Tvl. Vignesh Constructions vs. The Commissioner Of Commercial Taxes

Facts

The petitioner, Tvl. Vignesh Constructions, filed two writ petitions challenging assessment orders dated May 26, 2023, passed by the Assistant Commissioner (ST) for the assessment years 2013-14 and 2014-15. Initially, deemed assessment orders were passed accepting the declared turnover. However, the respondent revised these assessments based on a desk audit. The petitioner contended that the desk audit was not provided, violating principles of natural justice, and that the rejection of accounts and adoption of a high gross profit percentage (54.91% plus 15%) was arbitrary and lacked basis. The petitioner also argued that a used car sale included in the assessment belonged to the proprietor and not the business. The respondents argued that the desk audit report was confidential under Section 85 of the TNVAT Act and that the petitioner had not availed the opportunity for personal hearing.

Held

The Court allowed the writ petitions. Regarding the first issue, while the judgment does not explicitly state a finding on limitation, the allowance of the petitions implies that the orders were unsustainable on other grounds. On the second issue, the Court found that the respondents had not provided any real basis for rejecting the accounts maintained by the petitioner and that there was no ground warranting a best judgment assessment. The Court held that even a best judgment assessment cannot be a wild guess but must be a reasonable and justifiable guess based on some material. It found that the respondents had not produced any such evidence for adopting the 54.91% gross profit along with 15% turnover. The Court also held that the desk audit report, which included the order-in-original and show cause notice from the Commissioner of GST and Central Excise, could not be considered a secret document under Section 85 of the TNVAT Act, and thus the respondents' claim of confidentiality was not legally sustainable. Furthermore, the Court noted that an order passed by one tax authority cannot be the basis for levying tax by another authority; tax must be levied based on relevant provisions of law. The Court did not explicitly address the third issue regarding the used car sale, but the quashing of the assessment orders would cover this point. The operative direction was to quash the impugned orders.

Key Issues

1. Whether the assessment orders dated May 26, 2023, passed by the Assistant Commissioner (ST) for the assessment years 2013-14 and 2014-15 are barred by limitation, as contended by the petitioner? 2. Whether the rejection of the petitioner's accounts and the adoption of a gross profit of 54.91% plus 15% in the impugned assessment orders are arbitrary, without basis, and contrary to the principles of natural justice, particularly concerning the non-furnishing of the desk audit report, as argued by the petitioner? 3. Whether the sale of a used car, registered in the name of the proprietor, could be included in the assessment of the business entity, as contended by the petitioner? Petitioner's Arguments: The petitioner argued that the assessment orders were barred by limitation. They further contended that the desk audit report, which formed the basis for rejecting their accounts and adopting a high gross profit percentage, was not provided, violating principles of natural justice. They argued that the adopted gross profit percentage was arbitrary and lacked material evidence, citing the principle that best judgment assessment cannot be a wild guess. The petitioner also argued that the used car sale was personal and not business-related. They relied on the judgment in Vel Metal Industries Vs. the State of Tamil Nadu. Respondents' Arguments: The respondents contended that the desk audit report was confidential under Section 85 of the TNVAT Act and thus not required to be furnished. They argued that the petitioner had not availed the opportunity for personal hearing after the previous writ petition was disposed of. They maintained that the assessment was based on verification and evidence, and the impugned order was sustainable.