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The Commissioner, Trade Tax, U.P. Lucknow v. S/S Balvir Steels Pvt., Ltd., Orai - SALES/TRADE TAX REVISION DEFECTIVE No. 308 of 1997  RD-AH 3881 (17 February 2006)
Trade Tax Reference No. (308) of 1997
Commissioner of Trade Tax, U.P. Lucknow Vs. S/S Balveer Steels Private Limited, Orai.
Hon'ble Prakash Krishna, J.
Feeling aggrieved against the order dated 7th of August, 1997 passed by the Trade Tax Tribunal Kanpur in Second Appeal No.612 of 1996, the Commissioner of Trade Tax has filed the present revision under section 11 of the U.P. Trade Tax Act (hereinafter referred to as the Act).
The dealer opposite party is carrying on the business of manufacturing and sale of M.S. Ingots. Its account books for the assessment year in question 1990-91 were accepted by the Assessing Authority by the order dated 30th of March, 1995. The dealer opposite party had disclosed the total purchases and sales at Rs.2,18,39,888-31 and Rs.2,97,34,752-89 respectively. The account books of the dealer were examined by the Assessing Officer namely the Assistant Commissioner (assessment), Orai.
On the basis of survey dated January, 27, 1995 at the business premises of one M/s. Narendra Rerolling Mills Private Limited, Secundra (hereinafter called third party), reassessment proceedings under section 21 of the Act against the present dealer was initiated by the department, giving rise to the present revision. In the aforesaid survey at the business premises of M/s. Narendra Rerolling Mills Private Limited certain documents of the said firm were seized. Entries pertaining to the dealer opp.party were found recorded in the account books of the said firm and in the survey seized documents. Some of the entries recorded in the seized material could not be tallied with the account books of the dealer opp.party, consequently, the assessing authority formed a belief that the dealer opp.party has transacted the business outside the books of account, therefore, it issued reassessment notice under section 21 of the Act. At the first instance the reassessment notice was issued on 27th March, 1995, before the passing of the regular assessment order.
It is apparent from the record that regular assessment order was passed on 30th of March, 1995 and thereafter, after affording opportunity of hearing to the dealer opp.party, reassessment order on the basis of the notice issued on 27th of March, 1995, the Assessing Officer passed the reassessment order on 30th of September, 1995 and assessed the escaped turnover at Rs.1,01,00,000/- and levied tax of Rs.4, 04,000/-. However, this order was subject matter in appeal before the Deputy Commissioner (Appeals), being appeal no.415 of 1985, who by the order dated 18th of December, 1995 set aside the reassessment order dated 30th of September, 1995 on the short ground that there was no occasion for the Assessing Authority to issue reassessment notice under section 21 of the Act on 27th of March, 1995 when regular assessment proceedings were still pending which ultimately concluded on 30th of March, 1995. The appellate authority was of the opinion that issuance of notice on 27th of March, 1995 fixing 30th of March, 1995 was irregular and on this ground the reassessment order could not be sustained. A copy of the order of the first appellate authority has been annexed as annexure-1 to the supplementary affidavit of Shri R.C. Gaur.
Thereafter a fresh reassessment notice dated 3rd of February, 1996 under section 21 of the Act, giving rise to the present revision was issued by the Assessing Authority. The said notice was duly served on the dealer opp.party who in reply to the notice submitted that the department is not in possession of any material to show that the turnover has escaped assessment. It was submitted that the material which is in possession of department has already been taken care of in the earlier reassessment proceedings initiated by means of notice dated 27th of March, 1995.
The Assistant Commissioner (Assessment), Trade Tax, Orai by the order dated 13th March, 1996, after rejecting the contention of the dealer opp.party that the material which has been in possession of the department could not be relied upon or taken into account in the present proceedings, has held that as the earlier reassessment proceeding was set aside on a technical ground of irregularity in issuance of notice there is no illegality in the second/fresh proceedings initiated by notice dated 3.2.1996. On the basis of material collected at the time of survey at the business premises of M/s. Narendra Rerolling Mills Private Limited, Secundra, it concluded that the turnover of the dealer opp.party has escaped assessment and fixed the escaped turnover at Rs.5,01,00,000/- and levied the trade tax accordingly. This order was subject matter of first appeal before the Deputy Commissioner (Appeals), Trade Tax, Meerut, at the instance of dealer opp.party being appeal No.106 of 1996. The Deputy Commissioner (Appeals) allowed the appeal in part by reducing the tax liability to Rs.80,000/-, but it rejected the contention of the dealer opposite party that there was no escapement of turnover. Still aggrieved, the dealer opp.party preferred a second appeal numbered as 612 of 1996 which came up for consideration before the Tribunal. The Tribunal by the order under revision has allowed the appeal in toto and set aside the reassessment order dated 13th of March, 1996.
