This revision arises out of an order passed by the Commercial Tax Tribunal Lucknow dated 26.6.2014. The factual matrix of the case is that the revisionist filed monthly returns as well as annual returns in form-26 which were verified and accepted by the assessing authority in his order dated 02.01.2010 in the assessment year 2008-09 under the U.P. VAT Act. On 11.9.2008, a survey of the business premises of the revisionist was conducted but due to non-presence of any authorized persons, the books of account could not be produced. However, an estimate of the stock was taken and certain loose papers , which were found on the premises were seized. The Dy. Commissioner (S.I.B.) submitted his report and thereafter the matter came up before the assessing authority, Deputy Commissioner (Commercial Tax), U.P. Lucknow.
The contention of the revisionist is that the assessing authority while passing his order based upon best judgment assessment has relied in toto upon the S.I.B. report. The Assessing Authority in his best judgment assessment assessed the revisionist to a tax of Rs.37,43,116/-.
Aggrieved by the order of the assessing authority the revisionist filed a first appeal before the Additional Commissioner (Appeals) Commercial Tax, Lucknow. This appeal was partly allowed by order dated 10.8.2011 and the estimated turn over was reduced, resulting in tax liability being reduced by Rs.13,43,000/-. The revisionist then preferred a second appeal before the Commercial Tax Tribunal, Lucknow under section-57 of the U.P. VAT Act. The tribunal by the impugned order has remitted the matter again to the assessing authority on two questions :-
1."Whether ITC claimed can be disallowed against the provisions of 13 with rule 30 of the U.P. VAT Act and after signing the Purchases L (Purchase against tax invoice)
2.Whether ITC can be disallowed when no violation of any condition prescribed in Rule 21 of the U.P. has been made."
On the question as to whether preparation of food amounts to 'manufacture' the Tribunal has held that preparation would amount to 'manufacture'.
I have heard Shri Bharat Ji Agarwal and Shri S.M.K. Chaudhary, learned senior counsel assisted by Shri Vaibhav Pandey for the revisionist and Shri Sanjay Sareen learned Standing Counsel for the respondents.
With the consent of the learned counsel for the parties this writ petition is decided at the admission stage itself.
The first and principal submission of Shri Bharat Ji Agarwal learned senior counsel is that when the survey was conducted of the premises and a report prepared, that report was accepted in-toto by the assessing authority on the ground inter-alia that at the time of survey the revisionist had not been able to produce books of account. However, the revisionist was never confronted with the S.I.B. report which has formed the basis of the best judgment assessment order, passed by the assessing authority. On the second aspect of the matter it is contended by Shri Bharat Ji Agarwal that on the question of procurement of LPG cylinders the authority has held that the cylinders were procured from the open market and from unregistered dealers. His submission is that there is no material on record to that effect and in any case the revisionist could not have procured LPG cylinders except from the licenced and Company authorised dealers. The third leg of the submission made by Shri Bharat Ji Agarwal is that even though the books of accounts were never produced before the team lead by the Dy. Commissioner SIB at the time of survey nevertheless the books of accounts were produced before the assessing authority during the assessment proceedings and he could not have ignored the same and ought to have taken the same into consideration and recorded his findings thereafter.
However, aggrieved by the order of the best judgment assessment the revisionist preferred an appeal before the appellate authority. A specific plea was taken that the revisionist was never confronted with the survey report nor a copy of the same was given to the revisionist and therefore the revisionist was completely in the dark with regard to the findings recorded by the Dy. Commissioner (S.I.B.) in his survey report, the appellate authority, however, while passing the appellate order allowed a reduction in turn over resulting in a reduction in the tax liability to the extent of 13,43,000/-.
Aggrieved, the revisionist as well as the Department filed appeals before the Commercial Tax Tribunal, Lucknow. The following questions were raised in the appeal before the Tribunal:-
1.Whether ITC claimed can be disallowed against the provisions of 13 with rule 30 of the U.P. VAT Act and after signing the Purchases L (Purchase against tax invoice).
2.Whethere ITC can be disallowed when no violation of any condition prescribed in Rule 21 of the U.P. has been made.
3.Whether the Assessing Authority is justified in following the report of Authorities without issuing the copy of the same or considering the evidence filed against the presumptions made by the SIB Authority.
4.Whether the Assessing Officer is justified on the evidence, facts and figures on the record, under the influence of the report of SIB, without applying own independent mind and examining the explanation and books.
