AL-HILAL MOTORS STORES VS COLLECTOR, SALES TAX AND CENTRAL EXCISE (EAST), 2004 PTD-KARACHI-HIGH-COURT-SINDH 868 (2003)

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.3, 2(41), 2(35) & 2(33)‑‑‑Scope of tax‑‑‑"Taxable supply"‑‑ "Taxable activity"‑‑‑"Supply"‑‑‑Definition‑‑‑Sales tax shall be charged, levied and paid on taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him on the goods imported in Pakistan‑‑Sales tax liability could not be assessed/imposed solely on the basis of Bank statement of the registered person without any evidence of corresponding taxable supply made in the course of taxable activity‑‑‑Cash‑credits appearing in the account books for which no satisfactory explanation was furnished could not be treated as the amount received on account of taxable supplies or in furtherance of taxable activity‑‑‑Any Bank account of a registered person without any nexus to taxable supplies, could not be treated as amount received from such "supplies" and liable to sales tax‑‑‑Where the allegation of "tax‑fraud" was made, the onus of proof was on the Department‑‑ Principles.

In terms of the provisions contained in section 3 of the Sales Tax Act, 1990, which is the charging section, the sales tax shall be charged, levied and paid on taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him and on the goods imported in Pakistan.

While defining the terms "supply" and "taxable activity" the Legislature has enacted deeming provision also and by fiction of law has included private business or non‑businessthe course of business and an activity without pecuniary profit, as well as supply without any consideration is taxable activity. But, for the definitions contained in the Sales Tax Act, 1990, the above acts could not be treated as "supply" or "taxable activity". The definition of term "supply" has excluded the doctrine of mutuality. Thus, wherever the Legislature has deemed fit, resort has been made to the deeming provisions by fiction of law. However, there is no provision in the Sales Tax Act, 1990 analogous to the provisions contained in the Income Tax Law, whereby the discovery of any cash‑credits in the accounts of an assessee can be deemed to be supply, taxable supply or the amount received on account of taxable activity in furtherance of any business. An assessee can be subjected to tax under a provision of law, which is unambiguous and, clear. There is no room for any intendment and there is no presumption as to tax. In the absence of any deeming provision the Revenue is required to establish that a transaction falls within the parameters of taxable supplies or in furtherance of any taxable activity, failing which the sales‑tax imposed on the basis of some assumption or presumption not warranted in law, shall always be struck down. In the present cases it is apparent that except discovering certain cash‑credits entries in the books of the appellants, the Revenue Officers have not been able to produce any material to show that the said amounts are in any way linked with the taxable supplies or with any taxable activities or present an amount on account of any business activity. A perusal of the show‑cause notice as well as material produced further shows that no case of any tax fraud has been made out whereby the burden of proof can be shifted to the appellants The two forums below have misdirected themselves in placing the burden of proof on the appellants in terms of the provisions contained in section 2(37) defining the expression "tax‑fraud" without realising that in order to attract the above provision, the initial burden lies on the Department to show that an assessee, knowingly, dishonestly or fraudulently and without any lawful excuse has done any act or has caused to be done or has omitted to take any action or has caused the omission to take any action in contravention of duties or obligations imposed under the Sales Tax Act or rules or instructions issued thereunder with the intention of, understating the tax liability or underpaying the tax liability. Once this burden is discharged by the Department, only then, the burden is shifted to the assessee to establish that the act done was without any knowledge on his part or without any intention of dishonesty or fraud and was done with any lawful excuse.

Two forums below had misdirected in law in holding that the cash‑credits appearing in the account books for which no satisfactory explanation was furnished could be treated as the amount received on account of taxable supplies or in furtherance of taxable activity. The orders of the two forums below were set aside in circumstances.

Khalid Jawed Khan for Appellants.

Raja M. Iqbal for Respondent No. 1 (in both the Cases).

Date of hearing: 12th November, 2003.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.‑‑‑Common questions of law are involved in ,both these appeals, as follows:‑‑

"(1) Whether the learned Appellate Tribunal correctly interpreted the provisions of Sales Tax Act, 1990, in coming to the conclusion that sales tax liability can be assessed/imposed solely on the basis of Bank statements of the registered person without any evidence of corresponding taxable supply made in the course of taxable activity?

(2) Whether any amount in the Bank account of a registered person without any nexus to taxable supplies can be treated as amount received from such supplies and liable to sales tax?

