2014 (1) TMI 1613 - HC - VAT and Sales Tax

Provisional assessment under Section 25 (1) of UP Value Added Tax Act, 2008 - Held that - The provisions of Section 25 (1) (iii) authorise the assessing officer to make provisional assessment on the basis of material available on record with him. Whenever it appears to the assessing authority that the turnover of sale or purchase or both disclosed by the dealer is not worthy of credit, he can make provisional assessment after giving notice to the assessee of such proposed assessment - The petitioner has filed the returns. The assessing officer has not referred to any material in the notice. He has however stated in the last sentence of the second paragraph of the notice that the petitioner has constructed flats and has sold them which amount to deemed sale, on which he has not accepted the liability of payment of tax and has given a show cause notice to the petitioner to appear before him to give a reply. The assessing authority has not yet exercised jurisdiction to make a provisional assessment under Section 25 (1) of the Act. He has given the notice inviting objection on assumption of facts on which he may exercise his authority. If the petitioner satisfies the assessing authority that he has not sold any flats during the relevant period, the assessing authority may not make any assessment. His satisfaction will depend on the reply to be given by the petitioner. At this stage it cannot be said that there are no jurisdictional fact existing on which the power to make provisional assessment has been initiated - Decided against assessee.

Summary

Issues:
Challenge to show cause notice for provisional assessment under Section 25(1) of UP Value Added Tax Act, 2008.

Analysis:
The petitioner, a private limited company engaged in real estate development, sought to quash a show cause notice for provisional assessment issued by the Deputy Commissioner of Commercial Tax. The petitioner contended that the notice lacked jurisdiction as the necessary facts for invoking Section 25(1) were absent. Reference was made to a Supreme Court decision in M/s Larsen & Toubro Limited case, which clarified the tax implications on the sale of properties. The Court emphasized that each case's assessment depends on individual facts, requiring the assessing authority to examine evidence and allow petitioners to present their case before approaching the High Court.

Analysis:
The petitioner argued that the notice was solely based on the Supreme Court decision in M/s Larsen & Toubro Limited case, without any specific material against them. Citing the Arun Kumar case, the petitioner highlighted the need for jurisdictional facts to support provisional assessment under Section 25(1)(iii). The Court reiterated that jurisdictional facts are essential for the authority to act, and the assessing officer must have valid grounds to initiate provisional assessment.

Analysis:
The assessing officer's notice raised concerns about the sale of flats being deemed sales, potentially subject to tax liability. However, the petitioner had filed returns for the relevant period, and the assessing officer did not provide concrete evidence in the notice. The Court emphasized that the existence of facts does not automatically imply the presence of material supporting those facts. The assessing authority's power to conduct provisional assessment hinges on the availability of jurisdictional facts, which were not clearly established in this case.

Analysis:
The Court concluded that the assessing authority had not yet exercised jurisdiction to conduct provisional assessment but had merely issued a notice seeking the petitioner's response. The authority's decision would depend on the petitioner's explanation regarding the sale of flats during the relevant period. The Court highlighted that at this stage, the jurisdictional facts required for provisional assessment had not been definitively determined. Consequently, the writ petition challenging the show cause notice was dismissed.