Case Law Details

Case Name : Munesh Enterprises, Guna through its Proprietor Pratap Singh Dhakad Vs State of M.P. and another (Madhya Pradesh High Court)
Appeal Number : W.P. No. 7965 of 2015
Date of Judgement/Order : 11/05/2020
Related Assessment Year :
Courts : All High Courts (5661) Madhya Pradesh HC (62)

Munesh Enterprises, Guna through its Proprietor Pratap Singh Dhakad Vs State of M.P. and another (Madhya Pradesh High Court)

It appears that grant of an opportunity to cross-examine is a concomitant of the expression “Reasonable Opportunity”. In the instant case, the matter was remanded by the State only for the purpose that opportunity of cross-examination which was not afforded to the petitioner in respect of the documents of the Krishi Upaj Mandi Samiti, Guna (M.P.) should now be afforded. However, when the matter was taken up after receipt on remand, the Appellate Authority seems to have brushed aside the prayer for cross-examination by presuming without any basis that the records being 17 years old may not be available with the Krishi Upaj Mandi Samiti, Guna (M.P.). The least that was required of the Appellate Authority was to afford an opportunity to the petitioner to produce those records or to summon those records directly from the Krishi Upaj Mandi Samiti, Guna (M.P.), as the case may be and if the attempt would have failed then the Appellate Authority/Assessing Authority was well within its powers to proceed in accordance with law, but not otherwise.

Since the Appellate Authority has passed the impugned order by assigning reasons which cannot stand the test of reasonableness as authority fails to even address the issue in its right perspective, this Court is of the considered view that the power of judicial review deserves to be exercised u/Art.226 of Constitution in favour of the petitioner.

 Consequently, the petition stands allowed to the extent indicated below:-

(i) The impugned order Annexure P-14 dated 31.01.2012 passed by the Additional Commissioner, Commercial Tax, Gwalior (M.P.) is hereby set aside.

(ii) The orders dated 07.12.2006 [Annexure P-11A to Annexure P-11F] are further quashed.

(iii) The respondents are now directed to conduct reassessment proceedings by granting reasonable opportunity to the petitioner of cross-examination in respect of the documents pertaining to the Krishi Upaj Mandi Samiti, Guna (M.P.).

(iv) However, it is made clear that in case the petitioner fails to produce the documents after grant of reasonable opportunity and if the Assessing Authority in exercise of its powers under the relevant Act is unable to procure the said documents then the petitioner may be allowed to cross-examine any witness in the know of the said documents.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Shri Pawan Kumar Dwivedi, learned counsel for the petitioner.

Shri Ankur Mody, learned Additional Advocate General, for respondent/State.

(1) This petition filed by a proprietorship firm u/Art.226 of the Constitution of India assails Annexure P-14 dated 31.01.2012 by which the revision of petitioner has been dismissed by upholding the reassessment of tax under the Central Sales Tax Act and corresponding penalty under the M.P. Commercial Tax Act in respect of the periods from 01.04.1993 to 31.03.1994 and from 01.04.1994 to  1.03.1995.

(2) Learned counsel for the rival parties are heard on the question of admission.

