Shri Biswa Bikash Sengupta Vs. Commercial Tax Officer, Salt Lake - Court Judgment

Excerpt:
1. in this application under section 8 of the west bengal taxation tribunal act, 1987, applicant has prayed for an order quashing the seizure of books of accounts and documents made on february 21, 1997 from the business place of applicant and also for an order directing the respondents to refund the amount of rs. 50,000 paid by applicant on february 24, 1997.2. the applicant's case is that he carries on the business of manufacturing industrial rubber goods under the trade name and style of m/s. n.b.s. rubber industries. his two factories in calcutta are situated at 104, s.k. deb road and 202, jessore road. the applicant is duly registered as a dealer under the bengal finance (sales tax) act, 1941 (in short, "the 1941 act") and the west bengal sales tax act, 1954 (in short, "the 1954 act"). the assessments of the applicant were completed under the 1941 act and 1954 act up to the period march 31, 1994. returns for the period up to december 31, 1996 were submitted and the next return was scheduled to be due on april 30, 1997. applicant, however, paid the taxes up to the period january, 1997 in terms of the provisions of the relevant act.3. on february 21, 1997, respondent no. 1, commercial tax officer, salt lake charge, visited the business place of applicant at 104, s.k. deb road along with some inspectors of the said charge at 11.30 a.m. they took out the files, books of accounts and documents from the racks and almirahs of applicant without disclosing their identity. after this, they obtained some pieces of plain paper from the applicant, wrote various things on these papers and asked the applicant to sign on the said papers in the manner as was directed by them. they took away the books of accounts and documents as were available at the said business place. they also took away certain other papers which were not related to the business of purchase and sale of the applicant. they did not hand over any receipt to the applicant for taking away the said books of accounts and documents from the custody of the applicant, although they were requested to grant such a receipt. before leaving the business place, they directed the applicant to deposit a sum of rs. 50,000 by february 24, 1997 and stated that if such deposit was made the books of accounts and documents would be released immediately. they also threatened the applicant that unless the said amount of tax of rs. 50,000 was paid by february 24, 1997, coercive steps would be taken against the applicant who would be put to severe harassment.4. on february 24, 1997, the applicant paid the sum of rs. 50,000 as advance tax but in spite of such deposit, the books of accounts and documents taken away from him on february 21, 1997 were not released.it is the case of the applicant that the officers had no reason to suspect that he had attempted to evade payment of tax and hence the seizure was illegal. hence, he has approached this tribunal for redressal.5. the case of the respondents, as available from their affidavit-in-opposition, is that acting upon prior secret information that the applicant was trying to evade payment of tax under the west bengal sales tax act, 1994 (in short, "the 1994 act"), a team of officials of salt lake charge comprising two commercial tax officers and five inspectors led by shri s. mukherjee, commercial tax officer paid a surprise visit to the applicant's place of business at 104, s..k. deb road, calcutta-700 048 on february 21, 1997 to cause an enquiry regarding the tax status of the applicant. they met there one shri b.b. sengupta, who introduced himself as the proprietor of m/s.n.b.s. rubber industries. shri s. mukherjee requested him to produce the books of accounts relating to his business activities for examination. shri sengupta complied with the request and produced some exercise books in respect of movement of goods. on test examination of the books and the sales tax account registers no. 3 and 10 of 1996-1997 in respect of april and may, 1996, a difference of rs. 8,57,457.65 was detected in respect of the month of april, 1996. the amount recorded in the exercise books was rs. 13,55,859.57 whereas in the sales tax register the sum was found to be recorded rs. 4,98,402.32. similarly, in may, 1996, the amount shown in the sales tax account register was rs. 3,70,186.68 while in the exercise book the sum was recorded as rs. 12,28,095.26 and thus a difference of rs. 8,57,908.58 was detected.shri sengupta, on being requested, failed to reconcile the difference as noted above and on his failure a bona fide suspicion was formed that the applicant was trying to evade payment of taxes under the 1994 act.thereafter, the books of accounts were seized as per provisions of law after recording the reasons therefor prior to the seizure and thereafter proper seizure receipt had been handed over to the applicant. it is denied that any assurance that books of accounts and documents would be released on making a payment of rs. 50,000 was given to the applicant. the applicant voluntarily deposited rs. 50,000 towards his admitted tax liability involved in the seized books of accounts. the conditions precedent to exercise jurisdiction under section 66 of the 1994 act were duly fulfilled and hence the seizure was perfectly