2011 (9) TMI 882 - HC - VAT and Sales Tax

Whether opposite-party No. 2-Joint Commissioner of Sales Tax having approved the audit visit report is competent to assess the petitioner ? Whether the impugned orders of assessment are barred by limitation under section 42(6) and (7) of the OVAT Act 2004 ? Whether the demand raised in the orders of assessment on the ground of suppression of sale is without any valid reason ? Held that - In the instant case the audit visit report was received by the dealer on February 22 2010 the assessment could not be completed within six months and the assessing officer sought for extension of time from the Commissioner and the Commissioner extended the time to complete the audit assessment by February 9 2011 positively. Although the Commissioner could have extended the time till February 21 2011 i.e. one year from the date of receipt of the audit visit report by the dealer-assessee the assessment in the instant case has been completed on January 21 2011. When the impugned orders of assessment were passed the judgment of this court on the period of limitation was in operation. Therefore the stand now taken by the assessee is not acceptable and we are of the view that the impugned orders of assessment have been passed within the period of limitation. We set aside the orders of assessment passed under annexure 1 in both the aforesaid writ petitions and remand the matter for fresh assessment by the competent assessing authority having jurisdiction over the dealers assigned to LTUs who is in no way connected with the tax audit of the petitioner. However we make it dear that we have not expressed any opinion on the merits of the cases except on the question of limitation and jurisdiction/authority of Joint Commissioner of Sales Tax who has passed the impugned assessment orders. The fresh assessment process shall be completed within a period of eight weeks from today after giving opportunity of hearing to the petitioner-dealer.

Summary

Issues Involved:
1. Competence of the Joint Commissioner of Sales Tax to assess the petitioner.
2. Limitation period for passing the assessment orders under the OVAT Act.
3. Validity of the demand raised on the ground of suppression of sale.

Detailed Analysis of the Judgment:

Issue 1: Competence of the Joint Commissioner of Sales Tax to Assess the Petitioner
The petitioner contended that the Joint Commissioner of Sales Tax, who had approved the audit visit report, was not competent to pass the assessment orders. The petitioner argued that the Joint Commissioner acted both as the investigator and adjudicator, violating the principles of natural justice. The court observed that the Joint Commissioner's involvement in the audit process was evident as he approved the audit visit report and constituted the audit team. The court held that any officer involved in the audit process should not act as the assessing officer to maintain transparency and avoid bias. This view was supported by the judgment in the case of National Trading Co. [2001] 122 STC 212 (Orissa), which stated that the reporting officer should not be the assessing officer.

Issue 2: Limitation Period for Passing the Assessment Orders
The petitioner argued that the assessment orders were time-barred as they were passed beyond the prescribed period under section 42(6) and 42(7) of the OVAT Act. The court referred to its earlier judgment in Lalchand Jewellers Pvt. Ltd. (W. P. (C) No. 11864 of 2007 decided on October 9, 2007-Orissa High Court), which held that the limitation period runs from the date of receipt of the audit visit report by the dealer. The court noted that the audit visit report was received by the dealer on February 22, 2010, and the assessment orders were passed on January 21, 2011, within the extended period allowed by the Commissioner. Therefore, the court concluded that the assessment orders were within the period of limitation.

Issue 3: Validity of the Demand Raised on the Ground of Suppression of Sale
The petitioner challenged the validity of the demand raised on the ground of suppression of sale, arguing that the SION method adopted was not supported by any justified reason. The court did not delve into the merits of this issue, as it decided to remand the matter for fresh assessment by a competent assessing officer who was not connected with the tax audit of the petitioner. The court directed that the fresh assessment process be completed within eight weeks after giving the petitioner an opportunity of hearing.

Conclusion
The court set aside the assessment orders and remanded the matter for fresh assessment by a competent authority, emphasizing the need for transparency and adherence to the principles of natural justice. The court also clarified that the limitation period for assessment runs from the date of receipt of the audit visit report by the dealer, aligning with its previous judgment in Lalchand Jewellers Pvt. Ltd.