AI Structured Summary
Not yet generated for this judgment
Judgment
Dr. D.P. Choudhury, J.—In the captioned writ petition challenge has been made to the order of assessment under Section 43 of the Odisha
Value Added Tax Act, 2004 (hereinafter called ''the Act'') without making any assessment under Sections 39, 40, 42 or 44 of the Act served on
the petitioner. The impugned order has also been challenged on the ground that without forming any ""opinion"" by the learned assessing authority in
respect of turnover escaped from the assessment.
Facts
The factual matrix leading to the case of the petitioner is that the petitioner carries on business in preparation and selling of Vada, Piaji, Aluchop,
Mixture and sweets (Rasgola) being a registered dealer under the Act. The petitioner used to maintain books of account in course of the business
basing upon which statutory returns under the statute are filed before the opposite party. The petitioner has filed the return but no order of
assessment under Section 39 of the Act was passed. But a notice in the Form VAT-307 was served on the petitioner to produce the books of
account for assessment of tax on escaped turnover by the opposite party for the purpose of assessment under Section 43 of the Act for the period
from 1.4.2013 to 31.3.2015.
It is alleged, inter alia, that before issue of notice under Section 43 of the Act no assessment has been completed under Sections 39, 40, 42 or
44 of the Act and notice has been issued without forming any opinion as to the turnover escaping assessment as required under Sub-Section (1) of
Section 43. It is stated that without service of any report and without giving proper opportunity to the petitioner, the impugned assessment order
was passed on 20.11.2015 in Form VAT-312 showing daily average sale of the petitioner of Rs. 15,000/- instead of Rs. 2,000/- as contended by
the petitioner basing upon the books of account. It is claimed by the petitioner that the opposite party ridiculously determined the GTO and TTO
of the petitioner at Rs. 1,03,50,000/- to the best of his judgment and computed tax illegally at Rs. 8,81,238/- for the petitioner to pay. The
petitioner also alleged that the opposite party illegally levied penalty to the tune of Rs. 8,81,238/- and thus the petitioner was asked to pay total tax
and penalty of Rs. 17,62,476/-. So, the petitioner filed the present writ petition for quashing the impugned order of assessment and the
consequential notices of demand.
Learned counsel appearing for the petitioner submitted that the order of the opposite party is illegal, perverse and against the principles of
natural justice. He further submitted that the initiation of the proceeding under Section 43 of the Act without making the petitioner being assessed
under Sections 39, 40, 42 or 44 of the Act and as such the opposite party lacks jurisdiction to pass any order. It is also submitted that the
opposite party has never formed any opinion as to which part of the turnover of the petitioner is escaped assessment and in absence of his opinion
to be recorded in writing, initiation of proceeding under Section 43 of the Act and resultant notices thereunder are not tenable in law, being void
and without jurisdiction. He further submitted that in Indure Ltd. v. Commissioner of Sales Tax & others, reported in (2006) 148 VST 61
(Orissa) where this Court has categorically held that assessment cannot be reopened mechanically by the authorities and without showing any
application of mind by not recording any reason and the statutory authorities in issuing reassessment notice cannot surrender or abdicate its
statutory discretionary power in favour of a non-statutory authority and completely act under the dictate of such an authority. In support of such
contention he further submitted that the impugned order has no supporting material and no independent opinion has been taken by opposite party
to impose the tax in question.
It is further submitted on behalf of the petitioner that the best assessment made by the petitioner is not based on material and it is arbitrary, unfair
and unreasonable. When there is no suppression of any purchase or sale at all, the assessment/reassessment has been made by the opposite party
on the basis of surmises and presumption without any material supporting it, the same is bad in law and liable to be quashed. It is further submitted
by the learned counsel for the petitioner that no report on which the assessment depends has been served on the petitioner and as such the
opposite party has violated the natural justice, consequently the impugned order is liable to be interfered with and same should be quashed.
Learned Additional Standing Counsel appearing for the Revenue submitted that the Dealer was issued notice to produce the books of account
and after production of the books of account the opposite party was not satisfied with the contents of the books of account maintained towards
sale and purchase and as such came to hold best assessment procedure. He fairly submitted that the assumption made by the opposite party about
the GTO and TTO is on his knowledge but there is no any supporting material to prove his knowledge and belief. He also submitted that the
assessment under Section 43 (1) (a) of the Act has been made but learned counsel for the Revenue could not explain which item has escaped
assessment. However, he fairly submitted to quash the order of assessment and remit back the matter to the opposite party for reassessment
according to law.
Now the question arises whether the impugned order is passed arbitrarily, without jurisdiction and against the principles of law so as to quash
the same.
It is admitted fact that petitioner is a Dealer having a sweet stall on a Government land. It is not disputed that the petitioner has submitted the
income tax return for the period from 1.4.2013 to 31.3.2015. It is admitted fact that the petitioner used to maintain the books of account.
