2009 (8) TMI 1117 - HC - VAT and Sales Tax

Reassessment orders - Held that - There is considerable force in the submission of the learned counsel for the petitioner that the orders impugned are not speaking orders. The orders, annexure F series, of the first respondent-assessing officer being illegal cannot be sustained, and as a consequence, the demand notices, annexure G series, are also unsustainable. In the result, the petitions are allowed. The assessment orders, annexure F series and demand notices, annexure G series, are quashed. The proceeding is remitted with a direction to consider afresh the petitioner s objections after extending a reasonable opportunity of hearing to the petitioner and to pass the orders thereon, in accordance with law.

Summary

Issues involved: Assessment of tax under the Karnataka Sales Tax Act, 1957 on internet services provided by an operator, validity of assessment orders, sufficiency of reasons provided in the orders, reliance on a decision set aside by the apex court, legality of demand notices.

Analysis:
The petitioner, an internet service operator, was assessed to tax under the Karnataka Sales Tax Act, 1957, for providing broadband and web hosting services. The assessment orders were challenged in various appeals and revisions. The Karnataka Appellate Tribunal set aside the orders and remitted the proceeding to the assessing officer for fresh assessment. However, the subsequent reassessment orders were challenged due to lack of proper reasoning and non-application of mind by the assessing officer. The petitioner contended that the services provided did not involve the sale of CD-ROM and were subject to service tax. The assessing officer's reliance on a decision that was later set aside by the apex court was also questioned.

The High Court observed that the assessment orders were not speaking orders and lacked proper reasoning. The court emphasized the importance of recording reasons in decisions to ensure fairness and objectivity. Citing previous judgments, the court highlighted that the absence of reasons could lead to unconscious unfairness or arbitrariness. The court noted that the decision relied upon by the assessing officer had been set aside by the apex court, rendering it invalid for negating the petitioner's objections.

Based on the above analysis, the High Court held that the assessment orders and demand notices issued by the assessing officer were illegal and unsustainable. Consequently, the court quashed the assessment orders and demand notices. The court directed the assessing officer to reconsider the petitioner's objections in light of previous court orders and observations, ensuring a reasonable opportunity for the petitioner to be heard. The fresh assessment was to be conducted in accordance with the law.

In conclusion, the High Court allowed the petitions, emphasizing the importance of providing valid reasons in assessment orders and ensuring adherence to legal principles in tax assessments. The court's decision aimed to uphold fairness and transparency in the assessment process while protecting the rights of the petitioner.