TMI Blog1968 (3) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... T. XIV the accounts were produced by the petitioner-firm which were examined by the Assessing Authority and by virtue of the order dated 12th March, 1957, the deductions of sale to five registered dealers were disallowed. The order of assessment is annexed with the petition. According to this order, the transactions mentioned above were held not to be genuine because purchases worth lakhs were shown against the purchasers but no corresponding sales made by them (the purchasers) had been proved and that it was also not possible to contact them at their registered places of business for verifying the purchases and further disposal thereof. The registered certificates obtained by the said purchasers were also, according to the averments in the petition, held by the Assessing Authority to have been fraudulently obtained and steps were being taken for the cancellation of their registered certificates. The petitioner according to the averments in the petition had produced the declaration of the said registered dealers required under section 5(2)(a)(ii) of the Act read with rule 26 of the Sales Tax Rules. The only duty cast on the petitioners was to obtain a declaration required under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of sales to the two firms Messrs. A.K. Jain and Co. and Messrs. D. N. Hosiery, Ludhiana. An application made to the Financial Commissioner requiring him to refer the following questions of law under section 22(1) of the Act was also disallowed in April, 1961: "(a) Whether there is any material or evidence on the record to justify the presumption that goods never passed to the registered dealers. (b) Whether it was not the duty of the Assessing Authority to disclose any material or evidence in his possession leading to a suspicion or inference that the sales were not genuine to the knowledge of the petitioner and whether any such material was brought to the notice of the petitioner and the petitioner given opportunity to rebut the same. (c) Whether in the face of the facts that the deductions claimed were on account of sales made to registered dealers, the registration certificates of these dealers were in force at the time and had not been cancelled, the dealers were carrying on business in the market, the sales to one of two had been allowed and that the declarations required under section 5(2)(a)(ii) were duly obtained from the dealers, it was open to the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the proprietor. The file of this firm was stated to be with the Senior SubJudge with the result that this assertion could be verified. The order of the Assessing Authority was affirmed on the ground that the purchases were either bogus or the goods concerned had been misappropriated or that the real purchasers were some other persons. On revision the Excise and Taxation Commissioner also observed that Messrs. A. K. Jain Co. had been adjudicated insolvent by the Senior Sub-Judge, Ludhiana. Relying on this circumstance as also on the statement of Puran Chand relied upon by the Deputy Excise and Taxation Commissioner, the learned Commissioner upheld the refusal to allow deductions in regard to the purchases said to have been made in favour of Messrs. A.K. Jain Co. and Messrs. D.N. Hosiery. In regard to the other dealers the revision was allowed with the result that the taxable turnover was reduced as already mentioned. Shri Aggarwal has laid stress on the point that the fact of Messrs. A.K. Jain Co., having become insolvent as well as the statement of Shri Puran Chand of Messrs. D.N. Hosiery were not in existence at the time of assessment and that the insolvency was not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question which he was directed to refer for decision to this Court. The facts which are no longer in dispute may be narrated to appreciate the surviving point which calls for decision of this Court. The petitioner-assessee, Messrs. Ram Pal Madan Gopal, is a registered dealer and had filed returns for all the four quarters of the assessment years 1954-55 and 1955-56, to which the two references relate. In respect of the assessment year 1954-55, the gross turnover was shown as Rs. 9,12,341-6-6. Out of the deductions, a sum of Rs. 9,03,090-3-0 was claimed in respect of sales stated to have been made to registered dealers. Another sum of Rs. 2,207-8-0 was claimed as deduction on account of exports. The assessee stated that a taxable turnover of Rs. 7,043-11-6 only remained out of the gross sales of Rs. 9,12,341-6-6. The Assessing Authority disallowed the deduction in respect of Rs. 2,30,356-1-6 for the reason that the transactions of sale, to which they related, though made to registered dealers, did not appear to be genuine as the vendees were men of straw. The appeal preferred by the assessee to the Deputy Excise and Taxation Commissioner failed, but in revision the Excise a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which deductions had been claimed. The learned Financial Commissioner has assumed that it was for the assessee to adduce proof about the genuineness of the sales. Mr. C.L. Aggarwal has contended that the sales were made to registered dealers whose certificates of registration having been proved absolved the assessee from any further liability of enquiry regarding the genuineness of the transactions. He has invited our attention to a decision of the West Bengal Board of Revenue in Sriniwas Jiwanram v. State of West Bengal[1952] 3 S.T.C. 301., in which the petitioners' claim to exemption from sales tax in respect of sales to registered dealers to the tune of Rs. 24,150 was disallowed. The purchasing dealer in that case could not be traced and so the tax on the corresponding sales could not be realised. The declarations that the goods had been purchased by registered dealers could not, therefore, be verified. Considering the disallowance of the claim it was observed by the Member that the department's position embodied "rather a novel proposition of law. The Act only requires that sales should be made to a registered dealer and that the goods must be specified in the purchasing dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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