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1996 DIGILAW 32 (GAU)

Assam Agency and Another v. Commissioner of Taxes

1996-02-25

J.N.SARMA

body1996
This writ application has been filed challenging the legality and validity of the notice dated 14.3.95 issued by the authority under section 44 (1) of the Assam General Sales Tax Act, 1993 directing the petitioner to produce the books of accounts for the year 1993-94 and 1994-95 in respect of the business of the petitioner firm for verification. 2. In this writ application, seizure of the books of accounts of the petitioner by the Inspector, attached to the Bureau of Investigation (Economic Offences) on 14.3.95 on the grounds mentioned above is also challenged. The subsequent notice dated 1.4.95 issued by the Superintendent of Taxes, Bureau of Investigation (Economic Offences) directing the petitioner to produce the books of accounts in respect of the seized documents specified in the seizure list is also challenged. 3. I have heard Dr. AK Saraf, learned Advocate for the petitioners and Dr. BP Todi, learned Additional Senior Govt Advocate for the respondents. 4. The brief facts of the case are as follows. 5. The petitioner No. 1 is a registered partnership firm and carries on the business of sale and supply of motor parts and accessories, it has the place of business at AT Road, Guwahati. The petitioner No.2 is a partner of the petitioner's firm. On 14.3.95 a team of officers including the Superintendent of Taxes attached to the Bureau of Investigation (Economic Offences), Superintendent of Police, Bureau of Investigation (Economic Offences), Inspector of Taxes attached to the Bureau of Investigation (Economic Offences), Inspector of Police, Bureau of Investigation and other officers visited the premises of the petitioner's firm. It is alleged that the respondent No.4, Inspector of Taxes attached to the Bureau of Investigation (Economic Offences) instantly issued a notice dated 14.3.95 whereby the petitioner No.2 was directed to produce the books of accounts for the year 1993-94 and 1994-95 at 3.30 PM itself, on the same day for verification. It is further alleged that at the time of writing of the notice, the other officers started searching the business premises of the petitioner firm. The Inspector of Taxes also thereafter joined the said officers in conducting the search. It is further alleged that at the time of writing of the notice, the other officers started searching the business premises of the petitioner firm. The Inspector of Taxes also thereafter joined the said officers in conducting the search. After the search the respondent No.4 issued a seizure list and seized the cash memo book, certain loose sheets of papers as well as the cash book for the year 1994-95 on the ground that the petitioner was selling goods in loose sheets without entering the transaction in his regular books of account and thereby evading taxes under the Assam General Sales Tax Act, 1993. Thereafter on 1.4.95 & notice was issued to the petitioner directing to produce the books of accounts. 6. Dr. Saraf, learned Advocate for the petitioners raised the following points: (i) The seizure of the books of accounts without fulfilment of the mandatory requirement of recording of the reasons of suspicion that the dealer is to evade payment of any tax is illegal, without jurisdiction and not tenable in law. (ii) That the respondents by issuing a notice under section 44 (1) of the Assam General Sales Tax Act directing the petitioner to produce books of account, conducted search in the business premises of the petitioner firm, without any search warrant, which is illegal arbitrary and not tenable in law. (iii) That the power under section 44 of the Act is not arbitrary and uncanalised. Before issuing of a notice under section 44 (1), the officer must apply his mind to the facts of the case and must give due regard to the necessity of not disturbing the business of the dealer or his staff any more than that is necessary for the purpose of ascertaining the required information. The respondent No.4 having issued the notice under section 44 (1) of the Act without giving any reasons, the same is an omnibus notice which is illegal and not tenable in law. (iv) The reasons to suspect that the dealer is attempting to evade payment of any tax is that of the Commissioner and the said power has been vested by the Act with the Commissioner of Taxes. Such powers cannot be delegated to the authorities appointed to assist the Commissioner. (iv) The reasons to suspect that the dealer is attempting to evade payment of any tax is that of the Commissioner and the said power has been vested by the Act with the Commissioner of Taxes. Such powers cannot be delegated to the authorities appointed to assist the Commissioner. The other authorities appointed to assist the Commissioner can do the work as delegated for the assistance of the Commissioner, but cannot absolve the jurisdiction and/or power of the Commissioner of Taxes specifically given under the Act. (v) Thus as the Bureau of Investigation (Economic Offences) is not a part . of the Sales Tax Department and the constitution of the Bureau is not authorised by the statutory provisions, by mere notification the same cannot be vested with a statutory power to levy and collect tax under the Act. 7. In support of contention of Dr. Saraf, learned Advocate for the petitioner draws my attention to section 4.4 (1) of the Assam General Sales Tax Act, 1993. Section 44 provides for production, inspection and seizure of