valid, 6. in their affidavit-in-reply, the applicants have submitted that the material on record shows that there was total non-application of mind on the part of the respondents in examining the books of accounts and seizing the same. the respondent no. 1 without looking into the books of accounts properly has made some vague allegations against the applicant regarding the sales recorded in the books of accounts. the applicant, it is submitted, correctly recorded the total sales in the books of accounts but the respondents did not care to look into the same properly. their examination has been a negligent one conducted without proper application of mind. the petitioner has got two works, namely, works nos. 1 and 2 and separate sale figures are maintained for each works. the respondents have only taken into consideration the sales recorded in respect of works no. 2 but did not take into consideration the sales recorded in respect of works no. 1, although the relevant records in respect of recording of sales of works no. 1 also was produced before the seizing authority at the time of seizure.if the total sales effected and recorded in both works no. 1 and works no. 2 had been taken into consideration, the respondents could not have come to the conclusion that there was any discrepancy in the books of accounts. hence it cannot be said that there was sufficient material before the seizing authority to seize the books of accounts and records of the petitioner. the reasons recorded are based on irrelevant materials and are perverse and hence the tribunal can examine the perversity of the reasons recorded by the respondents.7. the applicant has submitted that there was no witness to the seizure and there is no satisfactory explanation as to why there was no witness. merely recording a statement "none agreed" is not sufficient to fulfil the statutory requirements. no reason was recorded prior to the seizure. the report in annexure "a" which the respondent no. 1 annexed with the affidavit-in-opposition was prepared after the seizure had already been made.8. in the course of his arguments, mr. a. chakraborty, learned advocate for the applicants submitted that the affidavit-in-opposition has been affirmed by shri nirmalya mukhopadhyay but shri mukhopadhyay was not a party during the search and seizure operation and hence he had no personal knowledge or personal information during the course of search and seizure and his affidavit cannot be considered to be of any value whatsoever. he also submitted that the provisions of rule 207 of the 1995 rules were not followed. the presence of witness was necessary because in this case respondents have denied that books of other firms have been seized.9. mr. sumit chakraborty, learned advocate for the applicants, also submitted that the non-application of mind on the part of the respondents would be clear from the fact that they examined only the sale figures shown in the sales tax account register of the works no. 2 and compared them with a red exercise book examined by them and came to the conclusion that the amount shown in the sales tax account register was less than the sales recorded in the exercise book. he submitted that this showed how carelessly the books were examined. mr.chakraborty submitted that the sales tax account register examined by them was referred only to the works no. 2 whereas the exercise book examined by them was maintained by the proprietor for personal control showing cost of goods only. hence there was no reason why these two documents should show identical figures. mr. chakraborty argued that, even at the time of inspection, returns for the past period had already been submitted by applicant and they were available with respondents. a mere glance through these returns would have shown that the amount of sales shown in the returns by applicant was far in excess of the amounts shown in the sales tax account register of works no. 2 which was examined by respondents and which formed the basis of their alleged suspicion. the bona fide of the applicant and the carelessness of respondents would be clear if the sale figures reported by the applicant in his earlier returns were examined and on such an examination, he submitted, it would be clear that there was no mala fide on the part of applicant and respondents' actions would be easily seen to be so careless that it could not be considered to be bona fide at all.10. the tribunal by its order dated august 5, 1997 directed the respondents to submit a report whether the figures of sales as shown in the returns are less than/equal to/more than the sale figures as shown in the sales tax account register referred to in the seizure list. from the statement furnished by respondents it appeared that for the quarter ending june 30, 1996, the sale figure as per the sales tax account register was rs. 10,31,497.80 while the sale figure as per returns submitted by applicant was rs. 40,87,594.92. similarly, for the quarter ending september 30, 1996, the respective figures are rs. 5,37,432.90 and rs. 45,96,713. for the quarter ending december 31, 1996, the respective figures were again rs. 4,17,412.19 and rs. 42,46,139.75.respondents accordingly reported that the figures of sales shown in the return for each of these quarters are no doubt higher than those shown in the seized sales tax account