It is revealed from the petition that the petitioner has mainly urged about best judgment assessment procedure which has not been legally
adopted by the opposite party. Of course the opposite party in the impugned order has mentioned that during personal hearing the petitioner could
not reconcile daily average sale of his business. The opposite party took up the best Judgment assessment procedure. The relevant portion of the
impugned order is quoted herein below:-
xxx Now the assessment is completed to the best of judgment in the following manner. The daily average of business is treated as Rs. 15,000.00
and the total number of days under the period of assessment is calculated to 690 days (345 for each year after deducting 20 days from each year
as off days of the business). Accordingly, the turnover for the year 2013-14 is calculated to Rs. 15,000.00 x 345 = 51,75,000.00. As the dealer
deals in both 5% and 13.5% tax rate goods the proportion of two different tax rate goods is calculated as 53.3% and 46.7% respectively.
Accordingly value of 5% goods comes to Rs. 27,58,275.00 and 13.5% goods valued Rs. 24,16,725.00. Likewise for the year 2014-15 out of
total turnover of Rs. 51,75,000.00, value of 5% goods calculates to Rs. 25,09,875.00 (48.5% of the turnover) and value of 13.5% goods comes
to Rs. 26,65,125.00 (51.5% of total turnover). This proportion of different tax rate goods are calculated on the basis of different tax rate goods
disclosed in the returns for the concern financial year. Thus for the F.Y. 2013-14 and 14-15 taken together, the GTO of the dealer is determined
as Rs. 1,03,50,000.00 and same is also treated as TTO as no deduction is admissible. Tax @ 5% of goods valued Rs. 52,68,150.00 calculates to
the tune of Rs. 2,63,407.00 and tax @13.5% on goods valued Rs. 50,81,850.00 calculates to Rs. 6,86,049:75.Thus the total tax amount
calculates to Rs. 9,49,456:75. After the dealer is allowed deduction of Rs. 24,555.00 towards input tax credit on purchase and Rs. 43,664.00
towards the VAT payment at the time of filing of return, the balance tax due comes to Rs. 8,81,238.00. The dealer is also visited with a penalty
equal to one time of tax due amounting to Rs. 8,81,238.00 u/s 43(2) of the OVAT Act. Thus the tax & penalty together comes to Rs.
17,62,476.00, which is required to pay the dealer as per the terms and conditions of the demand notice enclosed"".
From the aforesaid order, it does not appear how the opposite party could put the daily average business of the petitioner as Rs. 15,000/-
when the return was filed showing the sale business as Rs. 2,000/-. No document or statement of any person or the report of the Sales Tax Officer
has been computed by the opposite party to daily average business sale of the petitioner as Rs. 15,000/-. It is reported in State of Kerala v. C.
Velukutty, (1966) 17 S.T.C. 465 (S.C.), at page 470 where their Lordships observed:-
The limits of the power are implicit in the expression ""best of his judgment"". Judgment is a faculty to decide matters with wisdom truly and legally.
Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of
guess-work in a ""best judgment assessment"", it shall not be a wild one, but shall have a reasonable nexus to the available material and the
circumstances of each case.
With due respect, It is found that the power of making a best judgment assessment is to be exercised within the frame work of settled and
invariable principles of justice. The judgment should not depend upon the arbitrary caprice of a quasi-judicial authority and should be based on true
wisdom and meet the legal principle. It has also been laid down in the aforesaid decision although the best judgment revolves around the element of
guess work but the same cannot be a wild one, it must have a reasonable nexus to the available material and the circumstances of the case. It is
also reported in Raghubar Mandal v. State of Bihar; (1957) 8 S.T.C. 770, at page 778 where Their Lordships observed:-
We find nothing in those observations which runs counter to the observations made in Dhakeswari Cotton Mills'' case. No doubt it is true that
when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but
the estimate must be related to some evidence or material and it must be something more than mere suspicion. To use the words of Lord Russell of
Killowen again, "" he must make what he honestly believes to be a fair estimate of the proper figure of assessment"" and for this purpose he must
take into consideration such materials as the assessing officer has before him, including the assessee''s circumstances, knowledge of previous
returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. In the case under our
consideration, the assessing officer did not do so, and that is where the grievance of the assessee arises"".
With due respect to the decision, it appears that the best judgment procedure adopted by the assessing authority must be related to some
evidence or material and must be more than their suspicion.
Now averting to the fact of the case it appears none of the material or evidence has been produced or relied upon by the opposite party to
come to a conclusion that average business of the petitioner comes to Rs. 15,000/-. Moreover, when the petitioner is engaged in selling of some
low cost Tiffin and some Rasgola at no stretch of imagination the daily business would reach to such an amount. It is a fact that he has engaged six
persons including himself and his brother. Be that as it may, the best judgment procedure adopted by the opposite party does not meet the
requirement of law as propounded by the Hon''ble Apex Court. Consequently, we are of the view that such impugned order is illegal, perverse and
based on caprices and whims of the opposite party for which the same is liable to be quashed.
In view of the aforesaid analysis, we are of the view that the best judgment assessment as required to be followed under law as propounded by
the Hon''ble Apex Court (supra) to make assessment under Section 43 (1) of the Act being not followed by the opposite party, the impugned
order is illegal, bad in law, vulnerable and liable to be quashed. We, therefore, quash the impugned order. Accordingly, the writ petition is allowed.