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Judgment
Ramaprasada Rao, J.—The petitioner is a dealer of rice in Andhra Pradesh. It is said that he used to bring rice from Andhra Pradesh and
sell the stock in Madras through various commission agents in Madras. The department is said to have received information that between 4th
October, 1963, and 16th October, 1963, the petitioner purchased large stocks of rice, to wit, 2863 bags of rice from one Messrs Moorthy &
Co., 15, Chinnathambi Mudali Street, Madras, and effected sale of such stocks so purchased by him. After securing this information, investigation
was undertaken by the Special Staff of the Commercial Taxes Department, as the petitioner did not submit his returns of turnover in form A3, as
required under the Act and the Rules made thereunder. The investigation disclosed that there were certain money dealings between the petitioner
on the one hand and Messrs Moorthy & Co., on the other, and in order to realise such monies advanced by the petitioner to Messrs Moorthy &
Co., it is said, he purchased the entire stock of rice held by Messrs Moorthy & Co. and sold them in Madras. After having had such information,
the petitioner was asked to show cause as to why the turnover covered by such purchase and sales during the year 1963-64 be not brought to tax
and a penalty levied thereon inasmuch as there was no voluntary return of such dealings in a manner known to law. The petitioner explained that
there were only money dealings between him and Messrs Moorthy & Co., and that between 4th October, 1963, and 16th October, 1963, he
never made any purchases of rice from the company and sold them in Madras. But the assessing officer, relying upon the statement made to him by
the clerk of Messrs Moorthy & Co. and the State Co-operative Supply and Marketing Society Ltd. with whom the goods were warehoused, as
also the testimony of the watchman of the godown and warehouse that the stock was removed by the petitioner from the godown and warehouse
after engaging lorries for the purpose, came to the conclusion that the stock of rice should have been purchased by the petitioner from Messrs
Moorthy & Co. The assessing officer also relied on the fact that the petitioner was an assessee in Andhra Pradesh and that was an indication to
show that he was a dealer in rice.
The records produced on issue of the rule nisi disclose that the materials on which the assessing authority mainly relied upon to show that the
petitioner was the purchaser and Messrs Moorthy & Co. was the seller of the stock of rice, were carbon copies of unsigned credit bills produced
by Messrs Moorthy & Co., to show that there was a sale of such bags of rice to the petitioner. On a perusal of these bills, one is not sure whether
those bills ever existed in the firm of Messrs Moorthy & Co., and the non-disclosure or production of a carbon copy of such credit bills in the
usual form which are usually kept in a businessman''s house when such bills are issued to evidence the sale, is a circumstance which has not been
explained in full, nor have they been dealt with by the assessing officer when he passed the impugned order. The records equally do not disclose
that this material which was secured by the Special Staff was ever put to the petitioner ; nor were the witnesses whose testimony was relied upon
by the assessing officer when he decided on the subject, subjected to cross-examination by the petitioner as the aggrieved person in the
proceedings. The case of the petitioner, as disclosed in the affidavit in support of this application for the issue of a rule, is that Messrs Moorthy &
Co. was his debtor, as is seen from certain documents filed and marked in contemporaneous civil proceedings, which were by then pending as
between the petitioner and Messrs Moorthy & Co. He would emphatically deny that he ever purchased the magnitudinous stock of rice, as
suggested by Messrs Moorthy & Co. behind his back, and that the credit bills are not genuine. It is also made out in the affidavit that the learned
Counsel appearing for the petitioner requested the assessing officer to give him an opportunity to file other relevant documents, which were part
and parcel of the records in the civil proceedings in both the High Court and the City Civil Court, Madras, and that no such opportunity, even
though requested, was afforded to him before the challenged order was passed. The petitioner, therefore, complains that there has been violation
of the principles of natural justice, in that the material on which the assessing officer acted resulting in the impugned order was not squarely placed
before the petitioner, which would otherwise have enabled him to state his case and countermand such material by records in his possession and
also in the custody of courts like the High Court, Madras, and the City Civil Court, Madras. In these circumstances, the petitioner complains that
the order of assessment having been made without giving him a full opportunity to explain his case, suffers from an error apparent and is violative of
the principles of natural justice and has to be struck down. The learned Government Pleader would, however, state that the material on record is
sufficient for an instructed person to pass the order impugned and no request in writing having been made at any time by the petitioner to produce
material to counteract the material on record, the present suggestion is an afterthought. He also mentions that an appeal has already been filed as
against the impugned order and that the said appeal is pending disposal before the appellate authority.
On a fair appraisal of the merits as above, I am unable to agree with the learned Government Pleader that the case has been dealt with by the
assessing officer squarely, justly and reasonably. There has not been a square dealing of the merits, because the assessing officer examined the
representative of Messrs Moorthy & Co. behind the back of the petitioner, and after having done so, did not apprise the petitioner of such material
and kept it for himself to be used as against the petitioner. It is not a just order because no one should be condemned without being properly
heard. This principle is a well accepted one ; particularly in a case where there is no clinching evidence, but only circumstantial, to conclude that the
jural relationship of vendor and purchaser has been established, the onus on the department becomes heavier, for it should scrutinise the material
on record with lynx eye, and afford at every material point of time an opportunity to the affected party to countermand the same or let in evidence
to outweigh the weight of such material.
The credit bills typed on ordinary paper, and not even signed by any person authorised on behalf of Messrs Moorthy & Co. are accepted as
genuine and acted upon, and the tax and the penalty are sought to be imposed on the petitioner, on the strength of the said material. If the taxing
authority intends to bring to tax the turnover of a dealer, which, according to him, has escaped the assessment, by reason of a deliberate attempt
on the part of the dealer to avoid the net of taxation, then it is but fundamental that the person so called upon should be given a just and a fair trial,
and indeed a fair opportunity, to explain himself with all the material on which he could support his case. To establish a jural relationship of seller
and purchaser, the present material on which reliance is placed unilaterally by the ''department may not be sufficient. Such material has to be
decided in the presence of the person, who is accused of having deliberately avoided the region of taxation. No such attempt has been made in the
instant case. Again, the assessment is not proper, because the elements of sale, which have to be established as being present so as to compel the
assessing authorities acting under the Tamil Nadu General Sales Tax Act to assess the dealer have not been established in a manner known to law.
In a sale, there are three elements, viz., the seller, the buyer, the goods and the consideration for the sale or purchase of such goods. Unless a
nexus is established between two such persons and convincing proof is available to show that consideration did pass as a result of such a sale, it
would be difficult to assume that a sale of goods by one person to the other has resulted in the bargain. It is in this behalf, the impugned order is not
proper.
In a case where the matter was pending with the Sales Tax Appellate Tribunal and where it was found that the principles of natural justice, in
particular, the principle of audi alteram partem was not observed, a Division Bench of this Court in Murali Trading Co. v. Joint Commercial Tax
Officer (1967) 1 M.L.J. 258 set aside the original order of assessment and directed the concerned assessee to withdraw the appeal pending
before the Sales Tax Appellate Tribunal. Following this decision, I direct the assessee to withdraw the appeal before the appellate authority and
contemporaneously set aside the order of assessment which is impugned herein, as a full and fair trial has not been given to the petitioner when the
order of assessment has been made. It is, however, open to the assessing authorities to start fresh proceedings for assessing the petitioner, but they
shall do so after giving the petitioner every opportunity of stating his case and filing his documents. The writ petition is allowed. There will be no
order as to costs.