Heard Shri Bipin Kumar Pandey, learned standing counsel in support of revision and Shri Kunwar Saxena, the learned counsel for the dealer opp.party.
The learned standing counsel submitted that the Tribunal committed illegality in placing reliance upon the earlier reassessment proceedings which were dropped in pursuance of the order passed by the first appellate authority dated 18th of December, 1995 due to irregularity in issuance of reassessment notice. The first appellate authority while allowing the appeal of the dealer opp.party on earlier occasion did not consider the dispute on merits. It did not examine as to whether, the material so recovered as a result of search at M/s. Narendra Rerolling Mills could be utilized against the present dealer opposite party. The first appellate authority had earlier allowed the appeal on technical ground and as such the material which was in possession of the department relating to the escapement of the turnover was validly relied upon by the Assessing Authority after serving a valid notice afresh, giving rise to the present revision. In this view of the matter, it was submitted, that the Tribunal was not justified in holding that the reassessment proceedings could not be reinitiated. It was further submitted that the observation of tribunal that the papers seized from the business premises of M/s. Narendra Rerolling Mills Pvt. Ltd. were not shown or confronted to the dealer opp.party and in absence of such confrontation, no adverse inference can be drawn against the dealer, is factually and legally incorrect. Elaborating the argument it was submitted that the observations made in the last paragraph of the order of the Tribunal, just above the heading ''heading' (Adesh) that on 30th of March, 1995 Sardar Narendra Singh, Managing Director of M/s. Narendra Rerolling Mills Pvt. Limited had appeared before the Assessing Authority and gave statement and also gave affidavit that no Sariya was got manufactured by him on the order placed by the dealer opp.party, is factually incorrect.
Shri Kunwar Saxena, the learned counsel for the dealer opp.party submitted that the order of the Tribunal is perfectly valid and justified. Undoubtedly, first notice for reassessment was issued by the Assessing Authority on 27th of March, 1995 while the regular assessment/original assessment was framed on 30th of March, 1995, therefore, he submitted, that the material which was in possession of the department has been used and utilized against the dealer opp.party. It was submitted that, since the account books were initially accepted by the order dated 30th of March, 1995 while framing the original assessment it should be presumed that the said material was not such material to justify rejection of account books and as such the material having been taken care of while framing the original assessment order the initiation of the reassessment proceedings after giving a fresh/second notice is uncalled for and has been rightly set aside by the Tribunal. It was further submitted that in proceedings under section 21 of the Act the burden lies upon the department to prove that the turnover of assessee has escaped assessment and in the present case the department has failed to do so. He, therefore, submitted that reassessment order is liable to be set aside and has been rightly set aside by the Tribunal. Malwa Vanaspati and Chemicals Vs. CTT 1995 UPTC 987; Trilok Chand Brij Bhushan Lal Vs. CTT 1996 UPTC 1236 and CST Vs. Om Prakash Agrawal (2004) 24 NTN 290 were relied upon by him.
I have given careful consideration to the respective submissions of the learned counsel for the parties. The following two questions are mooted in the present revision:-
1. When very initiation of reassessment proceedings has been set aside or cancelled on the ground of irregularity in issuance of reassessment proceedings without recording any finding on the merits of the case, the reassessment proceedings can be reinitiated after issuing a valid notice under section 21 of the Act and the materials which were already in possession of the department at the time of issuance of first notice, can be utilized or not in the subsequent reassessment proceeding?
2. Whether it is always mandatory upon department to produce a third party for cross examination when the entries of such third party are sought to be relied upon by the department to hold that the return of turnover filed by the dealer is inadequate or incomplete or the turnover has escaped assessment?
