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2014 (3) TMI 657 - HC - VAT and Sales TaxValidity of assessment order - Correctness of the inspection report opportunity of being heard - Refusal to entertain documentary proofs - Held that - Before any punitive order is passed, there has to be assessment in reality and that will be possible only on verification of books of account - even if they had found discrepancies, petitioner was entitled to explain and had to be heard personally which the respondent has failed to accord - to support its reply with documentary proof like books of account, etc. it has sought four weeks time, but the revenue refused to accommodate and has proceeded to determine alleged tax liability on the allegation of suppression of facts based on inspection report. When tax is levied, it must be legally recoverable and if the assessee could substantiate that tax liability is not to the extent as assessed, there has to be a true assessment - That is the primary purpose of issuing show-cause notice soliciting reply and then to pass order - It is only when such order is passed after giving opportunity to the assessee, it could be enforced through punitive action, i.e. demand notice matter remitted back to the department for assessment - Assessee directed to produce books of account and file statement - Decided in favour of assessee.
Issues Involved:
Petitioner's challenge to assessment order and demand notice based on alleged suppression of tax without proper opportunity for explanation and time to produce relevant documents. Analysis: 1. Alleged Suppression of Tax: The petitioner, a proprietary concern engaged in the business of letting out a marriage hall, challenged the assessment order and demand notice issued by the authorities. The petitioner claimed to have filed monthly and annual tax returns for the period in question. The dispute arose when the authorities alleged suppression of tax after an inspection of the petitioner's business place. The petitioner raised objections against the alleged suppression and requested time to produce relevant documents, which was initially declined by the respondent. 2. Denial of Opportunity and Unreasonable Timeframe: The petitioner contended that the respondent issued a proposition notice without considering the request for additional time to produce books of account. The petitioner sought a reasonable period to support its contentions with documentary proof but was refused by the authority. The petitioner emphasized that it was not denying the tax liability but questioning the correctness of the inspection report. The petitioner highlighted the importance of being heard personally and having sufficient time to present its case effectively. 3. Violation of Principles of Natural Justice: The court noted that the entire assessment process was marred by an arbitrary exercise of power by the authorities, failing to adhere to the principles of natural justice. The court emphasized that before any punitive action is taken, a proper assessment must be conducted based on verified books of account. The respondent's failure to grant the petitioner the requested time and reliance solely on the inspection report was deemed unjustifiable. The court stressed that the petitioner should have been given a fair opportunity to present its case and that the assessment should be made in accordance with the law. 4. Decision and Remittance: In light of the above issues, the court allowed the petition, quashed the assessment order and demand notice, and remitted the matter back to the respondent. The court directed the respondent to provide a reasonable opportunity to the petitioner to produce relevant documents to support its defense. The court emphasized the importance of a true assessment based on verified material before any enforcement action could be taken. The petitioner was instructed to produce books of account and file a statement within a specified timeframe for further proceedings. This detailed analysis of the judgment highlights the key legal issues, the petitioner's arguments, the court's observations, and the final decision rendered by the Karnataka High Court.
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