Introduction
Under fiscal
statutes, there are provisions for investigation. Such provisions were there
under Bombay Sales Tax Act, 1959 also.
Normally, when investigation action takes place, a statement (also referred to as deposition) is recorded during the course of investigation. The intention of such deposition is to get the facts recorded which can be used further for assessments and for raising liability, if applicable. However, practical experience shows that under heavy pressure and threats, etc., the contents get recorded (admitted) in favour of revenue. In other words, the concerned dealer/party is forcibly made to admit tax evasion and thus commitment is taken for discharging the liability.
The issue arises whether such statement is binding in the course of assessment.
There are various instances where the parties have retracted the statements and judiciary has approved such retraction. Normally, such retraction is required to be done immediately and as early as possible after giving the statement. It should also be supported by reasonable ground for retraction. However, in spite of above general position, it can still be said that the statement given during investigation is not binding, if by circumstances and facts, it can be shown that the statement is factually incorrect. And under such circumstances, even late retraction or no retraction is also not an issue. In other words, inspite of admission in statement or deposition, if the factual position is shown to be different with satisfactory supporting, then the judiciary will certainly take into account such a changed position.
Judgement in case of Trilok Enterprises (VAT SA No.136 to 138 of 2011 dt.19.7.2017).
Recently, Hon. M.S.T. Tribunal had an occasion to deal with such an issue in above judgement. The facts as recorded by the Tribunal are as under:
“2. The appellant, a person not registered under Bombay Sales Tax Act, 1959 was visited by officers of Enforcement Branch, Mumbai on 21.01.1997. During the visit, no books of accounts found, however, details of Bank transactions were found which show that during 1994-95, 1995-96 and 1996-97, large amounts were deposited and withdrawn from the bank account. A statement of the appellant was obtained by Enforcement Officer. In this statement the appellant, viz. Bharat Deepchand Vora, proprietor of M/s.Trilok Enterprises, appears to have admitted that he has done trading with M/s. Gurjar Steel, so also business on commission basis in Iron and Steel during that period. The rate of commission is stated as 10 paise. The enforcement branch, treating the appellant as unregistered dealer, issued him notices for assessment for those three years period. The appellant is assessed on the basis of a statement of sales, furnished by him. The appellant appears to have filed return and deposited some tax with the same. The assessment orders were challenged by the appellant before the 1st Appellate authority. Main contention of the appellant was that, he has not done any business of sales and purchases, during those periods. The First appellate authority, vide its order dated 17.6.2000, had been pleased to set aside the assessment orders and remanded the matters to assessing authority, with a direction to assess the appellant afresh. On remand, it is stated, that the assessing officer gave opportunity of hearing to the appellant, and again he has passed identical assessment orders, as per earlier orders passed by him. The appellant appears to have maintained his stand in reassessment after remand that he has not done any business of buying and selling during relevant period. The assessing officer however, has assessed the appellant on the basis of record available before him and he has levied tax, interest and penalty. Against that order, passed after remand, the appellant had filed first appeal, which was dismissed on merit, by the first appellate authority, by the order impugned by the appellant in the instant appeal.”
On merits, on behalf of appellant, it was argued that the party has not done any business of sale/purchase but only financial transactions. It was argued that no sales or purchases have been established. It was further argued that mere statement before the officer of Enforcement cannot be allowed to form a basis for determining sales/purchase transaction particularly in absence of other cogent, reliable and trustworthy evidence. It was further brought to notice of Tribunal that the statement was obtained under threat. The returns filing and payments were also under threat of prosecution.
On behalf of the Revenue, the star argument was that since the appellant himself has admitted sale/purchase in the deposition and by filing returns and payment, there was no need for revenue to further bring any supporting material.
Hon. Tribunal examined the factual position vis-à-vis legal position. In para 15 & 16, Hon. Tribunal made remarks about the effect of deposition. The relevant paras are reproduced for ready reference.
“15. Now if we carefully look at this statement and the statement made by the appellant before the visiting officer at the time of visit admittedly books of accounts were not found. Firstly it is unlikely that a dealer having such a volume of trading would not maintain any books of accounts. Further he certainly does not know the changes in the rate of tax S. S. Patta from 1% to 4% and it is unlikely that he would calculate the interest exactly up to the date, and would show that the same is payable. Thus, though it is signed by the appellant, in all probability, it is a statement prepared by somebody else and not by the appellant and signature of the appellant appears to have been obtained on the same.
16. If we look at the bank statement available on record, it will be seen that firstly there has been no attempt to match the same with the list of bills mentioned above. Secondly, it is seen, that the appellant has deposited amounts in cash and has issued cheques to M/s.Gurjar Steel. In this statement before investigating officer, he had stated that he was dealing with Gurjar Steel. If cheques are issued to Gurjar Steel, at the most there could have been purchases from Gurjar Steel, who was a registered dealer. Admittedly bank account of Gurjar Steel was provisionally attached by the department for recovery of the dues, but subsequently the attachment was withdrawn. If the appellant had made payment by cheques to Gurjar Steel, who is registered dealer, there was no reason for not showing these transactions as purchases as that would have been instances of resale in the hands of appellant and would not have attracted any liability for payment of tax. It does not appear from the record that department has made any attempt to confirm the genuineness of the transactions from M/s. Gurjar Steel or from any other party, despite the fact that matter was remanded back by the first appellate authority with direction to bring additional material on record to establish the factum of sales. The assessing officer, without considering these directions appears to have passed same order on remand.”
In para 19, the Hon. Tribunal has made reference to judgement of the Hon. Supreme Court about relevance of statement, in the following words.
“19. In CBI vs. V. C. Shukla and others (1988) 3 SCC 410, Hon’ble S. C. while speaking about relevancy of evidence u/s.34 of Evidence Act has observed, that first part of section 34 speaks about relevance of entry in the books of account as evidence, and the second part speaks in a negative way, of its evidentiary value for charging a person with a liability. To make an entry relevant thereunder it must be shown that it has been made in a book, that book is book of account and that books of account has been regularly kept in the course of business. Even if, the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still the statement made therein shall not alone be sufficient to accept it as substantive evidence to charge any person with liability of paying tax.”
Observing that there is no independent evidence gathered by the revenue to establish sale/purchase transactions, the Tribunal held that the levy of sales tax on alleged sales in instant appeal is unsustainable. Accordingly, the Tribunal allowed the appeals by quashing assessment orders.
CONCLUSION
The above legal position laid down by the Tribunal will also be relevant under other fiscal laws. The sum and substance is that the tax can be levied only if there are established taxable transactions and not merely on admission. Therefore, in due cases, the parties are entitled to demonstrate their non-liability inspite of any wrong admission made in assessment or in investigation proceeding. Ultimately, the correct legal position will prevail. _