accounts, documents and goods and search of premises. Section 44 (1) provides that any authority appointed under sub-section (1) of section 3 may either before or after assessment, require any dealer to produce before it or him any accounts, registers or documents or to furnish any information relating to the financial transactions of the dealer, the profit derived from such transactions and the stock of goods produced, raised, processed, manufactured, bought, sold or delivered by such dealer and the dealer shall comply with such requirement. Sub-section (3) of section 44 provides that if any authority appointed under sub-section (1) of section 3 has reason to suspect that any dealer is to evade the payment of any tax, such authority may for reasons to be recorded in writing, seize such accounts, registers or documents of the dealer. Sub-section (5) gives the power to the authority to enter into and search any office. Dr. Saraf vehemently urges before this Court that no reasons were recorded by the authority to suspect that the petitioner firm evaded tax and he further submits that without recording such finding no seizure can be made nor any notice under section 44(1) of the aforesaid Act can be issued. Notice under section 44(1) and seizure list are quoted below to appreciate the contention of Dr. Saraf. Notice under section 44(1) and seizure list are quoted below to appreciate the contention of Dr. Saraf. Notice under section 44(1) is Annexure I and seizure list is Annexure II to the writ application. That is quoted below: "To, Annexure 1 M/s Assam Agency, AT Road, Guwahati -1 Sub: Production of books of accounts under section 44 (1) of the Assam General Sales Tax Act, 1993. Whereas it is felt necessary to verity your books of accounts in respect of your business for the year 1993-94 and 1994-95, you are hereby asked to produce your books of accounts before the undersigned at your business premises today the 14th March, 1995 at 3.30 PM under section 44 (1) of the Assam General Sales Tax Act, 1993 for verification." Annexure II: Seizure List: Time 4.15 PM Venue-Bisiness Premises at AT Road, Guwahati. In exercise of power conferred upon me under section 44 (3) of the Assam General Sales Tax Act, 1993, I Shri SK Das, Inspector of Taxes, attached to Bureau of Investigation (EO), Assam, Guwahati, do hereby seized the books of accounts mentioned below of M/s Assam Agency, AT Road, Guwahati from the posession of Mr. Debasis Chanda, one of the Partner of M/s Assam Agency, AT Road, Guwahati today the 14th March, 1995 at 4.15 PM on the reasons stated below : Ground of Seizure : The dealer selling goods in loose sheets without entering the transaction in his regular books of accounts and thereby evaded taxes under the Assam General Sales Tax Act, 1993. List of seized documents : (1) Loose Sheets - 42 Nos (2) Cash Memo Book - 3 NoS (3) Loose Sheets - 58 Nos (4) Challan Book - 2 Nos (5) Cash Book for the year 1994-95." 8. Dr. Saraf makes further submission that for recording -the reasons, it must be the satisfaction of the Commissioner or the authority duly appointed under section 3 (1) of the aforesaid Act and reasons recorded by the Inspector of Taxes attached to the Bureau of Investigation '(EO.) cannot be deemed to be sufficient compliance with the provisions of the Act. In support of his contention, Dr. Saraf relies in a decision reported in (1994) 2 GLR 239 (Saligram and Co & another vs. Deputy Commissioner of Taxes & others). That was a case under the Assam Finance (Sales Tax) Act, 1956. In support of his contention, Dr. Saraf relies in a decision reported in (1994) 2 GLR 239 (Saligram and Co & another vs. Deputy Commissioner of Taxes & others). That was a case under the Assam Finance (Sales Tax) Act, 1956. The section 31 gives the power to the authority to order for production of books of accounts. This Court pointed out that in order to exercise the power to seize the articles, conditions required must be fulfilled and without fulfilling the conditions, the question of seizure does not arise. How far this case helps the petitioner in this particular case will be decided later on. 9. The next case relied on by Dr. Saraf is unreported judgment of this Court in Civil Rule Nos.878 and 879 of 1972 (Mercantile Stores and Agency Company Pvt Ltd, Balimara Tea Company Pvt Ltd vs. Mr. R. Rahman, Inspector of Taxes Dibrugarh & others). That was a case under section 44 (3) of the Assam Sales Tax Act, 1947 and there the Division Bench of this Court relying on a Supreme Court's decisions pointed out that the reasons which must be recorded must be prior to the seizure of the books of accounts. Any reasons recorded subsequent to the seizure of the books of accounts make the seizure an invalid one. 10. On the other hand Dr. Todi, learned Additional Senior Govt Advocate submits that the claim of the petitioner is absolutely different. In this particular case Dr. Todi draws my attention to Rule 14 of the Assam General Sales Tax Rules, 1993. Rule 41 of the aforesaid Rules is regarding the production, inspection and seizure of accounts, documents and goods and search of premises. Rule 41 (2) provides as follows : "41. (2) Unless the authority acting under sub-section (1) of section 44 in his discretion deems, it necessary to make a surprise visit, he shall give reasonable notice in writing to the dealer of his intention to inspect the accounts, registers, documents or stock of goods of such dealer and in fixing the date, time and place for the purpose of as far as possible, be paid to the convenience of the dealer." 