2009 (5) TMI 875 - HC - VAT and Sales Tax

Reassessment proceedings challenged - Held that - As find from the record that to the show-cause notice dated March 27, 2004 the petitioner had filed a detailed objections/reply on March 29, 2004 but the Additional Commissioner had not given any reasons, whatsoever, nor has dealt with any of the objections raised by the petitioner in its reply. In view of the law laid down by this court in the case of S.K. Traders 2007 (7) TMI 573 - ALLAHABAD HIGH COURT the said order passed by the Additional Commissioner cannot be sustained and is, therefore, liable to be set aside.

Summary

Issues:
1. Quashing of order dated March 29, 2004 passed by Additional Commissioner, Trade Tax, Kanpur.
2. Reassessment proceedings initiated against the petitioner for the assessment year 1997-98.
3. Granting of permission for reopening the assessment under section 21(2) of the Act.
4. Compliance with the requirement of recording reasons for granting permission/sanction.

1. Quashing of Order:
The petitioner, a registered society engaged in the business of manufacturing ayurvedic medicines, sought to quash the order dated March 29, 2004 passed by the Additional Commissioner, Trade Tax, Kanpur. The petitioner claimed exemption under Notification No. 709 dated February 27, 1997 for items manufactured and sold by it. The Additional Commissioner granted permission for reassessment without providing reasons, which was challenged by the petitioner. The court held that the order lacked reasons and did not address the objections raised by the petitioner, thus setting it aside. The court emphasized the necessity of recording reasons for granting permission under section 21(2) of the Act.

2. Reassessment Proceedings:
The reassessment proceedings initiated against the petitioner for the assessment year 1997-98 were based on a proposal sent by the assessing authority to the Additional Commissioner. The Additional Commissioner granted permission for reassessment without providing reasons, leading to the challenge by the petitioner. The court held that the absence of reasons rendered the order unsustainable and directed the Additional Commissioner to pass a fresh order after considering the petitioner's reply and providing reasons if permission is to be granted.

3. Granting of Permission for Reopening Assessment:
The Additional Commissioner issued a notice to the petitioner to show cause as to why permission should not be granted for reopening the assessment for the year 1997-98. Despite the petitioner's detailed objections, the Additional Commissioner granted permission without providing reasons. The court, in line with legal precedent, emphasized the importance of recording reasons while granting permission for reassessment under section 21(2) of the Act. The court set aside the order due to the lack of reasons and directed the Additional Commissioner to pass a fresh order with proper reasoning.

4. Compliance with Requirement of Recording Reasons:
The court highlighted the necessity of recording reasons for granting permission/sanction for reopening assessment proceedings. Citing previous judgments, the court emphasized that the Additional Commissioner must provide reasons while granting permission, as failure to do so renders the order unsustainable. The court directed the Additional Commissioner to pass a fresh order considering the petitioner's reply and providing reasons if permission for reassessment is deemed necessary. The court clarified that reasons given by the Additional Commissioner would only pertain to permission for reopening assessment proceedings and would not impact the merits of the reassessment process. Additionally, the court addressed the issue of limitation for reassessment and directed the Additional Commissioner to act in accordance with the law within a specified timeframe.