First question has been dealt with by the Tribunal in its order under revision in a very cursory manner. A bare perusal of the order of the Tribunal would show that the Tribunal without applying its mind and giving any reason in support thereof has jumped to the conclusion that undoubtedly the order of the Assessing Authority cannot be called legally correct and is unsupportable. The Tribunal after quoting a portion from the order dated 18.12.1995 of the Deputy Commissioner (Appeals) passed in appealNo.415 of 1995, it held that since the reassessment proceeding initiated by means of notice dated 27th of March, 1995 (first reassessment notice), was set aside by the Deputy Commissioner (Appeals), therefore, on the same facts the Assessing Officer was not justified to reinitiate the reassessment proceedings in absence of any factual basis (Tathyatmak Adhar). To say least, this approach of the Tribunal is without any legal basis. The Tribunal has not given any justifiable reason or principle of law in support of its above conclusion and it is difficult to agree with the aforesaid conclusion of the Tribunal. The Tribunal came to curious conclusion and apparently without caring to read the entire order dated 18.12.1995 of Deputy Commissioner (Appeals) and without appreciating its purport or import. Reverting back to the undisputed facts of the case, it has come on record that the regular assessment order under Rule 41 (8) was passed on 30th of March, 1995. The notice under section 21 of the Act was issued on 27th of March, 1995. The Deputy Commissioner (Appeals) has found that issuance of notice on 27th of March, 1995 was irregular in as much as the assessment proceedings were pending and were in the process of finalization (as the assessment order was passed on 30.4.995), consequently it set aside the reassessment notice dated 27th of March, 1995 and the resultant proceedings thereon. On this short ground, the notice dated 27th of March, 1995 was vacated by the Deputy Commissioner (Appeals).
The learned counsel for the dealer opp.party could not show either from the original assessment order dated 30th of March, 1995 passed under Rule 41(8) or from the order of the Deputy Commissioner (Appeals) dated 18.12.1995 (vacating the reassessment notice), that any of the authorities had considered and discussed the material which were found in survey dated January,27, 1995conducted by S.I.B. at the business premises of M/s. Narendra Rerolling Mills Pvt. Ltd.
The Deputy Commissioner (appeals) by means of order dated 18.12.1995, allowed the appeal of the dealer, as he found that reassessment proceedings were invalid due to irregularity in issuance of reassessment notice dated 27.3.1995. He, however, did not touch any other issue. Question that turnover of dealer has not escaped was neither gone into nor he recorded any such finding in its order dated 18.12.1995.
It may be placed on record that the original assessment order dated 30th of March, 1995 was not annexed initially along with the revision by the department. On objection being taken, this Court vide order dated 9th of March, 2005 directed the learned standing counsel to file copies of the appellate order passed in proceedings initiated earlier under section 21 of the Act and also to produce the assessment record. The learned standing counsel in compliance of the aforesaid order not only produced the assessment record but also annexed the copy of the assessment order dated 30th of March, 1995 along with the supplementary affidavit. The learned counsel for the dealer opp.party after perusal of the record (which was made available to him as per my direction) as well as the original assessment order could not show that the material found in the survey conducted at the M/s. Narendra Rerolling Mills Pvt. Ltd. was taken into consideration either at the time of framing of the assessment order or by the first appellate authority while deciding the appeal against the reassessment order framed in pursuance of the notice dated 27th of March, 1995. Faced with this fact situation, he came out with the case that it shall be deemed to have been taken into account, an argument which does not hold any water and is liable to be rejected.
The upshot of the above discussion is that the record reveals that the material collected in the survey at M/s. Narendra Rerolling Mills Pvt. Ltd. was not taken into consideration in the earlier reassessment proceedings. In this fact situation, the question is whether such a material can be taken into consideration in the reassessment proceedings and reassessment proceedings can be initiated on such material. At this juncture the learned standing counsel has placed reliance upon the following two cases:-
1. State of Orissa Vs. Nanda Sahu and Padan Sahu (1973) 32, STC 223 and
2. M/s. Shyam Babu Vaishy and Co. Vs. Assistant Commissioner of Trade Tax 2004 UPTC 210.
The Orissa High Court in the case of State of Orissa Vs. Nanda Sahu and Padan Sahu (supra) has held that the "escaped assessment" has assumed definite meaning. It may arise in various circumstances. Dealer may neglect to make a return or while making a return may suppress a part of turnover. Even if turnover has been returned, either by negligence or omission or even by wrong application of law, a part of turnover may be left out from assessment. In such circumstances, it is a case of escapement of turnover and even if information was in possession of the Assessing Officer himself, but had not been taken into account in making the assessment, the position would be that of escapement of turnover. This case supports the contention of the learned standing counsel that the information from the report of the S.T.O. (S.I.B.) might be there in possession of the Assessing Officer while framing the assessment order dated 30th of March, 1995 but was not utilized by him due to negligence or inaction or any reason whatsoever, nonetheless it would amount to escapement of turnover. In the next case of M/s. Shyam Babu Vaish (supura), this Court has held that in the matters relating to reopening of assessment, action can be taken for reassessment on the basis of material already on record at the time of original assessment if escapement of assessment to tax was due to concealment by assessee or negligence and ignorance on part of the Assessing Officer. This also supports the stand of the department and is fully applicable to the facts of the present case.