register. respondents in the course of their report further pointed out that the exercise book (item no. 2 of the seizure receipt) disclosed sale figures in addition to those shown in the sales tax account register and pointed out that if the sale figures of the seized sales tax account register and that of the seized exercise books are taken together then the sale figures shown in the return for the quarter ending june 30, 1996 appears to be less than that shown in the sales tax account register and exercise books. on the other hand, the sale figures shown in the returns for quarter ending september 30, 1996 and quarter ending december 31, 1996 are higher than those shown in the sales tax account register (seized) and exercise books (seized) if taken together.11. applicant, in reply, pointed out that the exercise book seized by respondents was maintained by him for recording the cost of materials for the purpose of controlling sales. in that exercise book he did not include the sales and excise duty and delivery charges in the bills. if the sales tax account register nos. 1 and 2 and the exercise book had been read as a whole by respondent no. 1, he could not have actually come to the conclusion that there was any discrepancy.12. on going through the records, the conclusion is inescapable that the examination of the books of accounts by respondents when they visited the place of business of applicant was careless and perfunctory. they examined some books and on such examination came to the conclusion that there was discrepancy between the figures recorded in an exercise book and a sales tax account register. on this basis they came to believe that the dealer is attempting to evade payment of sales tax. it is admitted that at the time when they had visited the place to examine the tax status of the applicant the returns filed by the applicant were already in their possession and it is only expected that before starting an enquiry they should have been aware of the tax status of the applicant as revealed in the returns already filed by him and available with the revenue. there was no reason in that case why they should have accepted the amounts shown in the sales tax account register as the total amount intended to be shown by applicant to the sales tax authorities. the dealer had already declared sale figures far in excess of the amounts recorded in the sales tax register seized by respondents. respondents sought to point out that the sum of the amounts shown in the seized exercise book and in the seized sales tax account register exceeded the return figure for the quarter ending june 30, 1996 but that report itself shows that even this sum was less than the sale figure shown in the returns for the quarter ending september 30, 1996 and quarter ending december 31, 1996. if they had taken the return figures already available with them into consideration, they could not have escaped the conclusion that their interpretation of the seized exercise book as one showing sales not reflected in the seized sales tax account register was based on wrong premises. as has been observed by them when comparing the figures with the sale figure shown in the returns, the sale figure shown in the returns are higher than the sum total of the amounts shown in the seized sales tax account register and the seized exercise book for the quarters ending september 30, 1996 and december 31, 1996. it would, therefore, be evident that the examination of accounts made by them was done in a negligent and careless manner. they did not have any idea of the sale figures reported by applicant in the returns already filed by him although the same were available with them. under the circumstances, this examination of books of accounts was in the nature of a roving and fishing enquiry in the course of which, due to their carelessness, they overlooked the existence of the sales tax account register for the works no. 1 and took the seized exercise book to be a record of sales not recorded in the seized sales tax account register although, on the basis of the returns available with them there was no reason for such assumption. under the circumstances, it has to be held that there was no bona fide reason for them to suspect, on the basis of their examination of the records, that the dealer was attempting to evade payment of tax and hence the seizure must be held to be invalid.13. applicant has alleged that a sum of rs. 50,000 was deposited by him under instructions of respondents. respondents have denied having issued any such instruction and have contended that the amount was deposited by applicant as advance tax voluntarily. since there is no conclusive evidence in favour of the submission of either parties it is not possible for us to hold that the sum of rs. 50,000 was paid by applicant as a result of coercion.14. in the result, the application is allowed in part. the seizure of the books of accounts and other documents on february 21, 1997 made by the commercial tax officer, salt lake charge, from the place of business of applicant at 104, s.k. deb road, calcutta-700 048 is quashed. the seized books of accounts and documents are to be returned to applicant within a period of 48 hours from date. the sum of rs. 50,000 deposited by the applicant shall be adjusted by the applicant towards future payments of tax.

