2010 (1) TMI 1115 - HC - VAT and Sales Tax

Order of reassessment - directions to the assessing officer by Tribunal to give credit of ₹ 1,84,000 with consequential relief as per the provisions of law - Held that - The proceedings for reassessment in the case in hand were initiated without application of mind and without ascertaining facts and without recording reasons in support of the belief formed by the Sales Tax Officer under section 35 of the BST Act. The assessing officer has assumed jurisdiction by initiating reassessment proceedings not as per law. The assessment order was thus rightly set aside by the Tribunal for the reasons recorded therein.

Issues Involved:
1. Legality of the reassessment order dated July 29, 2002.
2. Validity of the Tribunal's order dated January 31, 2004, setting aside the reassessment order.
3. Validity of the Tribunal's order dated May 7, 2005, rejecting the application for rectification.
4. Jurisdictional challenge under Article 226.
5. Preliminary objections regarding maintainability and delay.

Detailed Analysis:

1. Legality of the Reassessment Order Dated July 29, 2002:
The reassessment was initiated based on a letter from the Sales Tax Officer, Enforcement Branch, indicating that the respondent-assessee had sold sulphur locally without paying tax. The Sales Tax Officer issued a notice in Form 28 on May 29, 1999, proposing reassessment. The respondent-assessee was reassessed, resulting in a demand of Rs. 7,30,817. The Tribunal found that the reassessment proceedings were initiated without proper application of mind and without recording reasons for the belief that turnover had escaped assessment. The Tribunal held that the reassessment was not based on any reasonable belief as required under Section 35 of the BST Act.

2. Validity of the Tribunal's Order Dated January 31, 2004:
The Tribunal quashed the reassessment order and the first appellate authority's order, including the penalty levied. The Tribunal directed the assessing officer to give credit of Rs. 1,84,000 with consequential relief. The Tribunal's decision was based on the finding that the reassessment proceedings were initiated without recording reasons and without proper application of mind. The Tribunal held that the Sales Tax Officer did not independently verify the material brought to his notice by the Enforcement Branch before issuing the notice in Form 28.

3. Validity of the Tribunal's Order Dated May 7, 2005:
The Commissioner of Sales Tax filed an application for rectification under Section 62 of the BST Act, which was rejected by the Tribunal. The Tribunal held that there was no mistake apparent on the face of the record that warranted rectification. The Tribunal's decision was based on a detailed discussion and reasons, concluding that the reassessment proceedings were not initiated as per law.

4. Jurisdictional Challenge Under Article 226:
The State of Maharashtra invoked the writ jurisdiction of the High Court under Article 226, challenging the Tribunal's orders. The petitioner argued that the Tribunal erred in not considering the reassessment order by adopting a liberal approach while construing Section 35 of the BST Act. The petitioner contended that the assessing officer had "reason to believe" that the respondent-assessee had evaded payment of sales tax. The High Court held that the expression "reason to believe" postulates belief and the existence of reasons for that belief, which must be based on reasonable grounds and not mere suspicion. The Court found that the reassessment proceedings were initiated without recording reasons and without proper application of mind, thus upholding the Tribunal's orders.

5. Preliminary Objections Regarding Maintainability and Delay:
The respondent raised preliminary objections regarding the maintainability of the petition, arguing that it was filed against a trade name instead of an individual, and that an alternate remedy by way of reference under Section 61 of the Act was available but not pursued. The respondent also contended that there was a delay in invoking the writ jurisdiction. The High Court observed that the alternate remedy was available and not resorted to, making the Tribunal's order final and conclusive. The Court did not find it necessary to dwell on other preliminary objections, as the main issue of erroneous assumption of jurisdiction by the assessing officer was sufficient to dismiss the petition.

Conclusion:
The High Court dismissed the petition, holding that the reassessment proceedings were initiated without proper application of mind and without recording reasons for the belief that turnover had escaped assessment. The Tribunal's orders were upheld, and the rule was discharged with no order as to costs.

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