It is true that the policy of law is that there must be point of finality in all legal proceedings. The stale issue should not be reactivated beyond a particular stage and with lapse of time must induce repose in and set at rest the judicial and quasi judicial controversies as it must in other spheres of human activity, vide Parashuram Poultry Works Company Ltd. Vs. I.T.O. 106 ITR 1 (S.C.). Once a final assessment order has been made it cannot be reopened except on grounds as is specified under the Act. But in fiscal Statutes, limited power is generally being given by the legislatures to reopen a concluded assessment to safeguard the interest of revenue and in the larger interest of public. Such power is circumscribed by number of condition precedents which are required to be fulfilled before reopening an assessment. In income tax matters, under the Income Tax Act it has been held that where after making reassessment order in pursuance of first notice, the Assessing Officer has reason to believe that there is any escapement of income, he can issue fresh notice under section 148 of the Income Tax Act, which corresponds to Section 21 of the Act so as to bring such escaped income in the case of sales tax turnover to charge tax and in that way he can make any number of order vide A.S.S.P and Co. Vs. CIT (1988) 172 ITR 274 (Madras).
The Supreme Court in the case of Anandji Haridas and Co. (P) Ltd. Vs. S.P.S.B.Kushare 21 STC 326 has observed at page 334 which reads as follows:-
" In Maharaj Kamar Singh Vs. CIT Bihar Orissa, this Court laid down that the term ''escaped assessment' in section 34 (1) (b) of the Income Tax Act, 1922 is applicable only where the income has not been assessed owing to inadvertence or oversight or owing to the fact that no return has been submitted, but also where return has been submitted but the Income Tax Officer has failed to tax a part of assessable income."
This has been followed by this Court in Hindustan Insulated Cable Co. Vs. CST 1978 UPTC 561 wherein it has been held that omission to notice a survey report which was misplaced, was regarded as proper material on which the Sales Tax Officer, could reasonably believe that the turnover of the assessee has escaped assessment.
To the same effect there are other cases of this Court such as CST Vs. Jagdish Prasad Satish Prasad (1979) 43 STC 415, CST Vs. Dwarkadas Varun Kumar 1979 UPTC 1152. In the case of Suwa Lal Pooranmal Vs. CST (1963) 14 STC (Allahabad) it has been held that language of Section 21 of the Act is wide enough to cover cases of inadvertent mistake, and it was not necessary that there should be fresh information on the basis of which an order under section 21 of the Act could be made. As discussed above, therefore, the argument of the dealer that the material being in possession of the department, while framing the regular assessment order, or while passing the first reassessment order cannot be taken into consideration in subsequent reassessment proceedings, has no substance.
The above proposition of law should not be misunderstood and will not be applicable in such cases where the material has been relied upon while passing the order. A distinction in between advertence mistake or omission and change of opinion is well established. In a case where a particular point has been considered on merits, and a view is taken, it would not be a case of inadvertent mistake or omission, even if it is found that view taken earlier was wrong. It would be case of change of opinion, but if it is not so then it would be a case of non application of mind. This distinction is well established and well recognized and has been taken note of, in the case of CST,U.P. Vs. Madhu Chemical Works Bareilly 1988 UPTC 230. Paragraph-21 is reproduced below:-
"The distinction between an advertent mistake or omission and change of opinion is well settled. In a case where a particular point has been considered on merits, and a view is taken, it would not be a case of inadvertent mistake or omission, if it is found that the view taken earlier was wrong. It would be a case of change of opinion, but if it is not so, then it would be a case of non-application of mind and certainly an action would be justified under Section 21 of the Act (see C.S.T. v. Steel Engineering Corporation, (1981) 48 STC 432). A Division Bench of this Court in M/s Hindustan Insulated Cable Co. v. C.S.T., 1978 UPTC 561, held that where the Sales-tax Officer accepted the account books by inadvertence or oversight of a survey report which was on record, has jurisdiction to proceed under Section 21 of the Act. For this statement of law the Court referred to on a decision of the Supreme Court in Anandji Haridas and Co. (P.) Ltd. v. S.P. Kushare, 21 STC 326 and relied on the observations which were to the following effect :-
" In Maharaj Kumar Singh v. Commissioner of Income-tax, Bihar & Orissa, this Court laid that the term "escaped assessment" in Section 34 (1) (b) of the Income-tax Act, 1922 is applicable only where the income has not been assessed owing to inadvertence or oversight or owing to the fact that no return has been submitted, but also where has been submitted but the Income-tax Officer failed to tax a part of the assessable income.""
