K. Mohan And Co. (Exports) vs M.H. Vatnani, Assistant ...
2002 Latest Caselaw 22 Bom

JUDGMENT

J.P. Devadhar, J.

1. In this petition, the petitioners challenge notice dated August 4, 1987 issued under Section 35 of the Bombay Sales Tax Act, 1959 (hereinafter referred to as "the BST Act", for short), wherein the respondents have purported to reopen the assessment in respect of the turnover for the period from September 1, 1978 to August 31, 1979.

2. Petitioner No. 1 is a partnership firm duly registered under the Partnership Act, 1932 and, inter alia, carries on the business of manufacture, sale and export of garments and is a reseller of dyes and chemicals.

3. For the abovesaid period from September 1, 1978 to August 31, 1979, the petitioners had filed their returns under the provisions of the BST Act and also under the Central Sales Tax Act, 1956 (hereafter referred to as "the CST Act", for short) and the assessment under both the Acts were passed on March 29, 1982. In the assessment order under the CST Act (exhibit "B" to the petition) sales by transfer of documents before the goods crossed customs frontiers were allowed at Rs. 62,35,943 under Section 5 of the CST Act. In the assessment order under the BST Act (exhibit A to the petition) sales under Section 75 of the BST Act which are exempt from sales tax were determined at Rs. 5,99,92,392. The said document included sales claimed and allowed amounting to Rs. 62,35,943 under Section 5(2) of the CST Act.

4. By the impugned notice dated August 4, 1987 addressed to K. Mohan & Co., the respondent No. 1. purported to make reassessment in Form No. 28 under Section 35 of the BST Act read with Rule 34 of the BST Rules, 1959, for the period from September 1, 1978 to August 31, 1979 on the ground deductions of high seas sales amounting to Rs. 62,35,943 had been wrongly allowed under Section 5(2) of the CST Act, 1956. By a letter dated September 7, 1987 and October 26, 1987, the petitioners pointed various infirmities in it and contended that, the said notice was without jurisdiction and barred by limitation. Since no reply was received, the above petition has been filed.

5. Mr. Jetly, the learned counsel appearing on behalf of the petitioners, raised several contentions, inter alia, on the ground that there were no reasons for reopening the assessment and that the same was barred by limitation. It was also submitted that in the absence of withdrawal/reassessment of the deductions granted under the CST Act, it was not open to the respondents to reopen the assessment under the BST Act, It was submitted that under Section 54 of the BST Act, the petitioners were required to preserve the books of accounts and registers for 5 years. Since the notice is issued beyond the period of 5 years and the petitioners have not preserved the books, except ledger and cash book, it was submitted that the petitioners will be seriously prejudiced if the impugned notice is allowed to be proceeded with.

6. Under Section 35(1) of the BST Act, an assessment can be reopened, if the assessing officer has reason to believe that any turnover of sales or turnover of purchases has escaped the assessment or has been under-assessed within a period of 5 years from the end of that the assessment year. Section 35(1)(b) provides that the assessment can be reopened within the extended period of 8 years if the assessing officer has reason to believe that the dealer has concealed such sales or purchases or has knowingly furnished inaccurate returns.

7. In the instant case, the notice under Section 35 of the BST Act has been issued almost after eight years from the end of the assessment year and, therefore, under Section 35(1)(b) of the BST Act, 1959, the burden was upon the respondents to establish that there was concealment of sales or purchases on the part of the assessee or that the assessee has knowingly furnished incorrect returns. In the impugned notice dated August 4, 1987 it is stated that the reopening of the assessment is on account of the deduction of high sea sales amounting to Rs. 62,35,943 being wrongly allowed under Section 5(2) of the CST Act, 1956.

8. It is not in disputed that the assessment for the period September 1, 1978 to August 31, 1979 passed on March 29, 1982 allowing deduction of high sea sales amounting to Rs. 62,35,943 has not been reopened at all under the CST Act, 1956 and as such the said assessment has become final. Under the circumstances, reopening of the assessment under the BST Act on account of the alleged wrong deduction under the CST Act cannot be sustained. It is pertinent to note that the assessment under the CST Act and the BST Act is done by the same authority and the authority or the officer who has issued the impugned notice under the BST Act could very well have issued notice for reopening of the assessment under the CST Act, if wrong deduction was given under that Act. However, no such notice has been issued and the said assessment under CST Act has become final.