Judgment:
1. In this application under Section 8 of the West Bengal Taxation Tribunal Act, 1987, applicant has prayed for an order quashing the seizure of books of accounts and documents made on February 21, 1997 from the business place of applicant and also for an order directing the respondents to refund the amount of Rs. 50,000 paid by applicant on February 24, 1997.

2. The applicant's case is that he carries on the business of manufacturing industrial rubber goods under the trade name and style of M/s. N.B.S. Rubber Industries. His two factories in Calcutta are situated at 104, S.K. Deb Road and 202, Jessore Road. The applicant is duly registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act") and the West Bengal Sales Tax Act, 1954 (in short, "the 1954 Act"). The assessments of the applicant were completed under the 1941 Act and 1954 Act up to the period March 31, 1994. Returns for the period up to December 31, 1996 were submitted and the next return was scheduled to be due on April 30, 1997. Applicant, however, paid the taxes up to the period January, 1997 in terms of the provisions of the relevant Act.

3. On February 21, 1997, respondent No. 1, Commercial Tax Officer, Salt Lake Charge, visited the business place of applicant at 104, S.K. Deb Road along with some Inspectors of the said Charge at 11.30 A.M. They took out the files, books of accounts and documents from the racks and almirahs of applicant without disclosing their identity. After this, they obtained some pieces of plain paper from the applicant, wrote various things on these papers and asked the applicant to sign on the said papers in the manner as was directed by them. They took away the books of accounts and documents as were available at the said business place. They also took away certain other papers which were not related to the business of purchase and sale of the applicant. They did not hand over any receipt to the applicant for taking away the said books of accounts and documents from the custody of the applicant, although they were requested to grant such a receipt. Before leaving the business place, they directed the applicant to deposit a sum of Rs. 50,000 by February 24, 1997 and stated that if such deposit was made the books of accounts and documents would be released immediately. They also threatened the applicant that unless the said amount of tax of Rs. 50,000 was paid by February 24, 1997, coercive steps would be taken against the applicant who would be put to severe harassment.

4. On February 24, 1997, the applicant paid the sum of Rs. 50,000 as advance tax but in spite of such deposit, the books of accounts and documents taken away from him on February 21, 1997 were not released.

It is the case of the applicant that the officers had no reason to suspect that he had attempted to evade payment of tax and hence the seizure was illegal. Hence, he has approached this Tribunal for redressal.

5. The case of the respondents, as available from their affidavit-in-opposition, is that acting upon prior secret information that the applicant was trying to evade payment of tax under the West Bengal Sales Tax Act, 1994 (in short, "the 1994 Act"), a team of officials of Salt Lake Charge comprising two Commercial Tax Officers and five Inspectors led by Shri S. Mukherjee, Commercial Tax Officer paid a surprise visit to the applicant's place of business at 104, S..K. Deb Road, Calcutta-700 048 on February 21, 1997 to cause an enquiry regarding the tax status of the applicant. They met there one Shri B.B. Sengupta, who introduced himself as the proprietor of M/s.

N.B.S. Rubber Industries. Shri S. Mukherjee requested him to produce the books of accounts relating to his business activities for examination. Shri Sengupta complied with the request and produced some exercise books in respect of movement of goods. On test examination of the books and the sales tax account registers No. 3 and 10 of 1996-1997 in respect of April and May, 1996, a difference of Rs. 8,57,457.65 was detected in respect of the month of April, 1996. The amount recorded in the exercise books was Rs. 13,55,859.57 whereas in the sales tax register the sum was found to be recorded Rs. 4,98,402.32. Similarly, in May, 1996, the amount shown in the sales tax account register was Rs. 3,70,186.68 while in the exercise book the sum was recorded as Rs. 12,28,095.26 and thus a difference of Rs. 8,57,908.58 was detected.

Shri Sengupta, on being requested, failed to reconcile the difference as noted above and on his failure a bona fide suspicion was formed that the applicant was trying to evade payment of taxes under the 1994 Act.