Otherwise also, on a plain reading of Section 21 of the Act, a reassessment notice can be issued if the Assessing Authority has reason to believe that whole or part of the turnover of a dealer which is assessable under this Act, or any deductions or exemptions has been wrongly allowed in respect thereof has escaped assessment, reassessment proceeding can be initiated. Power has been given to assess or reassess the dealer and to tax according to law.
The learned counsel for the dealer opp.party could not place any material before this Court to take a view other than one taken above and hold otherwise.
In the light of the binding precedents of the Apex Court and of Division Bench decisions referred to above, therefore, the contrary argument of the learned counsel of the assessee that the material which was very much there at the time of the framing of the original assessment order, could not be taken note of, irrespective of inadvertence or omission of the Assessing Officer while framing the original assessment order, is meritless and is liable to be rejected.
In view of the above discussion, the finding of the Tribunal that since the earlier reassessment proceeding in pursuance of the notice dated 27th of March, 1995 was set aside by the first appellate authority, the fresh reassessment proceedings could not be reinitiated suffers from manifest error of law and cannot be sustained. The Tribunal has failed to draw a distinction in between omission or inadvertence mistake and non consideration of material, and on the other hand inference drawn the consideration of such material, which amounts change of opinion.
Now I take up the second question. The factual matrix is that the S.T.O. (S.I.B.) conducted a survey at the business premises of M/s. Narendra Rerolling Mills Private Limited and seized certain documents relating to the dealer opp.party. The dealer opp. Party is carrying on the manufacturing business of M.S.Ingots. It has disclosed all its sales to registered dealer against Form- III B. The account books were accepted in the original assessment proceedings. In the survey dated 27th January, 1995 conducted at M/s. Narendra Rerolling Mills Private Limited, Kanpur Dehat, the S.T.O. (S.I.B.) seized five documents. Sanket Nos.2 and 3 related to dealer opp.party. Sanket No.2 is in the form of a note book and it consists of 43 pages wherein from 1st of December, 1990 to 31st of December, 1990, the transactions are recorded. It records the receipt of goods mainly of dealer opp.party which were received by M/s. Narendra Rerolling Mills Pvt. Limited. The entries do show that Ingots were received out of which Sariyas were manufactured and those manufactured Sariyas were sold as per direction of the dealer opp.party. The entries in this Sanket do show the name of dealer opp.party who got Sariyas manufactured out of M.S. Ingots and sold it. The Deputy Commissioner (Appeals) in its order has found that entries relate to the business transactions of the dealer opp.party with M/s. Narendra Rerolling Mills Pvt. Limited. Not only this the various letters written by the dealer opp.party to M/s. Narendra Rerolling Mills Private Limited directing them to sell the manufactured goods, were also recovered. The said documents contain the dates, weight of the Ingots, truck number through which these Ingots were transported and the sale order given by the dealer opp.party. The Deputy Commissioner (Appeals) has found that in total 556-63 tons of Ingots were received by M/s. Narendra Rerolling Mills Private Limited from the dealer opp.party. The Assessing Officer as well as the Deputy Commissioner (Appeals) on the basis of Sanket Nos. 3 and 4 have concluded that during the period of November, 1990 to December, 1990 ingots through 42 trucks were dispatched out of them 35 trucks wherein 355.870 tons are recorded in the regular account books of the dealer opp.party. Interestingly truck numbers through which the Ingots were sent by the dealer opp.party and received by M/s. Narendra Rerolling Mills Pvt. Limited are recorded in the account books of the dealer opp.party. The details such as truck number in Sanket Nos.2 and 3 and date tally with the account books of the dealer except the weight; which has been less recorded in the account books of the dealer opp.party. The Assessing Officer as well as the First Appellate Authority have found that 201.800 tones of Ingots were sold and not routed through the account books of the dealer opp.party. At this stage it is also relevant to look into the reply given by the dealer opp.party to the show cause notice. The dealer opp.party in reply to show cause notice has given absolutely no explanation about the discrepancy in his account books and that of M/s. Narendra Rerolling Mills Pvt. Ltd. Nor it has specifically denied the business transactions with the aforesaid party. Even otherwise the business relations with the aforesaid party in the facts and circumstances of the case could not possibly be denied by it. The only explanation is that the Assessing Officer was satisfied with the book version of the dealer opp.party and no adverse inference was drawn during the course of original assessment proceedings. The Tribunal has not adverted to this aspect of the case in its earlier order.
