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TMI Blog2008 (7) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... ed exhibits P4 and P5 replies to the two assessment orders. However, overruling the objections of the petitioner, exhibits P6 and P7 assessment orders are issued and following the same, exhibits P8 and P9 demand notices were issued for a huge amount against the petitioner also. A counter-affidavit is filed to which a reply affidavit is also filed. I heard Shri M.M. Abdul Aziz, learned senior counsel appearing for the petitioner and also the learned Government Pleader appearing on behalf of the respondents. The learned senior counsel appearing for the petitioner submits that the petitioner cannot be made liable on the basis of section 26 of the KVAT Act. He would submit that indispensable for the application of the said provision, is the element that the person is or was carrying on business. He would submit that even going by what is attributed against the petitioner, it would not amount to carrying on business, within the meaning of section 26 of the Act. He would contend that the section requires the existence of a state of mind with the assessing officer where he has reasons to believe that the ingredients of the said section exist. In this connection, he relied on the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer [1961] 43 ITR 387 (SC) (para 14) Partap Singh (Dr.) v. Director of Enforcement [1985] 155 ITR 166 (SC); [1985] 3 SCC 72 (para 9) Venkateswaran (A.V.), Collector of Customs v. Ramchand Sobhraj Wadhawasmi [1961] AIR 1961 SC 1506 (para 13) W.A. No. 1536 of 2008. M.M. Abdul Aziz, Senior Counsel for the appellant JUDGMENT The judgment of the court was delivered by H.L. DATTU C.J.-The judgment of the learned single judge in W.P. (C). No. 9272 of 2008 dated June 12, 2008 is the subject-matter of this writ appeal. The petitioner is an advocate. To facilitate a person to register himself as a dealer, the petitioner had offered her assistance, like, identifying the person before the registering authority/assessing authority. Apart from that, she had no other role to play in the business activities of one Sri. T.P. Varghese. For the assessment years 2004-05 and 2005-06, the assessing authority, after issuing notice to the petitioner, has proceeded to pass a protective assessment order under section 26 of the Kerala Value Added Tax Act, 2003 ("the KVAT Act", for short), inter alia, directing the petitioner to pay huge tax liability. Pursuant to the orders so passed, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally, be liable for the payment of the tax". The expression "reason to believe" has been explained by the apex court in several of its decisions. One leading case is Dr. Partap Singh v. Director of Enforcement [1985] 155 ITR 166 (SC); [1985] 3 SCC 72. In the said decision, the court has observed that: (page 171 of ITR) "The expression 'reason to believe' is not synonymous with the subjective satisfaction of the officer. The belief must be held in good faith; it cannot merely be a pretence." (page 171 of ITR) Further the court has stated: (page 171 of ITR) "... It is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section ..." This view of the apex court is reiterated in the subsequent decisions also. Reference to all those decisions may not be necessary for the disposal of this writ appeal. Section 26 of the Act, as we have already stated, provides for passing of the orders of protective assessment. The said provision commences with a non obstante clause. The assessing authority is authorised, if he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n association with any other person either directly or indirectly, whether as an agent, employee, etc. This should be reflected in the order passed under section 26 of the Act. The non-compliance of the same would be fatal to the proceedings. In a case of this nature, in our opinion, in the absence of specific finding to the effect that the petitioner was, either directly or indirectly, carrying on the business with any other person, the orders passed by the assessing authority cannot be sustained by this court. In our opinion, the order passed by the assessing authority is contrary to the statutory provisions and also contrary to the well-established principles of law. In A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhawasmi AIR 1961 SC 1506, it is stated that, "complete lack of jurisdiction in any officer or authority to take the impugned action would be a good ground not to insist on the exhaustion of statutory remedies. It was further pointed out that this exception along with the one where an order is passed in violation of the principles of natural justice cannot be regarded as exhaustive of the exceptions, and even beyond them a discretion vests with the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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