Thereafter, the books of accounts were seized as per provisions of law after recording the reasons therefor prior to the seizure and thereafter proper seizure receipt had been handed over to the applicant. It is denied that any assurance that books of accounts and documents would be released on making a payment of Rs. 50,000 was given to the applicant. The applicant voluntarily deposited Rs. 50,000 towards his admitted tax liability involved in the seized books of accounts. The conditions precedent to exercise jurisdiction under Section 66 of the 1994 Act were duly fulfilled and hence the seizure was perfectly valid, 6. In their affidavit-in-reply, the applicants have submitted that the material on record shows that there was total non-application of mind on the part of the respondents in examining the books of accounts and seizing the same. The respondent No. 1 without looking into the books of accounts properly has made some vague allegations against the applicant regarding the sales recorded in the books of accounts. The applicant, it is submitted, correctly recorded the total sales in the books of accounts but the respondents did not care to look into the same properly. Their examination has been a negligent one conducted without proper application of mind. The petitioner has got two works, namely, Works Nos. 1 and 2 and separate sale figures are maintained for each works. The respondents have only taken into consideration the sales recorded in respect of Works No. 2 but did not take into consideration the sales recorded in respect of Works No. 1, although the relevant records in respect of recording of sales of Works No. 1 also was produced before the seizing authority at the time of seizure.

If the total sales effected and recorded in both Works No. 1 and Works No. 2 had been taken into consideration, the respondents could not have come to the conclusion that there was any discrepancy in the books of accounts. Hence it cannot be said that there was sufficient material before the seizing authority to seize the books of accounts and records of the petitioner. The reasons recorded are based on irrelevant materials and are perverse and hence the Tribunal can examine the perversity of the reasons recorded by the respondents.

7. The applicant has submitted that there was no witness to the seizure and there is no satisfactory explanation as to why there was no witness. Merely recording a statement "none agreed" is not sufficient to fulfil the statutory requirements. No reason was recorded prior to the seizure. The report in annexure "A" which the respondent No. 1 annexed with the affidavit-in-opposition was prepared after the seizure had already been made.

8. In the course of his arguments, Mr. A. Chakraborty, learned advocate for the applicants submitted that the affidavit-in-opposition has been affirmed by Shri Nirmalya Mukhopadhyay but Shri Mukhopadhyay was not a party during the search and seizure operation and hence he had no personal knowledge or personal information during the course of search and seizure and his affidavit cannot be considered to be of any value whatsoever. He also submitted that the provisions of Rule 207 of the 1995 Rules were not followed. The presence of witness was necessary because in this case respondents have denied that books of other firms have been seized.

9. Mr. Sumit Chakraborty, learned advocate for the applicants, also submitted that the non-application of mind on the part of the respondents would be clear from the fact that they examined only the sale figures shown in the sales tax account register of the Works No. 2 and compared them with a red exercise book examined by them and came to the conclusion that the amount shown in the sales tax account register was less than the sales recorded in the exercise book. He submitted that this showed how carelessly the books were examined. Mr.

Chakraborty submitted that the sales tax account register examined by them was referred only to the Works No. 2 whereas the exercise book examined by them was maintained by the proprietor for personal control showing cost of goods only. Hence there was no reason why these two documents should show identical figures. Mr. Chakraborty argued that, even at the time of inspection, returns for the past period had already been submitted by applicant and they were available with respondents. A mere glance through these returns would have shown that the amount of sales shown in the returns by applicant was far in excess of the amounts shown in the sales tax account register of Works No. 2 which was examined by respondents and which formed the basis of their alleged suspicion. The bona fide of the applicant and the carelessness of respondents would be clear if the sale figures reported by the applicant in his earlier returns were examined and on such an examination, he submitted, it would be clear that there was no mala fide on the part of applicant and respondents' actions would be easily seen to be so careless that it could not be considered to be bona fide at all.

10. The Tribunal by its order dated August 5, 1997 directed the respondents to submit a report whether the figures of sales as shown in the returns are less than/equal to/more than the sale figures as shown in the sales tax account register referred to in the seizure list. From the statement furnished by respondents it appeared that for the quarter ending June 30, 1996, the sale figure as per the sales tax account register was Rs. 10,31,497.80 while the sale figure as per returns submitted by applicant was Rs. 40,87,594.92. Similarly, for the quarter ending September 30, 1996, the respective figures are Rs. 5,37,432.90 and Rs. 45,96,713. For the quarter ending December 31, 1996, the respective figures were again Rs. 4,17,412.19 and Rs. 42,46,139.75.

