1995 (2) TMI 429 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of reassessment based on audit report under section 19(1) of the Bihar Finance Act, 1981.
2. Jurisdiction of the Deputy Commissioner, Commercial Taxes, Jamshedpur, for reassessment after August 6, 1991.

Detailed Analysis:

1. Legality of Reassessment Based on Audit Report:

The petitioner, M/s. Eureka Forbes Ltd., challenged the reassessment notices issued by the Deputy Commissioner of Commercial Taxes, Jamshedpur, under section 19(1) read with section 17(2) of the Bihar Finance Act, 1981. The reassessment was based solely on an audit report which suggested that vacuum cleaners should be taxed as "electrical goods" at 12% instead of "machinery" at 8%.

The petitioner argued that the audit report does not constitute "information" under section 19(1) and hence cannot be a basis for reassessment. They cited various judgments, including Bhimraj Madanlal v. State of Bihar, which held that a mere change of opinion does not constitute "information" for reassessment purposes.

The court agreed with the petitioner, stating that "a mere change of opinion and/or second thought by any authority on the same set of facts and materials on record would not constitute 'information' under section 19(1) of the Bihar Finance Act, 1981." It emphasized that there must be new material or facts not considered during the original assessment. The court concluded that the audit report, being merely an opinion, does not meet this criterion and thus cannot justify reassessment.

2. Jurisdiction of the Deputy Commissioner, Commercial Taxes, Jamshedpur:

The petitioner also contended that after August 6, 1991, the power of assessment was vested with the Pataliputra Circle, Patna, as per the order issued by the Commissioner of Commercial Taxes, Patna. Therefore, the Deputy Commissioner, Commercial Taxes, Jamshedpur, lacked jurisdiction to reassess.

Given the court's decision on the first issue, it found it unnecessary to delve into the jurisdictional argument. However, the court recognized the petitioner's contention and noted the relevance of jurisdictional authority in reassessment proceedings.

Conclusion:

The court set aside the reassessment notices (annexure 1 series), the reassessment orders (annexure 2 series), and the revisional orders (annexure 3 series), declaring them illegal as they were based solely on the audit report, which does not constitute valid "information" under section 19(1) of the Bihar Finance Act, 1981. The writ petitions were allowed, and the impugned orders were quashed without any costs.