(3) Whether the learned Appellate Tribunal correctly interpreted the provisions of the Sales Tax Act, 1990, in coming to the conclusion that where the allegation of tax‑fraud is made, the onus lies on the accused person"

(4) Whether the learned Appellate Tribunal acted in accordance with law when it ignored all the material/evidence submitted by the registered person to explain the transactions in its Bank account?

Both the appeals have been heard together and are disposed of by this single consolidated judgment.

For the sake of convenience, the facts are narrated from the Special Sales Tax Appeal No.99 of 2002. The appellant is engaged in the business of import and sale of spare parts of motor vehicles. The appellant is duly registered with the Sales Tax Department. According to the appellant the taxes and duties on imports and sales are being paid regularly in accordance with the law. The appellant has been filing sales tax returns containing all the necessary information required under the law.

The auditors of the respondent No.1 audited the appellant's accounts in the month of April, 2000. After a thorough examination of the business activity, the books maintained by the appellant and all other necessary documents, a show‑cause notice was issued by the Additional Collector‑1, Collectorate of Sales Tax and Central Excise (East), Karachi on 30‑5‑2000 which reads as follows:‑‑

"Show cause notice

(1) Whereas it has been reported to the undersigned by the Senior Auditor, Audit‑I, Sales Tax & Central Excise (East), Karachi that on receipt of a credible information through reliable sources regarding under declaration of the domestic sales, for the purpose of sales tax by Messrs Al‑Hilal Motor Stores, Karachi.

(2) As a part of Audit Messrs Al‑Hilal Motor Stores situated at 48‑Tibet Centre, M.A. Jinnah Road, Karachi the audit team visited the premises of the Registered person conducting audit on 1‑4‑2000 to ascertain the reported misdeclaration and to verify the Sales Tax records.

(3) On comparison of sales declared by them in sales tax returns and the Bank Statement (Account No.402271 H.B.L., Tibet Centre Branch, Karachi), it revealed that they have declared sales for the purpose of sales tax through monthly sales tax returns (inclusive of Sales Tax and Further Tax) of Rs.3,26,25,189 for the period from March, 1998 to March, 2000, whereas the scrutiny of Bank Statement provided to the Audit Team total deposit during the same period were Rs.119,432,953, the Audit Team asked the Registered person about this Bank deposit, but the party failed to satisfy Audit Team, the difference is amounting to Rs.86,807,764. The Sales Tax amounting to Rs.14,201,430 is recoverable alongwith, additional tax Rs.115,630,99 (calculated up to 15‑5‑2000) from the Registered person under sections 34 and 36 of the Sales Tax Act, 1990.

(4) On further scrutiny of the sales records it was observed that during the period of July, 1998 to November, 1998 the Registered person has not charged and paid further tax against supplies to the unregistered person, which is calculated to Rs.19,714 and this amount is recoverable alongwith additional tax of Rs.31,538 (calculated up to 15‑5‑2000) under sections 34 and 36 of the Sales Tax Act, 1990.

(5) Thus Messrs Al‑Hilal Motors Stores, Karachi have violated the provisions of sections 2(37), 2(46), 3,3(1‑A), 6, 22, 23 and 26 of the Sales Tax Act, 1990 and amount o: tax as mentioned above is recoverable from them under sections 34 and 36 of the Sales Tax Act, 1990 and also liable for penal action under section 33 of the Act, ibid.

(6) Messrs Al‑Hilal Motors Stores, Karachi are therefore, called upon to show cause in writing within seven days of the receipt of this notice as to why recoverable amount of the tax alongwith the additional tax as mentioned above should not be recovered from them under sections 34 and 36 of the Sales Tax Act, 1990 and why action for contravention of the aforesaid provisions of law should not be taken against them under section 33 of the Sales Tax Act, 1990.

(7) Hearing in this case has been fixed on 10‑6‑2000 at 10‑00 hours. They or their authorized representative/counsel should appear before the undersigned in the office located at 81‑C, Block‑6; P.E.C.H.S., Karachi. If nobody appears or no written defence is received the case will be decided on the basis of case record ex parte."