9. In the affidavit-in-reply filed by M.H. Vatnani, the Assistant Commissioner of Sales Tax (Assessment) on November 21, 1987 it was stated in para 3 that the assessing officer had reason to believe that the assessee has knowingly furnished incorrect returns because during the course of raid in February, 1983 the petitioner had admitted to have dealing with bogus parties and had admitted their liability in respect of a part of their dealings for the assessment year 1978-79. It was also stated in the affidavit-in-reply that the audit party had raised serious objections to the deductions given under Section 5(2) of the CST Act, 1956 as the petitioners had not produced proof of transfer of documents before the imported goods crossed customs frontiers of India. The petitioners in their affidavit-in-rejoinder dated January 12, 1988, emphatically denied that during the course of raid they had admitted to have dealing with bogus parties. They also denied to have admitted their liability in respect of their dealings for the assessment year 1978-79.

10. Since the actual reasons for reopening of the assessment were not set out in the affidavit-in-reply and the factual statements made in the affidavit-in-reply were seriously disputed by the petitioners, with a view to give fair opportunity to the respondents, this Court permitted the respondents to file a fresh affidavit, directing them to disclose the actual reasons for reopening the assessment and not the reasons that the deponent may think reasonable at the time of the filing of the affidavit.

11. Accordingly, Shri. P.N. Khopade, Sales Tax Officer, filed a further affidavit, dated December 10, 2001 stating therein that there was doubt as to whether the sales took place before the goods crossed the customs frontiers of India and, therefore, by a letter dated June 6, 1984 the petitioner was requested to state as to why the said sales should not be treated as local sales and tax should be levied. It was stated that the petitioner's reply contained in their letter was not satisfactory and not accepted. It was further stated that the reasons recorded in the file regarding reopening of the assessment are as follows :

"August 4, 1987 : On scrutiny of the case records and documents of high seas sales available it is seen that deduction of high seas sales under Section 5(2) of the Cen-

tral Sales Act, 1956 was wrongly allowed to the extent of Rs. 62,35,943. Hence notice in F-28 is-

sued calling the dealer on August 24, 1987."

Sd/-

(A.C.)

12. From the aforesaid facts, it is abundantly clear that the assessment order passed on March 29, 1982 for the period September 1, 1978 to August 31, 1979, was reopened in 1987 because on scrutiny of the case records and documents, the assessing officer was of the opinion that the deduction of high seas sales given under Section 5(2) of the CST Act, 1956 was wrongly allowed. Under Section 35 of the BST Act, an assessment could be reopened only if the assessing officer has reason to believe that the assessee has concealed sales or has knowingly furnished incorrect returns. From the reasons recorded, it is evident that neither of the conditions set out in Section 35(1)(b) of the BST Act, 1959 are satisfied because admittedly the opinion formed by the officer is based on the scrutiny of the case records and documents which were already there on file. If the "reason to believe" is based on the material already on record and not based on any other material gathered, then there can neither be concealment nor it can be said that the assessee has furnished inaccurate particulars. As stated hereinabove, the assessment with deduction under Section 5(2) of the CST Act, 1956 has become final and mere change of opinion cannot constitute reasons for reopening of the assessment under the BST Act, especially when the assessing officer has consciously chosen not to reopen the assessment under the CST Act. Since the conditions precedent set out in Section 35(1)(b) of the BST Act, 1959 are not satisfied, we are of the opinion that the notice for the reopening of the assessment cannot be held to be valid. Accordingly, the petition succeeds and the impugned notice dated August 4, 1987 is quashed and set aside.

13. Since the petition is allowed on the limited ground of not fulfilling the conditions set out in Section 35(1)(b) of the BST Act, we are not dealing with the various arguments advanced and various decisions cited by Mr. Jetly, the learned counsel for the petitioners. However, in view of the contentions raised by the respondents in their affidavit to the effect that on account of the doubts about the allowability of the deduction under Section 5(2) of the CST Act, 1956, the assessment is being reopened we may refer to the decision of the Gujarat High Court, which has been relied upon by Mr. Jetly reported in [2000] 120 STC 510 Crompton Greaves Ltd. v. State of Gujarat. In that case, while dealing with Gujarat Sales Tax Act, 1969, wherein the provisions are similar to the BST Act, 1959 it was held that if the conditions precedent for invoking the jurisdiction after 5 years are not fulfilled, then the reassessment would be invalid. It was further noted in the said judgment that the words used in the section are "reason to believe" and not "reason to suspect". In the present case admittedly, the reasons for reopening was the doubt or suspicion gathered in 1987 by the officer on perusal of the records on the basis of which assessment order was passed in 1982. Such a case where the reopening is based on doubt or conjecture or surmises, is not covered under Section 35(1)(b) of the BST Act, 1959.

14. In the premises aforesaid, rule is made absolute in terms of prayer Clause (a) of the petition with costs.