Raghavendra Wines vs State of Karnataka

The assessee has preferred this petition challenging the order passed by the Tribunal which has declined to interfere with the order passed by the Joint Commissioner of Commercial Taxes, who in turn upheld the order of assessment. The principal ground on which the impugned order was challenged was, the entire proceedings were initiated on the basis of an intelligence report. Copy of the inspection report/which was not furnished. Thus the appellant was precluded from filing of proper defence and therefore, it is submitted that the impugned orders are liable to be set aside on that short ground.

Per contra, the learned Government Advocate contended that after the inspection the assessee admitted the liability and paid the amount by way of cheque. It is after the proceedings were closed, he has chosen to file an appeal and when the appeal was dismissed, he has chosen to file appeal before the Tribunal and after the same was dismissed, he is before this court. Therefore, he is precluded from contending to the contrary. Even otherwise, that was not the ground on which he challenged the order and lastly it was submitted, though a copy of the inspection report was not furnished to the assessee, it was shown during the assessment proceedings and therefore, she submits, no case for interference is made out.

Point No. 1 which was framed by the Appellate Tribunal for decision reads:

Is the assessing authority justified in making the best judgment assessment based on the information from Intelligence Wing and Excise Department?

Annexure C is the order dated September 28, 2001 passed by the assessing authority. It discloses that, after such inspection, they propose to add 15 percent to the value of the goods consumed for sales to arrive at the value of IML sold. Incorporating the details, a proposition notice dated August 16, 2001 was issued proposing to determine gross and net turnovers at Rs. 4,01,20,358 and taxable turnover at Rs. 1,39,86,789. It was also proposed to levy tax of Rs. 58,65,462. In response to the said notice, assessee has filed objections in rime. In fact they have set out their objections. At page 38 in the statement of objections the assessee has specifically requested the authorities to furnish a copy of the intelligence report to enable them to file proper objections.

It is not in dispute that such a copy of the report was not furnished to the assessee. On the contrary, in the assessment order, the assessing authority has observed as under:

Since inspection was conducted and inspections statements was drawn, notices were issued, difference tax was collected from the assessee firm. It is well established that the assessee-firm is in the know of things and at this stage giving copy of intelligence report would not arise. Intelligence report is only for internal, confidential information. However, these reports are shown to the person who produced the books of accounts for verification at the time of hearing.

Once the intelligence report is shown to the person who produced the books of accounts, it ceases to be a confidential information as contended by the State. If they can show the report, they can as well give a copy of the report when, a copy of the report was specifically requested for. It was contended that along with the proposition notice the entire contents of the report was made available to the assessee as an enclosure. We have gone through the enclosure to the proposition notice. In the said enclosure, the stock which they found at the time of inspection as set out in the report is not mentioned. All that is mentioned is, the action of the assessee admitting the claim, paying the amount, issue of notice and then closure of the case. If the assessee had admitted the claim and on his own volition paid the amount, he would not have preferred the appeal. He would not have stated in reply to the proposition notice that he wants a copy of inspection report so as to put forth his defence.

Under the circumstances, we are satisfied, as the entire proceedings are based on the inspection report as is clear from point No. 1 framed by the Tribunal and if the authority had shown the report to the assessee, in law they could not have refused to furnish a copy, which they have not done. Justice has suffered in the bargain. Principles of natural justice are violated. On this short ground, we set aside the impugned order and remit the matter to the assessing authority with a direction to furnish a copy of the inspection report to enable the assessee to file a detailed objection as prayed for and thereafter, to expeditiously proceed to conclude the assessment.

Hence, we pass the following order:

Appeal is allowed.

The impugned order is set aside.

The assessing authority shall furnish a copy of the inspection report on the basis of which proceedings are initiated and give 15 days time to the appellant to file his counter and on such objections being filed, to proceed expeditiously with the conclusion of the assessment proceedings.

Parties to bear their own cost.

The appellant is directed to appear before the assessing authority on October 10, 2011, without waiting for any notice from the assessing authority, to receive a copy of the inspection report. The learned Government Advocate is permitted to file memo of appearance within four weeks.