1996 (3) TMI 505 - HC - VAT and Sales Tax

Summary

Issues:
Reassessment of tax based on audit party's note under section 31 of the Haryana General Sales Tax Act, 1973.

Analysis:
The judgment by the High Court of Punjab and Haryana involved two General Sales Tax References pertaining to the same assessee, addressing identical questions of law and fact. The case revolved around the reassessment of tax for the assessment year 1976-77 based on a note from the audit party. The Assessing Authority had initially not levied tax under section 9 of the Act on certain purchases made by the assessee, which were used in manufacturing tax-free goods. However, upon receiving a note from the audit party pointing out this omission, the Assessing Authority reopened the assessment to reassess the tax that had allegedly escaped assessment.

The key issue for consideration was whether the note from the audit party constituted "definite information" within the meaning of section 31 of the Act, allowing the Assessing Authority to reopen the assessment. The Court held that the audit note did not qualify as "definite information" to justify reassessment under section 31. It was noted that the Assessing Authority changed its opinion based on the audit party's view that tax was leviable under section 9, which did not amount to providing the necessary information for reassessment.

The Court relied on established legal precedents, including a Supreme Court judgment and two division bench judgments of the same Court, to support its conclusion. These judgments clarified that an audit objection alone does not constitute valid information for reopening assessments under section 31. Additionally, the department had issued a circular emphasizing that reassessment based solely on audit objections was neither desirable nor mandated by the Act.

Ultimately, the Court ruled in favor of the assessee, holding that the Assessing Authority was not justified in reassessing the tax based on the audit party's note. The question referred to the Court was answered in the negative, favoring the assessee and ruling against the Revenue, with no order as to costs. The judgment provided a clear precedent regarding the limitations on reassessment based on audit objections under the relevant tax legislation.