1997 (12) TMI 627 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the notices issued for reopening the assessment.
2. Justification for reassessment based on the original assessment order.
3. Whether an audit objection qualifies as "information" under Section 19(1) of the Bihar Finance Act, 1981.
4. Whether a mere change of opinion constitutes "information" for reassessment.
5. Competence of the proceeding under Section 47 of the Act without required sanction.

Issue-wise Detailed Analysis:

1. Validity of the Notices Issued for Reopening the Assessment:
The petitioner contended that the notices (annexures 1 to 3) were not in the proper and prescribed form and did not indicate under which section they were issued, thus invalidating the proceeding under Section 19(1) of the Act. The court emphasized that for initiating a proceeding under Section 19(1), a notice in the prescribed form XIV must be served, recording the satisfaction of the prescribed authority that reasonable grounds exist to believe that the turnover has escaped assessment or has been under-assessed. The notices in question did not refer to Section 19 of the Act, did not clarify the purpose, and were not issued in the prescribed form, rendering them invalid. The court concluded that the absence of a valid notice vitiated the proceeding.

2. Justification for Reassessment Based on the Original Assessment Order:
The petitioner argued that the original assessment order (annexure 4) was valid and justified, and there was no need for reassessment. The court noted that the original assessment applied the special rate of tax correctly as per the law before its amendment. The assessment considered sales in the course of inter-State trade or commerce, even if effected from offices outside Bihar, which was valid under the unamended Section 13(1)(b) of the Act. The court found no justification for reassessment based on the original order.

3. Whether an Audit Objection Qualifies as "Information" Under Section 19(1) of the Act:
The petitioner argued that an audit objection does not amount to "information" as required under Section 19(1) for initiating reassessment. The court supported this view by referencing the Supreme Court's decision in [1979] 119 ITR 996 (Indian and Eastern Newspaper Society v. Commissioner of Income-tax, New Delhi), which held that an audit objection does not constitute information for the purpose of reassessment.

4. Whether a Mere Change of Opinion Constitutes "Information" for Reassessment:
The petitioner contended that a mere change of opinion by the prescribed authority on the same set of facts does not constitute "information" for reassessment under Section 19(1). The court agreed, citing previous judgments ([1984] 56 STC 273 (Pat) [FB] and [1988] 71 STC 293 (Pat)), which established that reassessment cannot be justified merely based on a change of opinion without new information.

5. Competence of the Proceeding Under Section 47 of the Act Without Required Sanction:
The petitioner argued that even if the proceeding is considered a review under Section 47, it was not competent without the required sanction. The respondents did not dispute this, as their case was that the reassessment was under Section 19(1). The court noted that the reassessment order could not be justified under Section 47 due to the lack of sanction.

Conclusion:
The court held that the initiation of the proceeding under Section 19(1) was not in accordance with law due to the invalid notices. Consequently, the notices (annexures 1, 2, and 3) and the reassessment order dated September 25, 1997 (annexure 5) were quashed. The writ petition was allowed.

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