The appellant submitted explanation, which was not accepted, and the matter was referred to Collectorate of Customs, Sales Tax and Central Excise (Adjudication), Karachi. It was contended on behalf of appellant before the Collector (Adjudication) that the sale tax is leviable on actual supplies of taxable goods by a registered person. Section 3 of the Sales Tax Act, 1990, which is the charging section contains the scope of sale tax which is to be charged, levied and paid on the value of taxable supplies made in Pakistan by a registered person in the, course or furtherance of any taxable activity carried on by him and on the goods imported into Pakistan. It was further contended that the show‑cause notice has assumed, without any evidence that all the receipts into the said Bank account of the appellant were on account of taxable supplies. It was also asserted, that, having done so, the appellant was made to account for each and every entry in the, Bank account relating to credits, thereby, shifting the burden to the appellant. It was submitted that there was no iota of evidence to prove that the receipts of money into the Bank account of the appellant were on account of taxable supplies of goods as envisaged under section 3 of the Sales Tax Act, 1990. Further contention was raised that there is no provision in the Sales Tax Act, purporting to deem the receipt of money to be a sale. Reliance in this regard was placed on an unreported judgment of Lahore High Court in Writ Petition No.8642 of 1995 dated 8‑4‑1999. In both the cases the point for determination was framed to the effect whether unexplained receipts in the Bank accounts having no co‑relation with the taxable supplies can be subjected to the levy of sales tax. The learned Collector (Adjudication) observed that, the respondents (appellants herein) failed to justify that the, payments deposited in their Bank were on some other account than taxable supplies. It was further observed that, the appellants could not produce any evidence in this respect. Another observation was made that no evidence was produced to substantiate that loans were received by the appellant and the entries showing receiving of `Amanats' revealed as if the appellant was working as a Bank. With reference to the provisions contained in section, 2(37) of the Sales Tax Act, 1990 containing the definition of expression, "tax‑fraud", it was held as follows:‑‑

"The Department has given the proof of payments‑received by the producing Bank statement of the respondent Firm wherein substantial amount was deposited for which the respondents could not provide any justification with the help of supporting documentary evidence. In my opinion, the stand point of respondents is nothing except to seek shelter behind baseless arguments. "

After rejecting the contention raised on behalf of appellant, the learned Collector (Adjudication) decided the case in the following terms:-‑

"14. In view of the foregoing I do not find any substantial reason to appreciate the contention of the respondents. I, therefore, within the specified domain of section 36 of the Sales Tax Act, 1990 order to recover the entire amount of sales tax to the tune of Rs.1,42,21,144 (Rs. One Crore, Forty Two Lacs, Twenty One Thousand, and One Hundred Forty Four only) alongwith the additional tax chargeable under section 34 ibid, from the respondents. I, under section 33(4) (f) of the Sales Tax Act, 1990 impose a penalty of 50% of the amount of tax involved for committing fraud. I also impose a penalty of 5% of tax involved under sections 33(2) (a) and 33(2) (cc) in each offence committed in term of sections 6 and 23 of the Sales Tax Act, 1990. I further impose penalty of 10% of the tax involved under section 33(3)(b) of Sales Tax Act, 1990 for violating section 22 ibid. Penalty of Rs.5,000 per return is imposed under section 33(1) of the Sales Tax Act, 1990 for not furnishing correct and true 'return as is envisaged under section 26 ibid. In addition, I also impose a penalty of Rs.50,000 (Rupees fifty thousand only) on the Chief Executive of the firm under section 33(6) of the Sales Tax Act, 1990."

In Special Sales Tax Appeal No. 100 of 2002 the Additional Collector (Adjudication) observed, that the receipts of Rs.1,68,16,942 remained unexplained and therefore, the charge for suppression of sale is established. The operative part of the order reads as follows:‑‑

"10. I therefore, order for the payment of sales tax amounting to Rs.2, 838,313 under section 36 alongwith additional tax chargeable under section 34 of the Sales Tax Act, 1990. I also impose a penalty of Rs.141,916 under section 33(2) (a), Rs.141,916 under section 33(2) (cc) and Rs.283,831 under section 33(3)(b) of the Sales Tax Act, 1990."

Similar contentions as agitated before Adjudicating Authority were raised before the Customs, Excise and Sales Tax Appellate Tribunal (herein refer to as the Tribunal). The judgment of Lahore High Court dated 8‑4‑1999, in Writ Petition No.8642 of 1995 was reiterated wherein it has been held as under:‑‑

"No provision of Sales Tax Act has purported to deem the receipt of money to be a sale. Consequently, the Department's interpretation has no basis in the text of the Act and that it seeks to change the nature of the tax from levy on the supply of goods to a tax on the mere bailment of money. In none of the provisions of the Sales Tax Act, bailment of money could be deemed to be a sale or a supply of the goods."