The plea which impelled the Tribunal to set aside the concurrent orders of the authorities below is that the assessing officer did not afford an opportunity to examine the account books of M/s Narendra Rerolling Mills Pvt. Ltd. containing the entries, adverse to the dealer, and no opportunity was given to cross examine the person who had made these entries. It has relied upon M/s Malwa Vanaspati & Chemicals Vs.. CTT 1995 UPTC 987 and M/s Trilok Chand Brij Bhushan Lal Vs.. CTT STI 1996(Alld) 117 equivalent to 1996 UPTC 1236. Sri Kunwar Saxena, learned counsel for the dealer/opposite party apart from the above two cases has added Commissioner of Sales Tax Vs.. Om Prakash Agrawal 2004 NTN (24) 290 to strengthen the order of the Tribunal. Applicability of these decisions to the facts of the present case is to examined.
The law is well settled that tax authorities entrusted with the power to make assessment of tax discharge quasi judicial function and while doing so, are bound to observe the principles of natural justice in reaching their conclusion. It is also equally settled that a taxing officer is not bound by the technical rules of evidence and pleadings and that he is entitled to act on such material which may not be accepted as evidence in the court of law. But that does not absolve him from obligation to comply with the fundamental rules of justice, which has come to be known in the jurisprudence of administrative law as principles of natural justice which requires that no person should be condemned unheard. The assessment and reassessment proceedings before an assessing authority are quasi judicial proceedings and they are bound to follow the principles of natural justice. The idea is that by following the principles of natural justice, it ensures prevention of miscarriage of justice.
The Apex Court in the case of State of Kerala Vs. K.T. Shaduli and Nallakandy Usuf on the point that opportunity of hearing by permitting cross-examination of a person from whose possession the account books containing the entries relating to the assessee has been obtained, has held that the cross examination be allowed so that the dealer may have an opportunity to prove that the entries contained in his account books is correct. However, it has been further laid down therein that the procedure required to be adopted for giving an opportunity to a person must be necessarily depend on the facts and circumstances of the each cases, meaning thereby, it has been held that applicability of principles of natural justice depends on the facts and circumstances of each case, it is not a matter of universal application. In the above case two separate concurrent judgment one by Hon'ble Mr. Justice Bhagwati and another by Hon'ble Mr. Justice Fazal Ali have been delivered and they have held that the assessing officer is not debarred from relying on any material against the assessee. Justice and fair play demands that the source of information relied upon by the officer concerned must be disclosed to the assessee so that he is in a position to rebut the same and an opportunity should be given to the assessee to meet effect of the said information. Following the aforesaid pronouncement of the Supreme Court which was given with reference to the provisions of Kerala General Sales Tax Act, 1963, this Court in the case of Commissioner of Sales Tax Vs. M/s Fakir Chand Hazari Mal 1981 UPTC 565 has held that the assessment is the responsibility of the department and burden lies upon the department to prove that sales and purchase are taxable. While determining the turn over the department can rely on evidence which is admissible (not in strict sense of Evidence Act), pass the order after affording opportunity to the dealer. Confronting does not mean telling the assessee that the document is on record if certain account books or diary or material belonging to the third party is relied upon, then the department is required to establish its authenticity which may be established either by admission of assessee or the department may prove it.
Above principle of law has been followed in various other cases such as Commissioner of Sales Tax Vs. Ram Das Manohar Das 1984 UPTC 399 M/s Pawan Kumar Sandeep Kumar Vs.. Commissioner of Sales Tax 1986 UPTC 309, Commissiner of Sales Tax U.P. Vs.. Om Prakash Agrwal 2004 NTN Vol (24) 290 etc.
Reading of above cases undoubtedly establish that assessing officer is empowered to consider the account books, register or other material of a third party while framing the assessment of an assessee provided that an opportunity is afforded to the assessee to rebut the entries contained or the material of such third party and to prove that his account books contain correct entries by producing the third part in evidence and affording opportunity to such dealer to cross examine the third party, and as noted above the above principle is a branch of principle of natural justice. It is also equally true that the principle of natural justice is not unruly horse when the facts are admitted no further enquiry is required to be done. Even, in the case of State of Kerala Vs. K.T. Shaduli (supra), Justice Bhagwati while laying down the applicability of the principles of the natural justice in fiscal statute, has also laid down:- "Rule which requires an opportunity to be heard to be given to a person likely to be affected by the decision is also like genus of which it is species, not an inflexible rule having a fixed connotation. It has a variable content depending upon the nature of inquiry, frame work of law under which it is held, the constitution of authority holding the inquiry, the nature and character, rights affected and the consequences flowing from the decision. It is therefore, not possible to Court that in every case the Rule of audi alterem paterem requires that particular specified procedure to be followed. It may be mentioned that in a given case the Rule of audi alterem paterem may import a requirement that the witnesses whose statements are sought to be relied upon by the authority holding enquiry should be permitted to be cross examined by a party affected while in some other case it may not be the procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend upon on the facts and circumstances of each case".
