2007 (7) TMI 687 - HC - VAT and Sales Tax

Summary

Issues involved: Reopening of assessment without recording reasons u/s 24 of the Delhi Sales Tax Act, 1975.

The judgment by the Delhi High Court, delivered by Justice Madan B. Lokur, addressed the grievance of the Petitioner regarding the reopening of a regular assessment without recording any reasons. The Petitioner argued that this action was impermissible under Section 24 of the Delhi Sales Tax Act, 1975, citing a Division Bench judgment in the case of M/s. Samagya Consultant Pvt. Ltd. vs. Commissioner of Sales Tax and Another. The notice for reopening simply stated that the turnover had escaped assessment without providing any specific reasons for this conclusion. The Petitioner contended that no reasons were recorded before issuing the notice, which was a violation of the law and the Circular No. 7 of 2001-02 issued by the Commissioner of Sales Tax emphasizing the necessity of recording reasons before reopening an assessment.

The Respondents, in their counter affidavit, argued that recording reasons before initiating reassessment proceedings was not a requirement under the Delhi Sales Tax Act, 1975, unlike the Income Tax law. However, the Court disagreed with this interpretation, stating that it was contrary to the previous decision and the Circular issued by the Commissioner of Sales Tax. The Court emphasized that circulars issued by governmental authorities are binding on subordinate authorities and that there must be a valid reason for reopening a completed assessment, as highlighted in the M/s. Samagya Consultant Pvt. Ltd. case.

The Court further elaborated that the power to reopen an assessment is not a plenary power and requires the Assessing Officer to have material on record, consider that material, and then record reasons for the reopening. In this case, the Court found that reasons were not recorded before issuing the notice, leading to the decision to quash the notice and subsequent proceedings. The Court granted the relief prayed for by the Petitioner and awarded costs amounting to Rs. 3000 to be paid within six weeks.