such adjustments as may be necessary . (7). If the prescribed authority is satisfied that goods have been sold a price higher than that shown by the dealer, he may determine value of goods at the time of the sale and proceed to assess the tax on such price. Provided before initiating such proceedings, the prescribed authority shall record his reasons for doing so and no orders shall be passed under this sub-section without giving the dealer an opportunit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder in writing direct that he shall, in addition to any tax payable which is or may be assessed under Section 35 or 36 or 38, pay by way of penalty a sum equal to thrice the amount of tax on the concealed turnover or on concealed or incorrect particulars* for each month of such suppression or concealment or for furnishing incorrect particulars; on the amount of tax payable under the Act or on the suppressed turnover or on concealed turnover or for furnishing incorrect particulars. The interest shall be payable before the completion of the assessment and for determining the amount of penalty payable, the prescribed authority shall quantify the amount of tax payable provisionally under this Act. 11. After going through the proviso to Section 35 (7) of the Act it appears that the statute specifically postulates that prescribed authority shall record his reason before initiating the proceedings and no order shall be passed under this sub section without giving the dealer an opportunity to be heard. Section 40(1) provides for Assessment in cases where turnover has escaped assessment on account of reasons indicated under Clause (a) to (e). In cases of concealment or failure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents, distributors, etc., particularly if he is a manufacturer. In such cases, his price structure has to be scrutinized by the Department under the sales tax law to find out the real sale price receivable by him. There may be cases where he is required to give a discount on account of defect in quality or delay. The important thing to be noted is that price is the amount of consideration which a seller charges the buyer for parting with the title to the goods. It comprises of the amount which the dealer himself has to pay for the purchase of the goods, the expenditure, which he is to incur for transporting the goods from the place of purchase to the place of sale, the duties, if any, levied on the particular goods bought by him, the octroi duty, which he may have had to pay and his own margin of profit after meeting handling charges including interest on the capital invested. The cost price of the goods actually paid by him under various heads of accounts would no doubt constitute the consideration for which he would part with his title to the goods. The entire amount of consideration, including the sales tax component, which the purchaser pays, would constitute the price of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax it would be necessary not only to show that the source of money has not been explained but also to show existence of some material that such acquisition of money has resulted from transactions liable to Sales Tax and not from other sources. 14. At this stage it is relevant to refer the relevant part of the revised assessment order which is quoted herein below: From the above extracts of the revised assessment order, it clearly transpires that the Assessing Officer has come to the finding that it is a case of underpricing . The finding with respect to underpricing of the goods sold by the petitioner recorded by the assessing officer is not tenable in the eye of law. Further, assessing officer in its revised order has stated that underpricing of the petitioner has been occasioned due to connivance of the seller and the purchaser, but no details of such enquiry has been mentioned in the revised order. The lower court records do not show that any such enquiry was conducted by the assessing officer to conclude underpricing done by the petitioner before proceeding to impose tax and penalty under Section 40(1) based on the IBM rates. Even the appellate authority on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 35 (7) of the JVAT Act before initiation of the proceedings, we consciously refrain from making any observation on the merits of the case regarding the levy of tax and penalty upon the petitioner under Section 35 (7) r/w Section 40 (1) of the JVAT Act. The judgment relied upon by the learned Advocate General i.e. M/s VEENA THEATRE, PATNA and THE COMMISSIONER OF SALES TAX, MADHYA PRADESH (supra) relate to cases of best judgment assessment after the rejection of Books of Account of the Assessee. Since in the present case the requirement of law for initiation of the proceedings have not been fulfilled, these decisions are not of assistance to the present cases. 17. As such, on remand, the AO shall proceed strictly in accordance with law. The petitioner shall be at liberty to raise all the grounds available to him before the AO which shall be considered accordingly. 18. Learned Tribunal has completely failed to consider that the requirement of law for initiating a proceeding under Section 35(7) by recording reasons has not been fulfilled by the Assessing Officer even after remand by the Appellate Authority on the first instance. Consequently, the common impugned order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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