Cross-Examination should be Allowed to the Assessee when the Assessment is Solely based on the Evidence from Third Party: Madras HC [Read Judgment]

Madras High Court

Recently, the Single bench of the Madras High Court held that the assessee should be granted with an opportunity to cross-examine the third party when the assessment under the provisions of Tamil Nadu General Sales Tax Act, 1959 is completed solely on the basis of the statements of the latter. The Court emphasized that this is essential since such evidence relied upon by the Department would affect the interest of the petitioner adversely.

The petitioner, in the instant case, is a registered dealer in iron and steel products on the file of the respondent under the provisions of the Tamil Nadu General Sales Tax Act. While completing assessment, the assessing officer disallowed the entire claim of second sale exemption on the basis of certain purchases effected from four registered dealers. The petitioner challenged the above order before the High Court contending that the officer failed to furnish the copies of the statement records obtained from the third parties based on which the assessment was completed. Further the respondents did not provided an opportunity of cross examination with reference to the accounts of the registered dealers before disallowing the claim of exemption.

The Court noted that in Kalra Glue Factory case, the Apex Court, while allowing the Special Leave Petition, has set aside the order of the High Court as well as the Sales Tax Tribunal and remitted the matter back to the Tribunal with liberty to the assessee to produce documents subject to proof of its genuineness and the Tribunal was directed to redo the matter.

Referring to the above decision, the single bench directed the assessing officer to re-consider the matter and held that “Therefore, when statement recorded from a third party was the sole basis of revision of assessment, such material is an adverse material to the interest of the dealer. In any event, it cannot be stated that the respondent cannot rely upon those statements, but could have done so only after furnishing copies thereof to the petitioner and when the petitioner disputed the correctness of those statements, the efficacy and admissibility of those statements have to be tested, for which, an opportunity of cross examination ought to have been afforded.”

Read the full text of the Judgment below.

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