2006 (7) TMI 572 - HC - VAT and Sales Tax

Initiation of a reassessment proceeding - notice issued u/s 12(8) of the Orissa Sales Tax Act, 1947 ( the OST Act ) - Whether the expression for any reason in section 12(8) of the OST Act gives wider powers to the authorities to reopen assessment than the words reasons to believe and whether the exercise of power u/s 12(8) of the OST Act has to be consistent with the statutory rules and in accordance with the statutory forms framed under the said Act? - HELD THAT - This court feels bound by the interpretation given to section 12(8) of the OST Act by the apex Court in Uttareswari Rice Mills 1972 (9) TMI 109 - SUPREME COURT and which was subsequently followed in Ugratara Bhojanalaya 1992 (7) TMI 300 - ORISSA HIGH COURT . Following the aforesaid ratio this court reiterates that the difference in phraseology between for any reason and where the Sales Tax Officer has reasons to believe does not make any material difference in view of the provisions in rule 23 of the said Rules which mandate that notice for reopening has to be in form VI and form VI uses the expression where the Sales Tax Officer has reasons to believe . Thus, we hold that the words for any reason in section 12(8) of the OST Act do not give wider powers to the authorities to reopen assessment compared to words reasons to believe since the words reasons to believe are incorporated in the statutory form in which notice of assessment is to be issued. The court also holds that while exercising power u/s 12(8) of the OST Act, the authority has to act consistently with the statutory norms prescribed under the statutory rules and the forms. The importance of this doctrine lies in the fact that if a statutory functionary is vested with a power to act, it is that statutory authority alone who will form the necessary objective opinion for exercising its powers. In doing so, it may take into consideration whatever is relevant. As in the instant case, audit objection may be a relevant consideration. Taking that objection into consideration, the Sales Tax Officer has to form his objective opinion. But the Sales Tax Officer cannot totally abdicate or surrender his discretion to the objection of the audit party by mechanically reopening assessment u/s 12(8) as has been done in this case. This was frowned upon again by Justice Hegde again while delivering the judgment of the apex Court in Purtabpur Company Ltd. v. Cane Commissioner of Bihar 1968 (11) TMI 96 - SUPREME COURT . The Supreme Court quashed the order of the Cane Commissioner as it found that the Cane Commissioner virtually worked as the mouth-piece of the Chief Minister. In State of U.P. v. Maharaja Dharmander Prasad Singh 1989 (1) TMI 315 - SUPREME COURT , support of the principle that a statutory authority cannot permit its decision to be influenced by the direction of others as that would amount to abdication and surrender of its discretion . The court laid down if an authority hands over its discretion to another and acts under the dictate of the other authority it acts ultra vires. Following these principles this court holds that the manner in which reassessment proceeding was blindly initiated on audit objection by the Sales Tax Officer without any independent application of mind, the exercise of power u/s 12(8) of the OST Act has been vitiated and as such the impugned notice of reassessment is liable to be quashed and is accordingly quashed. Annexure 1 is quashed. The writ petition is thus allowed.

Issues Involved:
1. Whether assessment can be reopened mechanically by the authorities without showing any application of mind by not recording any reason?
2. Whether in issuing reassessment notice, the statutory authorities can surrender or abdicate its statutory discretionary power in favor of a non-statutory authority and completely act under the dictate of such an authority?
3. Whether the issuance of the statutory notice of the reopening of assessment can precede the recording of anything in the order sheet in the concerned file?
4. Whether the expression "for any reason" in section 12(8) of the OST Act gives wider powers to the authorities to reopen assessment than the words "reasons to believe" and whether the exercise of power under section 12(8) of the OST Act has to be consistent with the statutory rules and in accordance with the statutory forms framed under the said Act?

Detailed Analysis:

Issue 1: Mechanical Reopening of Assessment
The court scrutinized whether the assessment could be reopened mechanically without showing any application of mind. It was found that the notice was issued on September 23, 1998, even before the necessary directions were issued by the Sales Tax Officer (S.T.O.) on October 24, 1998. The court held that the notice was issued mechanically and without any formation of opinion, which is not permissible under the law.

Issue 2: Abdication of Discretionary Power
The court examined if the statutory authorities could abdicate their discretionary power to a non-statutory authority, such as an audit party. It was found that the notice of reassessment was issued based on an audit objection without any independent application of mind by the S.T.O. The court held that while audit objections can be a valid factor for consideration, the S.T.O. must independently form an opinion. The S.T.O.'s formation of opinion cannot be dictated by the audit objection, making the issuance of the notice ultra vires and void.

Issue 3: Issuance of Notice Before Recording Opinion
The court analyzed whether the issuance of the statutory notice could precede the recording of any order in the file. It was found that the notice was issued on September 23, 1998, while the order for issuing the notice was recorded on October 24, 1998. The court held that this sequence of actions was impermissible, as the notice was issued mechanically first, followed by an attempt to cover it up by recording an opinion later.

Issue 4: Interpretation of "For Any Reason"
The court addressed the statutory interpretation of the expression "for any reason" in section 12(8) of the OST Act. It was held that the words "for any reason" do not give wider powers to the authorities compared to "reasons to believe," as the statutory form VI uses the expression "where the Sales Tax Officer has reasons to believe." The court emphasized that the exercise of power under section 12(8) must be consistent with statutory rules and forms. The court relied on the Supreme Court's judgment in Sales Tax Officer v. Uttareswari Rice Mills, which held that the difference in phraseology does not make a material difference. The court also noted that the basis for reopening must be disclosed in the notice, which was not done in this case.

Conclusion:
The court concluded that the reassessment proceedings were initiated blindly on audit objections without any independent application of mind by the S.T.O. This vitiated the exercise of power under section 12(8) of the OST Act. Consequently, the impugned notice of reassessment was quashed. The writ petition was allowed with no order as to costs.

← Previous Next →