2010 (3) TMI 1046 - HC - VAT and Sales Tax

Whether the Commissioner for Commercial Tax has duly authorised the officer to reassess the tax in terms of section 39(1) of the Act read with rule 46 of the Rules thereunder? Held that - Under section 38(7) of the Act, the Commissioner has been conferred with power to authorise an authority to assess the tax. After reading of provision of section 38(7) read with section 39(1) further read with rule 46 and in the light of the decision of the Division Bench, thus it is clear that there is no authorisation as required under section 39(1) of the Act read with rule 46 of the Rules. The e-mail print out produced by the State at annexure R1 does not satisfy the requirements of section 39(1) read with rule 46 of the Rules. If that is so, the writ petition requires to be allowed only on this short question. Accordingly, the writ petition is allowed. The impugned annexures D and E are quashed.

Summary

Issues:
1. Validity of reassessment of tax under section 39(1) of the Karnataka Value Added Tax Act, 2003 without proper authorization.

Analysis:
The petitioners challenged the orders dated December 23, 2009, and January 4, 2010, issued by the respondent demanding payment of tax, penalty, and interest totaling to &8377; 71,64,999. The petitioners, engaged in manufacturing, were accused of tax evasion due to alleged ineligibility for input-tax credit on goods transferred out of the state. The respondent conducted a reassessment under section 39(1) of the Act, leading to the disputed demands. The petitioners contended that the reassessment lacked proper authorization from the Commissioner of Commercial Taxes, as required by law.

The learned senior counsel for the petitioners argued that the reassessment by the respondent was unauthorized as the officer lacked the necessary authorization under section 39(1) read with rule 46 of the Rules. He emphasized the importance of preventing bias in reassessment procedures and cited a judgment highlighting the necessity of precise authorization by the Commissioner for such actions. The counsel maintained that the petitioners had paid taxes as per assessment orders, and any reassessment should be conducted by an authorized officer.

In response, the Government Advocate for the respondent defended the reassessment, claiming it was conducted in accordance with the relevant provisions. He presented an email as evidence of authorization, stating that the reassessment was justified due to alleged tax evasion by the petitioners. The respondent argued that the objection raised by the petitioners' counsel was overly technical.

The central issue for consideration was whether the Commissioner had properly authorized the officer for reassessment under section 39(1) of the Act. Section 39(1) empowers the prescribed authority to reassess tax liabilities, subject to proper authorization by the Commissioner. The Court emphasized that reassessment must be carried out by an authorized person, explicitly designated by the Commissioner. The lack of express authorization rendered the reassessment invalid, regardless of the merits of the tax evasion allegations.

Relying on precedents and statutory provisions, the Court concluded that the reassessment conducted without proper authorization was unlawful. The Court directed the Commissioner to issue valid authorization for reassessment within two months. The judgment highlighted the necessity of strict adherence to procedural requirements in tax assessments to ensure legality and fairness in tax administration.