An Incorrect Rejection of Documents would amount to ‘Prejudicial of Interest of Revenue’: Gauhati HC upholds Revision Order [Read Judgment]

While upholding a revisional order passed by the Additional Commissioner of VAT, a two-judge bench of the Gauhati High Court has held that an incorrect rejection of the documentary evidence would amount to “prejudicial to the interest of the Revenue” attracting the provisions of the 36(1) of the Assam General Sales Tax Act, and Section 82(1) of the Assam Value Added Tax Act.

The petitioner is a star hotel located at Guwahati and in course of their regular business makes the sale of certain taxable goods such as cooked food etc., and for the purpose is a registered dealer under the Assam General Sales Tax Act, 1993 and the Assam VAT Act. The notice was issued against the petitioner and a secret search was conducted wherein, seized documents were found in the business premises of the petitioner but no documents being bills or invoices related to any customer have been produced.

Following this, assessments were passed against the petitioners on the ground that inconsequent to search proceedings, it was discovered that there was an attempt to keep a substantial part of the sales of taxable goods unaccounted and thereby causing evasion of tax. Later, the appellate authority granted relief to the petitioner and directed the Assessing Officer to re-do the assessment. Accordingly, an order in favor of the assessee was passed.

However, the Additional Commissioner invoked his revisionary jurisdiction under Section 36(1) of the AGST Act, or under Section 82(1) of the AVAT Act and found that the subsequent order was erroneous and against the interest of the Revenue.

Though the petitioner approached the Appellate Tribunal for relief, the same was rejected.

The issue before the Court was whether there was an incorrect assumption of facts by the appellate authority.

The division bench consisting of Chief Justice Ajai Lamba and Justice Achintya Malla Bujor Barua dismissed the revision petition relying on the Apex Court decision in Malabar Industrial Co. Ltd. Wherein the Court interpreted the term “prejudicial to the interest of Revenue” to mean that where two views are possible and the assessing authority has taken one view to which the appellate authority do not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view of the assessing authority is unsustainable in law or a sum not earned by a person is assessed as income in his hands.

“In other words, if an income not earned or a sales not made is included for the purpose of imposing a tax, such order would be erroneous and prejudicial to the interests of the revenue. As a corollary if an income earned or a sales made is not submitted in the returns but, the documents relied upon by the assessing authority shows such income earned or sales made and such documents have incorrectly been rejected by the appellate authority on an incorrect assumption of facts or incorrect application of the law, such incorrect rejection by the appellate authority would be prejudicial to the interests of the revenue,” the bench said.

“In view of such conclusion arrived, the two circumstances required to exist for the purpose of invoking the suo-moto revisional power under Sections 36 (1) of the AGST Act and 82 (1) of the AVAT Act are present in the instant case and therefore we do not find any infirmity in the exercise of any suo-moto power by the Addl. Commissioner of Taxes in the order 28.10.2015.” the bench said.