5.Whether preparation of fast food can be held to be manufacturing of whereas the definition of nmanufacture as given in the Act the word is not written.
6.Whether the 1st Appellate Authority is justified is not giving a decision claim of ITC objected in the grounds of after mentioning in the objection has been raised that ITC has wrongly been disallowed.
7.Whether failure on the part of A.O. to issue specific SHOW CAUSE NOTICE on each point before passing a BEST JUDGMENT ORDER provided under section 28(3) III of the UP VAT Act, and it will make order irregular and against the provisions of law.
8.Whether the purchases written in the seized loose purcha 68 for prep cheques can be treated concealed purchases the payment for these purchase were made by cheque in July, 2008 while survey was made in September ..........."
So far as the questions 1 and 2 are concerned, the same need not to be dealt with by this Court as on these two questions the Tribunal has already remanded the matter to the Assessing Authority to examine the matter afresh. However, so far as the question no.3 is concerned, namely, that the assessing authority made a best judgment assessment order relying exclusively on the report of Dy. Commissioner SIB without providing a copy of the same to the revisionist, the Tribunal has held that there was sufficient material before the assessing authority to make a best judgment assessment.
With regard to question no.4 as to whether the books of accounts were never taken into consideration by the assessing authority and the best judgment assessment order is based entirely upon the report of the SIB, the Tribunal has justified the same.
Having heard the learned senior counsel for the revisionist and perused the documents on record, it is noticed that the assessing authority while passing the order has relied entirely upon the SIB report and it is silent so far as material contained in the books of accounts which were produced by the revisionist and the material contained therein. Before the Tribunal though this matter was agitated but the same has been rejected. On the question as to whether preparation of food amounts to 'manufacture' or not, the Tribunal has held that the same amounts to 'manufacture'. However, this Court need not go into that question at this stage.
Shri Bharat Ji Agarwal has placed reliance on a Division Bench Judgment of the Allahabad High Court reported in 2008 UPTC 1133 Ms. Vehalana Steels and Alloys Pvt Limited Muzaffarnagar vs. State of U.P. And others wherein an identical question came up before the Court where a report of the Dy. Commissioner (S.I.B.) had not been provided to the assessee. Paragraphs 7 and para 8 of the Judgment read as follows:-
"7. It is mentioned in Annexure-5 to the writ petition that the substance of the adverse inferences' has been communicated to the petitioner. But the communication of the substance of the adverse findings in that report may not always be sufficient. The reason is that the material adverse to the petitioner in the report may not have been properly or completely understood or appreciated in its proper perspective by the Officer when it read the report and what has been understood by the Officer may not have been communicated accurately to the petitioner by that Officer. Language as a medium for communication of ideas is far from perfect and that imperfection increases indirect communication. The inadmissibility of hearsay evidence is based on that concept. Moreover, the context in which the adverse conclusion finds place in the report may, in some cases, have great importance. Again the basis of the adverse conclusion, as mentioned in the report, would also be important. Therefore, principles of natural justice would require a copy of the original report to be supplied instead of supplying indirect information to the person against whom that report is proposed to be relied upon.
8. In the circumstances, we dispose of this writ petition finally directing the respondents not to proceed with the provisional assessment unless copy of the report of the Deputy Commissioner (S.I.B.) is supplied to the petitioner if the department proposes to rely on any part of that report in the provisional assessment proceedings. It is clarified that the supply of the copy of the report will not be necessary and the provisional assessment proceedings may be continued if the department does not propose to rely upon that report at all in the provisional assessment proceedings. However, in the latter situation the petitioner will be informed in advance in writing by the department that the department will not rely on any part of that report."
In the facts and circumstances of the case and the law laid down by the Division Bench of this Court providing a copy of the report of the SIB to the revisionist during the assessment proceedings was absolutely imperative in order to enable the revisionist to prepare his defence. Having not done so the assessment order itself stands vitiated. In the present case since the Tribunal has itself remitted the matter to the assessing authority for consideration on certain questions, the order of the Tribunal deserves to be set aside. Order of the Tribunal dated 26.6.2014 and the assessment order dated 02.01.2010 and the appellate order dated 10.8.2011 are hereby set-aside. The matter is remitted to the Assessing Authority with the direction that the assessing authority shall make a fresh assessment after providing a copy of the SIB report to the revisionist and after giving him an opportunity to submit his explanation to the same.
The revision is allowed.
Order Date :- 1.8.2014 mks