The Tribunal however, repelled the contentions and held that, in terms of the provisions contained in section 2(37) of the Sales Tax Act, 1990 the onus lay upon the appellant, as it was a case of tax‑fraud. It was further observed that, the Bank statement is not that of an individual, rather it is that of a limited company and since the company's main concern is the sale of goods, the Department has, legitimately asked them to explain their position regarding their Bank deposits. It was further observed that, the initial burden, stood clearly discharged by the Department as the case has been initiated on specific information and while there is a wide disparity between the sales declared and their Bank statement. With these observations the appeal was dismissed.

We have heard Mr. Khalid Jawed Khan, learned counsel for both the appellants and Mr. Raja M. Iqbal, learned counsel for respondent No. 1.

Mr. Khalid Jawed Khan, learned counsel for both the appellants has submitted that both the appellants are engaged in the sale of hundred per cent imports which have been duly offered for the levy of sale tax. He has further contended that under section 3 of the Sales Tax Act, 1990, which is charging section, the sale tax shall be charged, levied and paid on the value of taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity, carried on by him and the goods imported into Pakistan. According to him if the Departmental officers are of the view that any sales tax has not been paid or taxable activity and taxable supply has been concealed then it is for the Department to prove the taxable activity and to show that there was any taxable supply. He has vehemently argued that there is no deeming provision in the Sales Tax Act, 1990, under which unexplained receipts in the Bank account of a Registered person can be deemed be a sale proceed on account of taxable supplies or on account of furtherance of any taxable activity. He has further submitted that in the Income Tax Law there are deeming provisions under which any unexplained amount available with an assessee shall be deemed to be his income from the undisclosed sources and shall be subjected to the levy of Income Tax.

He has next submitted that reliance placed by the Adjudicating Authority as well as the Tribunal, on the provisions contained in section 2(37) of the Sales Tax Act is misplaced, because it is provided therein that the "tax‑fraud" means knowingly, dishonestly or fraudulently and without any lawful excuse, (burden of proof of which excuse shall be upon the accused) shall amount to the 'commission of tax‑fraud, if accused does any act or causes to do any act or omits to take any action or causes the omission to take any action in contravention of duties or obligations imposed under the Sales Tax Act or rules or instructions issued thereunder with the intention of understating the tax liability or underpaying the tax liability for two consecutive tax periods or overstating the entitlement to the tax credit or tax refund to cause loss of tax. He has maintained that none of the ingredients constituting tax fraud as defined above has been shown to exist by the Department.

In support of his contention that, there is no deeming provisions in the Sales Tax Act analogous to the deeming provisions contained in the Income Tax Ordinance, 1979, Income Ordinance, 2001, he has placed reliance on two judgments from Indian jurisdiction. In the case of Girdhari Lal Nannelal v. The Sales, Tax Commissioner, AIR 1977 SC 298, a question was considered whether it was legal to treat an item of cash‑credit standing in the name of the wife of one of the partners of the assessee Firm, as the profit or income out of concealed sales. The assessee in the above cited case was a partnership firm and a dealer registered under the Sales Tax Act. The Assessing Authority while determining the taxable turnover under the Indian Statute, took into account, an amount in respect of which there was a cash‑credit entry in account books of the assessee. He treated the same as income of the appellant out of concealed sales. Adopting ten per cent as the rate of profit, the turnover in this regard was determined to be rupees one lakh. This amount of rupees one lakh was added to the turnover in computing the gross turnover of the assessee. The explanation furnished in respect of the cash‑credit was not accepted. The appeals preferred before the Appellate Authority and the Board of Revenue were unsuccessful. The question was then referred to Madnya Paradesh High Court. The High Court also decided the question against the assessee for the reason that the explanation offered for the cash‑credit was not reasonable and therefore, it was inferred that the amount reflected profits of the business of the assesssee. The High Court formed opinion that the cash‑credit arose out of the sales not shown in the account books.

It was contended before the Supreme Court of India on behalf of assessee that there was nothing to show that the amount of cash‑credit represented the income realized as a result of sale transactions entered into by the assessee. It was further contended that mere fact that there was no satisfactory explanation regarding the source of that money would not lead to the conclusion that the amount represented the income of the assessee derived as a result of undisclosed sale transactions.

