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2023 (3) TMI 61 - HC - VAT and Sales TaxUnder-pricing of goods/colourful transactions - Determination of sale price of Iron Ore sold by the petitioner on the basis of average I.B.M. rate in exercise of the powers under Section 35 (7) read with Section 40 (1) of the JVAT Act - HELD THAT:- 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 disclose willfully etc. the penal provisions under proviso to 40(1) provide imposition of three times the amount of additional tax assessed - 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 noteworthy that even after remand by the appellate authority in the revised assessment order the assessing officer has not correctly applied its mind to the requirement of law under Section 35(7) of the Act and rather observed that it is not a case where the assessee has sold the goods at a price higher than what is shown by him. In the case of GIRDHARI LAL NANNELAL VERSUS SALES TAX COMMISSIONER, MP [1976 (3) TMI 51 - SUPREME COURT], the Apex Court, held that for the purpose of levy of Sales 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. 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 learned 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 - In the absence of tangible materials to support such a finding, it is difficult to assume that a purchaser of petitioner would purchase minerals at a lesser price under an invoice in order to evade payment of tax especially when the said purchaser is entitled to avail ITC under the JVAT Act, 2005. It is only after recording of reasons for initiation of proceedings under Section 35(7) the exercise for determination of value of goods at the time of sale and assessment of tax on such price is to be done by giving the dealer an opportunity of being heard. Though several contentions have been raised by the parties on the merits of the matter regarding the levy of tax and penalty but since the matter is being remanded for the assessing officer on the point of recording of satisfaction under Section 35 (7) of the JVAT Act before initiation of the proceedings, it is refrained 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. VEENA THEATRE, PATNA VERSUS THE STATE OF BIHAR [1970 (4) TMI 169 - SUPREME COURT] 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. Petition disposed off.
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