2010 (4) TMI 997 - HC - VAT and Sales Tax

Order dated February 25, 2010, passed by the Additional Commissioner, Grade I, Commercial Tax, Varanasi Zone I, Varanasi, granting approval under the proviso to section 21(2) of the U.P. Trade Tax Act, 1948 to reopen the proceedings for the assessment years 1997-98 and 1998-99 both under the U.P. Trade Tax Act as well as under the Central Sales Tax Act, 1956 beyond the normal period of limitation challenged Held that - In the present case, we find that the Additional Commissioner, Grade I, Commercial Tax, Varanasi Zone I, Varanasi has not acted in accordance with law and despite the order passed by this court the power has not been exercised carefully and judiciously and the order of this court has not been complied with. For the reasons stated above, the writ petition is allowed. The impugned orders dated February 25, 2010 for the assessment years 1997-98 and 1998-99 both under the U.P. Trade Tax Act as well as under the Central Sales Tax Act are set aside with cost of ₹ 25,000, which will be payable by the Additional Commissioner, Grade I, Commercial Tax, Varanasi Zone I, Varanasi, to the petitioner by account payee cheque within a period of one month.

Summary

Issues:
Challenge to order granting approval to reopen assessment beyond limitation under U.P. Trade Tax Act and Central Sales Tax Act.

Analysis:
The petitioner, a registered dealer under U.P. Trade Tax Act and Central Sales Tax Act, challenged the order granting approval to reopen assessments for 1997-98 and 1998-99 beyond the normal limitation period. The Additional Commissioner, after remand, issued notices based on earlier grounds. The petitioner contended that the approval was granted based on a fresh report, exceeding the limitation period. The court noted that the impugned orders were passed mechanically without considering the petitioner's reply. The Additional Commissioner clarified that approval was based on earlier grounds, not the new report. The court found errors in the Commissioner's approach, emphasizing the need for careful consideration and application of mind in such cases.

The court highlighted that the Additional Commissioner's role under section 21(2) of the Act is to prevent reopening of assessments on flimsy grounds. The Commissioner is not required to adjudicate but to ensure the reasons recorded justify the belief of escaped assessment. Detailed reasoning is unnecessary; the focus should be on applying mind to the reasons and submissions. In this case, the court found the Commissioner did not act in accordance with the law, failing to comply with the court's previous order.

Consequently, the court allowed the writ petition, setting aside the impugned orders for 1997-98 and 1998-99 under both Acts. The Additional Commissioner was directed to pay costs to the petitioner. Citing a previous decision, the court clarified that the period of limitation does not apply after a court sets aside proceedings under Article 226, emphasizing the need for timely action by authorities within a reasonable period.

The petitioner was instructed to provide a copy of the order to the Additional Commissioner, who was directed to pass a fresh order within four weeks in compliance with the law. The judgment underscored the importance of proper application of mind and adherence to legal provisions in such matters to ensure fairness and justice in tax assessments.