The Supreme Court of India accepted the contention and held that, the judgment of High Court was, not sustainable. It was further held that, in order to impose liability upon the assessee for payment of sales tax by treating that amount as profits arising out of the undisclosed sales of the assessee, two things, had to be established, (i) the amount was the income of the assessee and not of the person shown in the account books, and (ii) that the said amount represented profits from income realized as a result of transactions liable to sales tax and not from other sources. It was further observed that, the onus to prove the above two ingredients was upon the Department. The fact that the assessee or the person in whose name the cash‑credit appeared failed to adduce satisfactory or reasonable explanation with regard to the source of said amount would not in the absence of some further material have the effect of discharging that onus and proving both the ingredients. The Supreme Court ultimately held as follows:‑‑

"The approach which may be permissible for imposing liability for payment of income‑tax in respect of the unexplained acquisition of money may not hold good in sales tax cases. For the purpose of income‑tax it may in appropriate cases be permissible to treat unexplained acquisition of money by the assessee to be the assessee's income from undisclosed sources and assess him as such. As against that, for the purpose of levy of sales tax it would be necessary not only to show that the source of money has not been explained but also to show the existence of some material to indicate that acquisition of money by the assessee has resulted from transactions liable to sales tax and not from other sources. Further, whereas in a case like the present a credit entry in respect of Rs.10,000 stands in the name of the wife of the partner, no presumption arises that the said amount represents the income of the firm and not of the partner or his wife. The fact that neither the assessee‑Firm nor its partner or his wife adduced satisfactory material to show the source of that money would not, in the absence of anything more, lead to the inference that the said sum represents the income of the firm accruing, from undisclosed sale transactions. It was, in our opinion necessary to produce more material in order to connect the amount of Rs.10,000 with the income of the assessee‑Firm as a result of sales. In the absence of such material, the mere absence of explanation regarding the source of Rs.10,000 would not justify the conclusion that the sum in dispute represents profits of the firm derived from undisclosed sales."

The judgment of High Court was reversed and the question was decided in favour o the assessee and against the Revenue.

Again a similar question came for consideration before the Supreme Court of India in the case of P.C. Ittymathew v. Deputy Commissioner of Sales Tax, Sales Tax cases Volume 121‑2001.

In this case the assessee disclosed an additional income to the Income Tax Authorities. On the basis of this disclosure the Assessing Officer for the purpose of sales tax held that, the dealer had disclosed an additional income consequent to raid by the Income‑tax Authorities on the premises of the dealer and, therefore, it was treated as profit derived from unaccounted sales. The above conclusion was set aside by the Tribunal holding that, it was for the sales tax authorities to show the existence of material to indicate that the acquisition of money by the assessee had come from transactions liable to sales tax and not from other sources. The Tribunal further held that, the Sales Tax Authorities had not established that the income disclosed by the assessee had been derived from the business transactions liable to sales tax. The Kerala High Court reversed the order of the Tribunal. The Supreme Court set aside the judgment of High Court and restored the decision of Tribunal with the observation that, the Assessing Authority had relied on no material which indicated that the additional income had come from transactions that were liable to sales tax. It was merely a presumption on his part and that presumption could not rightly be drawn.

On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for respondent No. 1 has merely submitted that under section 38 of the Sales Tax Act, 1990, any Officer authorized by the Board or Collector shall have free access to business or manufacturing premises, registered office or any other place where any stocks, business records or documents required under the Sales‑tax Act are kept or maintained belonging to any registered person or a person who is required for any inquiry or investigation in any tax‑fraud committed by him or his agent or any other person, and such officer may, at any time, inspect the goods, stocks, records, data, documents, correspondence, accounts and statements, utility bills, Bank statements, information regarding nature and sources of funds or assets with which his business is financed, and any other records or documents, including those which are required under any of the Federal, Provincial or local laws to be maintained in any form or mode and may take into custody such, records, statements; diskettes, documents or any part thereof, in original or copies thereof in such form as the authorized officer may deem fit. Mr. Khalid Jawed learned counsel stated that there is no cavil with the authority vested in the Officer authorized under section 38 for the Sales Tax Act but on inspection and scrutiny of the record and after holding an inquiry or investigation the Department is required to establish that any amount from undisclosed sources is in anyway linked with taxable supplies or in furtherance of taxable activity.

We specifically asked Mr. Raja M. Iqbal, whether there is any deeming provision in the Sales Tax Act, 1990 analogous to the provisions contained in the Income Tax Law, whereby any amount appearing in the books of account or acquiring of any property or valuable article or any investment made may be treated as arising out of sale transactions liable to the charge of sale tax. Mr. Raja M. Iqbal had no option but to concede that there is no such deeming provision in the Sales Tax Act, 1990.