(3) The skeletal facts necessary for adjudication are that the business of the petitioner firm which is a registered dealer under the M.P. General Sales Tax Act, M.P. Commercial Tax Act and Central Sales Tax Act allegedly came to a standstill and was closed from the year of 1999 due to heavy losses. It is further alleged by the petitioner that the Commercial Tax Officer vide orders dated 27.12.1997 and 20.03.1998 had completed the assessment under the M.P. CT CST and Entry Tax Act for the said periods on the basis of books of accounts after due verification and enquiry. The respondent No.2, it is alleged, reopened the original assessments of the said periods as aforesaid, under the directions of the Deputy Divisional Commissioner of Commercial Tax, Gwalior on the basis of some information received from Krishi Upaj Mandi Samiti, Guna (M.P.) as regards purchase made by petitioner. It is alleged that no opportunity during the reopening and reassessment proceedings was afforded to the petitioner and the same were conducted ex parte by passing appropriate orders on 03.12.2001 vide Annexure P-1, P-2, P-3, P-4, P-5 and P-6. It is submitted that consequently additional tax under the Central Sales Tax Act separately for the said two periods and penalty u/Sec.28 of the M.P. C.T. Act separately for the two periods were levied. It is further alleged that petitioner came to know of these impugned orders of reassessment when the Revenue raised demand for the additional amount. It is submitted that consequently the petitioner on 29.03.2004 preferred a revision Vide Annexure P-7. It is submitted that the Revisional Authority by order dated 31.03.2004 vide Annexure P-10 allowed the revision and remanded the matter for fresh assessment. Respondent No.2 on receipt of the matter on remand initiated proceedings for reassessment afresh. It is submitted that the parties were heard and the petitioner filed written submissions expressly seeking opportunity of cross-examination qua the record received from Krishi Upaj Mandi Samiti, Guna (M.P.) which was the foundation of the reassessment proceedings. It is submitted that the Assessing Authority, however, turned down the said request for cross-examination. Accordingly, respondent No.2 passed fresh orders of reassessment on 07.12.2006 vide Annexure P-11A to Annexure P-11F. It is submitted that before passing the order the respondent No.2 did not care to even call for the records of Krishi Upaj Mandi Samiti, Guna (M.P.) and also did not afford any opportunity of cross-examination. It is submitted that petitioner being aggrieved preferred an application u/Sec.39/62 of the M.P.GST/MPCT Act before the State Government vide Annexure P- 12. The State Government vide Annexure P-13 remanded the matter to the Additional Commissioner, Commercial Tax, Gwalior (M.P.) vide order dated 03.10.2011. Thereafter, it is submitted that the Additional Commissioner, Commercial Tax, Gwalior (M.P.) initiated proceedings u/Sec.62(2) of the M.P. C.T. Act and passed final order on 31.01.2012 vide Annexure P-14 dismissing the revision petition and while doing so recorded the finding that since the period of assessment is of 1994- 95 vintage which is about 17 years’ old, the possibility of records being available with the Krishi Upaj Mandi Samiti, Guna (M.P.) is remote and therefore affording of opportunity for cross-examination will be an exercise in futility.

(4) Accordingly, this petition has been filed challenging Annexure P-14 dated 31.01.2012 passed by the Additional Commissioner, Commercial Tax, Gwalior (M.P.)/Appellate Authority.

(5) Learned counsel for the petitioner by relying upon “State of Kerala Vs. K.T. Shaduli Grocery Dealer Etc. [(1977) 2 SCC 777]”, “Commissioner of Sales Tax, U.P., Lucknow and others Vs. Suresh Chand Jain, Tendu Leaves Dealer, Lalitpur and others [1988 (Supp.) SCC 421]” and two orders of the Division Bench of this Court rendered on 20.07.2010 in WP.442/2004 [M/s Govind Trading Company Vs. State of M.P. and others] and the other rendered on 08.08.2019 in WP.5256/2006 [M/s Mannulal Gyanichand, Shivpuri Vs. State of M.P. and others] submits that the requirement of reasonable opportunity inherently involves the opportunity to cross- examine. Relevant para 4 and 5 of the judgment in the case of K.T. Shaduli Grocery Dealer Etc. (supra) which has been followed in all the subsequent decisions cited by learned counsel for the petitioner are reproduced below for ready reference and convenience:

“4. Now, in the present case, we are not concerned with a situation where the rule of audi alterem partem has to be read into the statutory provision empowering the taxing authorities to assess the tax. Section 17, sub-section (3), under which the assessment to sales tax has been made on the assessee provides as follows:

If no return is submitted by the dealer under sub section (1) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it, assess the dealer to the best of its judgment:

Provided that before taking action under this sub- section the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness or completeness of such return.

It is clear on a plain natural construction of the language of this provision that it empowers the Sales Tax Officer to make a best judgment assessment only where one of two conditions is satisfied: either no return is submitted by the assessee or the return submitted by him appears to the Sales Tax Officer to be incorrect or incomplete. It is only on the existence of one of these two conditions that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment. The fulfilment of one of these two prerequisites is, therefore, a condition precedent to the assumption of jurisdiction by the Sales Tax Officer to make assessment to the best of his judgment. Now, where no return has been submitted by the assessee, one of the two conditions necessary for the applicability of Section 17, sub-section (3) being satisfied, the Sales Tax Officer can, after making such inquiry as he may consider necessary and after taking into account all relevant materials gathered by him, proceed to make the best judgment assessment and in such a case, he would be bound under the proviso to give a reasonable opportunity of being heard to the assessee. But in the other case, where a return has been submitted by the assessee, Sales Tax Officer would first have to satisfy himself that the return is incorrect or incomplete before he can proceed to make the best judgment assessment. The decision making process in such a case would really be in two stages, though the inquiry may be continuous and uninterrupted the first stage would be the reaching of satisfaction by the Sales Tax Officer that the return is incorrect or incomplete and the second stage would be the making of the best judgment assessment. The first part of the proviso which requires that before taking action under sub- section (3) of Section 17, the assessee should be given a reasonable opportunity of being heard would obviously apply not only at the second stage but also at the first stage of the inquiry, because the best judgment assessment, which is the action under Section 17, sub-section (3) follows upon the inquiry and the “reasonable opportunity of being heard” must extend to the whole of the inquiry, including both stages. The requirement of the first part of the proviso that the assessee should be given a “reasonable opportunity of being heard” before making best judgment assessment merely embodies the audi alterem partem rule and what is the content of this opportunity would depend, as pointed out above, to a great extent on the facts and circumstances of each case. The question debated before us was whether this opportunity of being heard granted under the first part of the proviso included an opportunity to cross-examine Haji Usmankutty and other wholesale dealers on the basis of whose books of accounts the Sales Tax Officer disbelieved the account of the assessee and came to the finding that the returns submitted by the assessee were incorrect and incomplete. But it is not necessary for the purpose of the present appeals to decide this question since we find that in any event the assessee was entitled to this opportunity under the second part of the proviso.