Respondents accordingly reported that the figures of sales shown in the return for each of these quarters are no doubt higher than those shown in the seized sales tax account register. Respondents in the course of their report further pointed out that the exercise book (item No. 2 of the seizure receipt) disclosed sale figures in addition to those shown in the sales tax account register and pointed out that if the sale figures of the seized sales tax account register and that of the seized exercise books are taken together then the sale figures shown in the return for the quarter ending June 30, 1996 appears to be less than that shown in the sales tax account register and exercise books. On the other hand, the sale figures shown in the returns for quarter ending September 30, 1996 and quarter ending December 31, 1996 are higher than those shown in the sales tax account register (seized) and exercise books (seized) if taken together.

11. Applicant, in reply, pointed out that the exercise book seized by respondents was maintained by him for recording the cost of materials for the purpose of controlling sales. In that exercise book he did not include the sales and excise duty and delivery charges in the bills. If the sales tax account register Nos. 1 and 2 and the exercise book had been read as a whole by respondent No. 1, he could not have actually come to the conclusion that there was any discrepancy.

12. On going through the records, the conclusion is inescapable that the examination of the books of accounts by respondents when they visited the place of business of applicant was careless and perfunctory. They examined some books and on such examination came to the conclusion that there was discrepancy between the figures recorded in an exercise book and a sales tax account register. On this basis they came to believe that the dealer is attempting to evade payment of sales tax. It is admitted that at the time when they had visited the place to examine the tax status of the applicant the returns filed by the applicant were already in their possession and it is only expected that before starting an enquiry they should have been aware of the tax status of the applicant as revealed in the returns already filed by him and available with the Revenue. There was no reason in that case why they should have accepted the amounts shown in the sales tax account register as the total amount intended to be shown by applicant to the sales tax authorities. The dealer had already declared sale figures far in excess of the amounts recorded in the sales tax register seized by respondents. Respondents sought to point out that the sum of the amounts shown in the seized exercise book and in the seized sales tax account register exceeded the return figure for the quarter ending June 30, 1996 but that report itself shows that even this sum was less than the sale figure shown in the returns for the quarter ending September 30, 1996 and quarter ending December 31, 1996. If they had taken the return figures already available with them into consideration, they could not have escaped the conclusion that their interpretation of the seized exercise book as one showing sales not reflected in the seized sales tax account register was based on wrong premises. As has been observed by them when comparing the figures with the sale figure shown in the returns, the sale figure shown in the returns are higher than the sum total of the amounts shown in the seized sales tax account register and the seized exercise book for the quarters ending September 30, 1996 and December 31, 1996. It would, therefore, be evident that the examination of accounts made by them was done in a negligent and careless manner. They did not have any idea of the sale figures reported by applicant in the returns already filed by him although the same were available with them. Under the circumstances, this examination of books of accounts was in the nature of a roving and fishing enquiry in the course of which, due to their carelessness, they overlooked the existence of the sales tax account register for the Works No. 1 and took the seized exercise book to be a record of sales not recorded in the seized sales tax account register although, on the basis of the returns available with them there was no reason for such assumption. Under the circumstances, it has to be held that there was no bona fide reason for them to suspect, on the basis of their examination of the records, that the dealer was attempting to evade payment of tax and hence the seizure must be held to be invalid.

13. Applicant has alleged that a sum of Rs. 50,000 was deposited by him under instructions of respondents. Respondents have denied having issued any such instruction and have contended that the amount was deposited by applicant as advance tax voluntarily. Since there is no conclusive evidence in favour of the submission of either parties it is not possible for us to hold that the sum of Rs. 50,000 was paid by applicant as a result of coercion.

14. In the result, the application is allowed in part. The seizure of the books of accounts and other documents on February 21, 1997 made by the Commercial Tax Officer, Salt Lake Charge, from the place of business of applicant at 104, S.K. Deb Road, Calcutta-700 048 is quashed. The seized books of accounts and documents are to be returned to applicant within a period of 48 hours from date. The sum of Rs. 50,000 deposited by the applicant shall be adjusted by the applicant towards future payments of tax.