M/S. I Kon Associates vs. The State Of Telangana

Held

The Court held that it was incumbent upon the 3rd respondent to consider the material placed before him by the petitioner before passing the impugned order. Merely because the petitioner did not file written objections to the show-cause notice, the 3rd respondent could not have ignored the material already provided by the petitioner. The Court found that the assessment order was passed without proper consideration of the petitioner's submissions and without affording a reasonable opportunity. Therefore, the impugned Assessment Order No. 32931 dated March 20, 2020, was set aside. The petitioner was granted two weeks to file written objections with supporting material, and the 3rd respondent was directed to provide a personal hearing and pass a reasoned order. The petitioner was also directed to deposit 12.5% of the tax determined by the impugned order within two weeks.

Facts

M/s. I Kon Associates, a partnership firm and registered dealer under the T.S. VAT Act, 2005, engaged in the sale of agricultural implements and HDPE woven sacks, is challenging an Assessment Order dated March 20, 2020, passed by the Commercial Tax Officer (3rd respondent). This order pertains to the tax periods 2014-15 to 2017-18 (up to June 2017). The 3rd respondent had audited the petitioner's accounts. Subsequently, a show-cause notice was issued on December 16, 2019, proposing to add an estimated 25% to the reported sales turnover, disallow exemption on agricultural implements due to lack of documentary evidence, and disallow input tax credit for non-production of purchase bills. The petitioner claims to have provided details during the assessment but could not file a formal reply to the show-cause notice due to the COVID-19 pandemic.

Key Issues

1. Whether the estimation of turnover by the Commercial Tax Officer (3rd respondent) is arbitrary and unjustified, considering the petitioner maintained statutory books of accounts and purchased goods from local VAT registered dealers, in light of Section 72 of the T.S. VAT Act, 2005? 2. Whether the Assessment Order was passed without affording a reasonable opportunity to the petitioner to submit detailed objections to the allegations in the show-cause notice, violating principles of natural justice? Petitioner's arguments: The estimation of turnover is arbitrary as statutory books were maintained and tax was paid correctly. The addition of turnover is not justified. The order was passed without a reasonable opportunity to submit objections, and the COVID-19 pandemic prevented timely submission of documentary evidence. Tax should not have been levied on exempt agricultural implements. Respondents' arguments: The petitioner failed to file a response to the show-cause notice, leading to the assessment being made on a best judgment basis. The Special Counsel did not dispute that the petitioner had filed sales details for the relevant periods, but these were not considered in the impugned order.