We have carefully considered the relevant facts and the contentions raised by the learned Advocates for the parties.

We are persuaded to agree with the contention of the learned counsel for the appellants that in terms of the provisions contained in section 3 of the Sales Tax Act, 1990, which is the charging section, the sales tax shall be charged, levied and paid on taxable supplies made in Pakistan by a Registered person in the course of furtherance of any taxable activity carried on by him and on the goods imported in Pakistan. The terms `taxable supply' and `taxable activity' are defined as follows:‑‑

Section 2(41)

"Taxable supply" means a supply of taxable goods made in Pakistan by an importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods, which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4.

(Section 2(35)

"Taxable activity" means any activity which is carried on by any person, whether or not for a pecuniary profit, and involves in whole or in part, the supply of goods to any other person, whether for any consideration or otherwise and includes any activity carried on in the form of a business, trade or manufacture.

The term "supply" has been defined in section 2(33) as under:‑‑

(33) "supply" includes sale, lease excluding financial lease or other disposition of goods in furtherance of business carried out for consideration and also includes:‑‑‑

(a) Putting to private, business or non‑business use of goods acquired, produced or manufactured in the course of business;

(b) Auction or disposal of goods to satisfy a debt owed by a person;

(c) Possession of taxable goods held immediately, before a person ceases to be a Registered person; and

(d) Such other transaction as the Federal Government may, by notification in the official Gazette, specify;

A perusal of the above definitions shows that while defining the terms "supply" and "taxable activity" the Legislature has enacted deeming provision also and by fiction of law has included private business or non‑business use of goods in the course of business and an activity without pecuniary profit, as well as supply without any consideration is taxable activity. But, for the definitions contained in the Sales Tax Act, 1990, the above acts could not be treated as "supply" or "taxable activity". The definition of term "supply" has excluded the doctrine of mutuality. Thus, wherever the Legislature has deemed fit resort has been made to the deeming provisions by fiction of law. However, there is no provision in the Sales Tax Act, 1990 analogous to the provisions contained in the Income Tax Law, whereby the discovery of any cash‑credits in the accounts of an assessee can be deemed to be supply, taxable supply or the amount received on account of taxable activity in furtherance of any business. It is established principle of the law of taxation that an assessee can be subjected to tax under a provision of law, which is unambiguous and clear. There is no room for any intendment and there is no presumption as to tax. In the absence of any deeming provision the Revenue is required to establish that a transaction falls within the parameters of taxable supplies or in furtherance of any taxable activity, failing which the sales tax imposed on the basis of some assumption or presumption not warranted in law, shall always be struck down. In the present appeals it is apparent that except discovering certain cash‑credits entries in the books of the appellants, the Revenue Officers have not been able to produce any material to show that the said amounts are in any way linked with the taxable supplies or with any taxable activities or represent an amount on account of any business activity. A perusal of the show‑cause notice as well as material produced before us further shows that no case of any tax‑fraud has been made out whereby the burden of proof can be shifted to the appellants. The learned two forums below have misdirected in placing the burden of proof on the appellants in terms of the provisions contained in section 2(37) defining the expression "tax‑fraud" without realizing that in order to attract the above provision, the initial burden lies on the Department to show that an assessee, knowingly, dishonestly or fraudulently and without any lawful excuse has done any act or has caused to be done or has omitted to take any action or has caused the omission to take any action in contravention of duties or obligations imposed under, this Act or rules or instructions issued thereunder with the intention of understating the tax liability or underpaying the tax liability. Once this burden is discharged by the Department, only then, the burden is shifted to the assessee to establish that the act done was without any knowledge on his part or without any intention of dishonesty ‑or fraud and was done with any lawful excuse.

For the foregoing reasons, we are of the considered opinion that the learned two forums below had misdirected in law in holding that the cash‑credits appearing in the account books for which no satisfactory explanation is furnished can be treated as the amount received on account of taxable supplies or in furtherance of taxable activity. The orders of the learned two forums below are therefore, hereby set aside.

The questions of law reproduced in the earlier part of this judgment are answered as follows;‑‑

(1) Negative.

(2) Negative.

(3) Negative.

(4) In view of answers to questions Nos. 1 and 3, above, no opinion is required to be recorded in respect of this question.

The appeals stand disposed of accordingly.

After hearing the learned counsel for the parties on 12‑11‑2003, the appeals were disposed of by a short order. These are the detailed reasons in support thereof.

M.B.A./A‑5/K Order accordingly.