2009 (11) TMI 841 - HC - VAT and Sales Tax

Reopening of concluded assessment - Held that - There is no denial in the counter-affidavit with regard to the filing of the reply by the petitioner before the Additional Commissioner, Grade 1, Trade Tax. It follows that the Additional Commissioner, Grade 1, Trade Tax has granted the permission without taking into consideration the reply dated March 10, 2005 filed by the petitioner. In view of the decision of the Division Bench of this court in S.K. Traders, Modi Nagar, Ghaziabad v. Additional Commissioner, Grade 1, Trade Tax Zone Ghaziabad 2007 (7) TMI 573 - ALLAHABAD HIGH COURT the order granting the permission is bad on this ground also. The Additional Commissioner, Grade 1, Trade Tax, has not taken into consideration the reply filed by the petitioner. In view of the above, the writ petition succeeds and is allowed. Reassessment orders quashed.

Summary

Issues:
Reopening of concluded assessment based on subsequent circular, liability to pay trade tax on meter rents charged by the petitioner.

Analysis:
The petitioner, a registered company under the Companies Act, is engaged in supplying electricity to consumers in Kanpur urban areas and other districts in the State of U.P. The Department initially accepted that trade tax is not leviable on meter rents charged by the petitioner from customers for the assessment years 1998-99 to 2001-02. However, notices were later issued for reassessment based on the ground that meter rents had escaped assessment. The petitioner challenged these reassessment orders, arguing that the original assessment orders were in compliance with a circular issued by the Commissioner at the time. The respondents contended that the petitioner is liable to pay tax on the meter rents under section 3F. The main issue revolved around whether a concluded assessment could be reopened based on a subsequent circular issued by the Commissioner.

The High Court referred to a judgment by the apex court in Binani Industries Limited v. Assistant Commissioner of Commercial Taxes, which held that changing views in subsequent circulars cannot affect assessments completed based on earlier circulars. The Court concluded that reopening an assessment is impermissible if the Commissioner revises an earlier circular. The subsequent circular dated January 13, 2005, was found not to be prospective in nature and was held to be applicable to concluded assessments. The Court also noted that the Additional Commissioner, Grade 1, Trade Tax, had granted permission to reopen the assessment without considering the petitioner's reply, which was deemed improper based on a previous court decision.

In light of the above analysis, the High Court allowed the writ petition, quashing all impugned orders related to reassessment for the relevant assessment years. The Court did not award any costs in this matter.