2017 (6) TMI 1203 - HC - VAT and Sales Tax

Principles of Natural Justice - without issuing a second notice to the petitioner under section 39 of the KVAT Act, the assessing officer, respondent No. 2, has passed the reassessment order dated April 27, 2017 - Held that - section 39 (b) of the Act specifically requires that a notice be issued to the dealer prior to reassessing the tax liability. Thus, an opportunity of hearing has to be given to the assessee. Bare perusal of the re-assessment order dated April 27, 2017 clearly reveals that a notice was issued to the petitioner on October 5, 2015, but only for production of books of account for the assessment year 2010- 11. However, subsequent thereto, no notice was issued to the petitioner under section 39 of the KVAT Act. Thus, the very vital step in reassessing the tax liability has been skipped by the assessing officer. Thereby, the assessing officer has violated the petitioner s right under the principles of natural justice - Since a fair procedure has not been adopted by the respondent No. 2, this Court has no other option, but to set aside the reassessment order dated April 27, 2017. Petition allowed by way of remand.

Summary

Issues:
Challenge to legality of reassessment order under KVAT Act for tax liability.

Analysis:
The petitioner, a public limited company engaged in manufacturing, challenged a reassessment order directing payment of tax liability. The petitioner submitted returns under KVAT Act and CST Act for assessment year 2010-11. The Commissioner of Commercial Taxes assigned an audit of the petitioner's accounts, leading to a notice for document verification. The assessing officer passed the reassessment order without issuing a second notice under section 39 of the KVAT Act, depriving the petitioner of a hearing opportunity.

The petitioner's counsel argued that section 39 of the KVAT Act mandates issuing a notice to the dealer before reassessment to provide an opportunity for a hearing. The counsel for the Commercial Tax Department acknowledged the absence of such notice in the reassessment order. Section 39(b) of the Act requires issuing a notice to the dealer before reassessing tax liability, ensuring the opportunity for a hearing.

The reassessment order dated April 27, 2017, revealed that a notice was issued only for document production, not under section 39 of the KVAT Act. This omission violated the principles of natural justice by denying the petitioner a fair procedure. Consequently, the Court set aside the reassessment order and remanded the case to the assessing officer to reassess the tax liability for the assessment year 2010-11 while following the legal procedures.

In conclusion, the Court allowed the writ petitions, setting aside the reassessment order and directing the assessing officer to reassess the petitioner's tax liability for the relevant year in compliance with legal procedures.