BEST OF JUDGEMENT AND PRINCIPLES OF NATURAL JUSTICE UNDER TNVAT Act, 2006
In the recent times, many writ petitions have been filed before the Hon’ble Madras High Court seeking intervention of the High Court and to direct the Assessing Authorities to set aside the best of judgement Orders passed under Section 22 (4) and Section 27 of the TNVAT Act, 2006 on the ground that reasonable opportunity of hearing was not granted to the petitioners, as provided in Section 22 (4) and Section 27. The Hon’ble High Court has recorded its clear finding in many cases that adequate opportunity is mandatory for the assessee to rebut the relied upon material/documents collected by the Assessing authority for the notices issued or orders passed for the determination of the tax liability. Though deemed assessments have been introduced in TNVAT Act for the years 2006-07 to 2011-12 under Section 22, many best of judgement orders have been passed by the Assessing Authorities and they are under litigation and pending before the various forums. Some of the Assessments have been passed by the Assessing Officer without even providing reasonable opportunity of hearing or cross examination. According to the High Court, it is settled legal principle that when a notice is issued to a dealer with an opportunity of being heard by calling upon them to file objections within a time frame, it is for the dealer to file objections, and only thereafter, the relevant proposal stated in the said notice will be implemented. But without the following the principles of natural justice guaranteed under the Constitution of India, the Assessing Officers are issuing the Notices and passing the orders and hence the intervention of High Court and necessity arises in a such a situation
Legal provisions invoking constitutional remedy: It is trite law that if the notice issued by the authority is in violation of the fundamental rights guaranteed under the Constitution of India; violation of the principles of natural justice; ultra-vires the provisions of the relevant law; grave error in the notice and miscarriage of justice, then the question of waiving the alternative remedy will arise and this Court, under Article 226 of the Constitution of India, could invoke the Writ jurisdiction and interfere with such notice issued by the authority. A fundamental principle that governs all quasi judicial determinations is strict adherence to principles of natural justice.
Recent judgements of Madras High Court for the principles of natural justice for not providing the opportunity of hearing/cross examinations in various situations:
TAR MAKERS Vs THE COMMERCIAL TAX OFFICER (MAIN) 2015-TIOL-757-HC-MAD-VAT
M/s SARAVANA SELVARATHNAM RETAIL PVT LTD Vs THE COMMERCIAL TAX OFFICER 2015-TIOL-758-HC-MAD-VAT
SAMBANDAM SPINNING MILLS LTD Vs THE ASSISTANT COMMISSIONER (CT) 2015-TIOL-791-HC-MAD-VAT
KUMAR AGENCIES Vs COMMERCIAL TAX OFFICER 2015-TIOL-772-HC-MAD-CT
GOPI TRADERS VsTHE COMMERCIAL TAX OFFICER 2015-TIOL-861-HC-MAD-CT
Deemed Assessment and Best of Judgement under TNVAT Act, 2006.
Let us see what is deemed assessment and best of judgement and procedures to be followed under TNVAT Act, 2006.
TNVAT Act, 2006-Section 22. Deemed Assessment and procedure to be followed by the assessing authority.-
(1)The assessment in respect of the dealer shall be on the basis of return relating to his turnover submitted in the prescribed manner within the prescribed period.
(2) The assessing authority shall accept the returns submitted for the year, by the dealer, if the returns are in the prescribed form and accompanied with the prescribed documents and proof of payment of tax. Every such dealer shall be deemed to have been assessed for the year on the 31st day of October of the succeeding year.
Provided that in respect of such returns submitted for the years 2006-2007, 2007-2008, 2008- 2009, 2009-2010 and 2010-2011, on which assessment order are not passed shall be deemed to have been assessed on the 30th day of June 2012.
When is the assessment deemed to have been assessed under the Act:
In order to have deemed assessments, the following are the criteria.
1. The Monthly Returns in the prescribed form should have been filed
2. The Proof of payments are to be accompanied
3. Also accompanied with prescribed documents.
Despite this, the Department can still issue notice for a detailed scrutiny under Section 22 (3) which reads as follows:
Sect 22 (3) Notwithstanding anything contained in sub-section (2), not exceeding twenty per cent of the total number of such assessments shall be selected by the Commissioner in such manner as may be prescribed for the purpose of detailed scrutiny regarding the correctness of the returns submitted by the dealer and in such cases, revision of assessment shall be made, wherever necessary.
Best of Judgement: Section 22 (4) of the TNVAT Act deals with Best of Judgement. Acttording to Section 22(4) -If no return is submitted by the dealer for any period of the year or if the return filed is in complete or incorrect, or if not accompanied with any of the documents prescribed or proof of payments of tax, the assessing authority shall, after making such enquiries as it may consider necessary, assess the dealer to the best of its judgement, subject to such conditions as may be prescribed, after the completion of that year: Provided that before taking action under this sub-section, the dealer shall be given a reasonable opportunity of being heard.
(5) In addition to the tax assessed under sub-section (4), the assessing authority shall, in the order of assessment passed under sub-section (4) or by a separate order, direct the dealer to pay by way of penalty, a sum which shall be, one hundred and fifty percent of the difference of the tax assessed and the tax already paid as per the returns: Provided that no penalty under this sub-section shall be imposed after the period of six years from the date of assessment order * unless the dealer affected has had a reasonable opportunity of showing cause against such imposition.
Best of Judgement under Section 27. Assessment of escaped turnover and wrong availment of input tax credit (1) (a) Where, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax, the assessing authority may, subject to the provisions of sub-section (3), at any time within a period of [six years from the date of assessment], determine to the best of its judgement the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary.
(b) Where, for any reason, the whole or any part of the turnover of business of a dealer has been assessed at a rate lower than the rate at which it is assessable, the assessing authority may, at any time within a period of 2 [six years from the date of assessment], reassess the tax due after making such enquiry as it may consider necessary.
(2) Where, for any reason, the input tax credit has been availed wrongly or where any dealer produces false bills, vouchers, declaration certificate or any other documents with a view to support his claim of input tax credit or refund, the assessing authority shall, at any time, within a period of [six years from the date of assessment], reverse input tax credit availed and determine the tax due after making such a enquiry, as it may consider necessary: Provided that no order shall be passed under sub-sections (1) and (2) without giving the dealer a reasonable opportunity to show cause against such order.
Situations where best of judgement arises:
1. When returns are not filed
2. When returns are in the prescribed form
3. When returns are incomplete or incorrect
4. When not accompanied by documents prescribed
5. When Proof of payments are not accompanied
6. When turnover is escaped or not reported
7. When Input Tax Credit is wrongly availed or not reversed
The Assessing Officer can invoke the provisions of Section 22 (4) and Section 27 on the above reasons within the limitation period of six years from the date of assessment.
In the author’s opinion, if the speaking orders are not passed or orders are passed without granting opportunity of hearing or even without granting time to file their objections, every assessee will naturally approach the Hon’ble High Court for intervention and to get the direction to set aside the impugned orders. The approach of the assessing officers, of late, are perfunctory that makes the officer to issue the notice or to pass the orders without invoking correct provisions and without following the assessment procedures.
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