5. The second part of the proviso lays down that where a return has been submitted, the assessee should be given a reasonable opportunity to prove the correctness or completeness of such return. This requirement obviously applies at the first stage of the enquiry before the Sales Tax Officer comes to the conclusion that the return submitted by the assessee is incorrect or incomplete so as to warrant the making of a best judgment assessment. The question is what is the content of this provision which imposes an obligation on the Sales Tax Officer to give and confers a corresponding right on the assessee to be afforded, a reasonable opportunity “to prove the correctness or completeness of such return”. Now, obviously “to prove” means to establish the correctness or completeness of the return by any mode permissible under law. The usual mode recognised by law for proving a fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correctness or completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Sales Tax Officer. Here, in the present case, the return filed by the assessee appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the book’s of account of the assessee. The Sales Tax Officer relied on the evidence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously the assessee could not do, unless he was given an opportunity of cross-examining Hazi Usmankutty and other wholesale dealers with reference to their accounts. Since the evidentiary material procured from or produced by Hazi Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incorrect and incomplete, the assessee was entitled to have Hazi Usmankutty and other wholesale dealers summoned as witnesses for cross- examination. It can hardly be disputed that cross-examination is one of the most efficacious methods of establishing truth and exposing falsehood. Here, it was not disputed on behalf of the Revenue that the assessee in both cases applied to the Sales Tax Officer for summoning Hazi Usmankutty and other wholesale dealers for cross-examination, but his application was turned down by the Sales Tax Officer. This act of the Sales Tax Officer in refusing to summon Hazi Usmankutty and other wholesale dealers for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the assessee.”

(6) From the aforesaid, it appears that grant of an opportunity to cross-examine is a concomitant of the expression “Reasonable Opportunity”. In the instant case, the matter was remanded by the State only for the purpose that opportunity of cross-examination which was not afforded to the petitioner in respect of the documents of the Krishi Upaj Mandi Samiti, Guna (M.P.) should now be afforded. However, when the matter was taken up after receipt on remand, the Appellate Authority seems to have brushed aside the prayer for cross-examination by presuming without any basis that the records being 17 years old may not be available with the Krishi Upaj Mandi Samiti, Guna (M.P.). The least that was required of the Appellate Authority was to afford an opportunity to the petitioner to produce those records or to summon those records directly from the Krishi Upaj Mandi Samiti, Guna (M.P.), as the case may be and if the attempt would have failed then the Appellate Authority/Assessing Authority was well within its powers to proceed in accordance with law, but not otherwise.

(7) Since the Appellate Authority has passed the impugned order by assigning reasons which cannot stand the test of reasonableness as authority fails to even address the issue in its right perspective, this Court is of the considered view that the power of judicial review deserves to be exercised u/Art.226 of Constitution in favour of the petitioner.

(8) Consequently, the petition stands allowed to the extent indicated below:-

(i) The impugned order Annexure P-14 dated 31.01.2012 passed by the Additional Commissioner, Commercial Tax, Gwalior (M.P.) is hereby set aside.

(ii) The orders dated 07.12.2006 [Annexure P-11A to Annexure P-11F] are further quashed.

(iii) The respondents are now directed to conduct reassessment proceedings by granting reasonable opportunity to the petitioner of cross-examination in respect of the documents pertaining to the Krishi Upaj Mandi Samiti, Guna (M.P.).

(iv) However, it is made clear that in case the petitioner fails to produce the documents after grant of reasonable opportunity and if the Assessing Authority in exercise of its powers under the relevant Act is unable to procure the said documents then the petitioner may be allowed to cross-examine any witness in the know of the said documents.

(9) The petition accordingly stands allowed to the extent indicated above with no cost.

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