Thus, it follows that it is not a rule of thumb that in each and every case when a material collected from outside is sought to be relied upon, the department must necessarily produce the third party for cross examination.
Keeping the above declaration of law in mind if the order of the Tribunal is examined, it is clear that the Tribunal in the impugned order without keeping the above principles of law in mind has mechanically followed the decision relied upon by the dealer/opposite party, while allowing the appeal. In the case in hand the dealer/opposite party was served with a notice to show cause as to why its account books may not be rejected in view of the material collected in the survey relied on in the business place of the third party and the papers seized in that survey to which the only reply given by the dealer/opposite party was that the assessing authority had knowledge of those materials while framing the original assessment order under Rule 41 (8) of the Trade Tax Rules. It was submitted that the reassessment notice was initially issued on 27th March, 1995, while the assessment order took place on 30th March, 1995, meaning thereby, it was submitted, that the material collected in the survey conducted at the business premises of third party, the assessing officer of the dealer opp.party has taken into account the material in the assessment order itself. The other pleas raised in the defence were more or less of the same nature. It is interesting to note that while submitting the reply to the show cause notice, the dealer/opposite party did not dispute the correctness of the entries found in the documents in the survey of the third party. The dealer opposite party did not ask for the production of account books of third party and its cross examination. It could not be pointed out either from the reassessment order or from the order of the first appellate authority by the learned counsel for the dealer/opposite party that he demanded either production of the account books of third party or cross examination of partner, proprietor or the person concerned at any stage of the proceedings. The record does not show that prayer for cross examination was ever made and at any rate before the Tribunal.
The observation of the Tribunal in its order, which is just above the heading "order" (Adesh) requires consideration, wherein it is stated that it is desirable to note that on 30th March, 1995 Sardar Narendra Singh, the Managing Director of M/s Narendra Re rolling Mills Pvt Ltd had appeared before the assessing officer and gave his statement and also affidavit to the effect that the dealer/opposite party (appellant before the Tribunal) did not order the manufacture of Saria, nor he manufactured any Saria for him and this fact was ignored by the assessing authority. The aforesaid observation of the Tribunal does not borne out from the record. It may be recalled that the entire record was produced by the learned Standing Counsel before this Court and was perused by Sri Kunwar Saxena before the Court. On perusal of the record he fairly accepted that it is difficult for him to substantiate the above observation of the Tribunal from the record. He was also unable to say as to how the aforesaid observations have been crept into the order of the Tribunal. He suggested and requested the Court that the judgment may not be delivered immediately after close of the hearing and in the mean time he will contact the dealer/opposite party and obtain the instructions with regard to the aforesaid observations. Liberty to mention, if some tangible information is received, was granted but learned counsel Sri Kunwar Saxena could not produce any thing to show that the aforesaid observation made by the Tribunal is based on some cogent material on record. In this facts situation, irresistible conclusion is that the aforesaid observation made in the order of the Tribunal is factually incorrect. The order of the Tribunal is perverse and based on material, which does not form part of the record and is liable to be ignored.
In view of the above observation made by the Tribunal that statement of Sardar Narendra Singh Managing director of M/s Narendra Re rolling Mills Pvt. Ltd was recorded and he filed an affidavit disputing the contention of the department and supporting the dealer/opposite party's contention is patently incorrect and wrong. The necessary inference is that the dealer/opposite party did not lay any claim and ask the department to produce the original record of the third party, in such situation in my opinion it was not necessary for the department to produce the third party for cross examination. In such type of cases there are twin requirements, firstly the person concerned should know the nature of entries and secondly the dealer should be given opportunity to state his case. It is not denied in reply to the show cause notice that in the survey conducted at the place of the third party the documents containing the entries relating to the dealer/opposite party were not recovered and those documents and entries were made known to the dealer/opposite party. The dealer/opposite party did not dispute the nature of entries in reply to the show cause notice. To put it differently, he was made aware by the department that in the survey at the plea of a third party the transactions relating to the dealer were found recorded in the account books of the third party, which do not tally with the entries found in the account books of the dealer/opposite party. Thus the dealer/opposite party was made known the nature and kind of material to be used against him. It can not be said that the dealer/opposite party was taken by way of surprise.