11. So, this rule gives the power to the authority to make a surprise visit of the premises and that is what was done in the instant case. So, this rule gives the power to the authority to make a surprise visit of the premises and that is what was done in the instant case. Having made a surprise visit by the Inspector of Taxes attached to the Bureau of Investigation (Economic Offences) and other officers found that the petitioner firm is selling the goods in loose sheet without maintaining the cash memo to evade the tax. Thereafter, the notice under section 44 (1) was issued. The very purpose of the surprise visit is to find out whether any business house or any business institution is maintaining proper books of accounts, cash memo etc and on surprise visit the authority finds that the business house or business institution is not maintaining the books of accounts, cash memo etc and selling the goods in loose sheets/memo to evade tax, the authority can seize the books of accounts/loose sheets etc and can issue notice otherwise the very purpose of surprise visit will be otiose one. 12. In construing a statute the object of the statute has to be kept in view and a construction which will uphold the object has to be placed. Every taxing statute has a fiscal policy a feel of which is necessary to gather the intent and effect of its different parts (see AIR1976 SC1935, Controller Estate Duty vs. Kantilal, AIR 1981 SC 1922 Verghese vs. ITO). The Court will not stretch a point in favour of a tax prayer to enable him to get by his astuteness a benefit. Provisions designed to evade tax evasion should receive due consideration in the hands of the Court, it should not be used to defeat the avowed object of the legislature. The enactment and the rule are designed to prevent fraud on the revenue. It is more properly a statute against fraud rather than a taxing statute and for this reason properly subject to a liberal construction in the Governments favours. However, we must avoid arbitrary, unconstitutional and potentially unjust results. The enactment and the rule are designed to prevent fraud on the revenue. It is more properly a statute against fraud rather than a taxing statute and for this reason properly subject to a liberal construction in the Governments favours. However, we must avoid arbitrary, unconstitutional and potentially unjust results. It must also be remembered that in applying a statute designed for detection of fraud for one providing for search and seizure of tax prayer's property two competing public interests are involved, that offences involving tax fraud should be detected and that the right of the individual to the protection of law from the unjustified interference with his use and enjoyment of his private property should be upheld. A construction should be placed that in least restrictive of individual rights, if the contention of Dr. Saraf is accepted it will mean that the very purpose of surprise visit will be frustrated, the logical consequence of such a surprise visit shall fall through. That sort of construction will encourage tax evasion instead of checking it. The claim made by a person who is suspected to be a tax evader must be scrutinised closely and more so by a writ Court, when he approaches the writ Court without pursuing the remedies provides by the statute. A writ Court cannot put a premium on the wrongful state of things alleged to be in existence by an authority. The rule of strict construction applied primarily to charging provision in a taxing statute, but not to the procedure for collection or to the mode to prevent evasion of taxes. This should be construed by the ordinary mode of construction. 13. Now coming to point No.IV urged it can be said that under section 3 (3) of the Act there can be valid delegation by the Commissioner and it is the case of the respondents that there was such valid delegation. Further Annexure I and II were signed by Inspector of Taxes and he is a person appointed under section 3(1) of the Act to assist the Commissioner of Taxes but he is only attached to BI (EO). By being attached there he does not lose his power, authority and status. He remains and exercise all powers of Inspector of Taxes. Further Annexure I and II were signed by Inspector of Taxes and he is a person appointed under section 3(1) of the Act to assist the Commissioner of Taxes but he is only attached to BI (EO). By being attached there he does not lose his power, authority and status. He remains and exercise all powers of Inspector of Taxes. Perusal of Rule 7 of the Assam General Tax Rules, 1993 will show4hat Inspector of Ta* is an authority/person ta carry out the purposes of the Assam General Sales Tax Act, 1993. Section 3 (6) of the Act also gives the power to persons appointed under section 3 (1) of the Act. The meaning of word/term delegation is conferring on an authority to do things which otherwise that person would have to do himself. So. issue of notice and recording of reasons by the Inspector of Taxes cannot be deemed to be bad. The two decisions (supra) relied on does not help the petitioner, as the factual matrix and the provisions of statute are different. 14. Regarding Bureau of Investigation, section 45 of the Act is a complete answer. This authority is for the purpose of collection of intelligence, enquiry and investigation in connection with evasion of taxes. 15. Accordingly, there is no merit in this writ application and the same is dismissed. Stay order, if any, passed earlier shall stand vacated.