It may be noted that the Supreme Court in the case of Aligarh Muslim University Vs. Mansoor Ali Khan, AIR 2000 SC 2783 has held that the absence of notice to show cause does not make any difference for the employee as already told that his further over stay in continuing in the job with foreign University, it is bound to be refused. The Supreme Court by placing reliance upon its earlier judgment in the case of MC Mehta Vs. Union of India A.I.R. 1999, SC 2583 has held that where no prejudice is caused to the person concerned, inference by Court under Article 226 of the Constitution of India is not necessary. To the same effect is Viveka Nand Sethi Vs.. Chairman J & K Bank Ltd. and others (2005) 5 SCC 337. Para 22 of the said judgment is reproduced below : -
"22. The principle of natural justice, it is trite, is no unruly horse. When facts are admitted, an enquiry would be an empty formality. Even the principle of estoppel will apply (See Gurjeewan Garewal (Dr.) v. Dr. Sumitra Dash (2004) 5 SCC 263 : 2004 SCC (L & S) 747 The principles of natural justice are required to be complied with having regard to the fact situation obtaining therein. It cannot be put in a straitjacket formula. It cannot be applied in a vacuum without reference to the relevant facts and circumstances of the case. (See State of Punjab v. Jagir Singh (2004) 8 SCC 129 : 2004 SCC (L & S) 1109 and Karnataka SRTC v. S.G. Kotturappa (2005) 3 SCC 409 : (2005) 2 Scale 493)."
In view of above discussion, therefore, it is not a principle of universal application that whenever the department relies upon the material collected from the business premises of third party, the third party should necessarily be produced by the department for cross examination. A distinction is to be drawn where a dealer demands or asks for production of the material and cross examination of such party and where no such demand or request is made to produce the material in original or to cross examine the third party. In the latter case the department in my view is absolved from the responsibility to produce the material in original or the third party for cross examination. However, this does not mean that the department should not disclose the assessee the material such as the information given by the third party or obtained as of result of enquiry. The dealer should be given sufficient opportunity to produce the evidence in rebuttal on the material to be relied upon against him. It is for the dealer to rebut the material collected by the department. If sufficient evidence on record to show that the material was disclosed to the assessee and he was given an opportunity to rebut the same, the said material can be utilized against the assessee in the absence of rebuttal. The burden is shifted on the dealer to rebut the material thus collected by the department, how the said burden is to be discharged is upon the assessee, he if so likes may ask the department to produce the material in original or to produce the concerned third party for cross examination. In the absence of failure of department to produce the material in original or the third party for cross examination, if demanded by the assessee, the burden is shifted on the shoulders of the department to produce such material or evidence and in this respect the power has been conferred on it under Rule 75 of the Rules of the U.P. Trade Tax Rules. It is useful at this stage to notice the statutory provision as contained in Rule 41 (8) of the said Rules. Second proviso to said Rule provides that before determining the turnover of a dealer to the best of his judgment the assessing authority shall cause a notice to be served on the dealer stating the notice to be served on the dealer stating the reasons for non acceptance of the turnover as disclosed in the return and shall give him a reasonable opportunity of furnishing its reply thereto. The said proviso is in consonance with the principles of the natural justice and was adhered to in the present case this is the only statutory requirement: In the absence of any demand or request by a dealer/opposite party, the department in the facts of the present case was fully justified in placing reliance upon the entries of third party and the finding to the contrary in the order of the Tribunal without properly appreciating the principles of natural justice can not be sustained and is liable to be set aside. The Tribunal has not found that no show cause notice was given and as noted above, the observation of the Tribunal that the Managing Director of the third party appeared before the assessing authority on 30th March, 1995 or he filed the affidavit supporting the case of the dealer/opposite party is incorrect, reliance placed by it on the two judgments namely, M/s Malwa Vanaspati & Chemicals (supra) M/s Trilok Chand Brij Bhushan Lal (supra) are misplaced one. Those were the cases where the dealer requested for production of third party for the purpose of cross- examination. This is not so in the present case. The cases relied upon by the Tribunal are distinguishable on the facts. The Tribunal without noticing the distinction has blindly followed the principle of law laid down therein and has obviously committed mistake of law. The order of the Tribunal is, therefore, indefencible.
Additionally the Tribunal has committed another grave error of law. Having found that the third party was not produced for cross examination, the only course left for it was to remit the matter to the assessing officer to produce the third party and afford an opportunity to the dealer/opposite party to cross examine him. The law is well settled that by setting aside an order which was passed in violation of principles of natural justice, the proceedings does not come to an end. The matter should be restarted from the stage from where the principle of natural justice was violated.
The upshot of the discussion is that the order of the Tribunal can not be sustained. The order of the Tribunal is set aside and the revision is allowed by deciding both the questions posed above in favour of the department and against the dealer/opposite party with costs. The cost is assessed at Rs. 1000/- payable by the dealer/opposite party to the department.
Dt. February 17, 2006.
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