2015 (10) TMI 223 - HC - VAT and Sales Tax

Legality and validity of order on the basis of the audit report - same authority to issue the audit report and pass the assessment order - Held that - A perusal of the assessment order dated August 1, 2014 under annexure 6 reveals that tax audit of the dealer-company for the period April 1, 2011 to March 31, 2013 was conducted by the audit team headed by the Sales Tax Officer, Bhubaneswar-I Circle, Bhubaneswar, who submitted the audit report in form VAT-303under sub-rule (3) of rule 45 of the OVAT Rules, 2005 and the said audit report has been utilized against the petitioner for passing the impugned assessment order. The impugned assessment order further reveals that same has been passed by the Deputy Commissioner of Sales Tax, Bhubaneswar-II Circle, Bhubaneswar as assessing authority. A portion of the audit visit report under annexure 2 quoted above reveals that opposite party No. 3-Deputy Commissioner of Sales Tax, Bhubaneswar had issued letter No. 747 dated January 21, 2014 relying upon which audit visit report was prepared. - Deputy Commissioner of Sales Tax, Bhubaneswar-II Circle, Bhubaneswar-opposite party No. 3, who has passed the impugned order of assessment on the basis of the audit visit report is involved in the audit process - principle of natural justice demands that nobody shall be a judge of his own cause - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues: Challenge to audit visit report and order of assessment under OVAT Act

Issue 1: Challenge to legality and validity of audit visit report and order of assessment

The petitioner challenged the legality and validity of the audit visit report dated February 3, 2014, and the order of assessment dated August 1, 2014, issued by the Sales Tax Officer and Deputy Commissioner of Sales Tax, respectively, under section 42(4) of the Orissa Value Added Tax Act, 2004, for the period from April 1, 2011, to March 31, 2013. The challenge was based on the allegation that the audit visit report was influenced and biased, leading to an illegal assessment. The petitioner contended that the assessing officer abdicated his jurisdiction by relying on a superior officer's directions, violating principles of natural justice. The petitioner cited the Tata Sponge Iron Ltd. case to support the argument that an officer involved in the audit process should not be the assessing officer to ensure transparency and fairness.

Issue 2: Competency of the Deputy Commissioner of Sales Tax for assessment

The main question before the court was whether the Deputy Commissioner of Sales Tax, who issued a crucial letter relied upon in the audit visit report, was competent to assess the petitioner-company under the OVAT Act. The court analyzed the contents of the audit visit report and the assessment order to determine the involvement of the Deputy Commissioner in the audit process. Citing the principle of natural justice that prohibits a person from being a judge in their own cause, the court referred to the A. K. Kraipak case to emphasize the importance of fairness and impartiality in quasi-judicial proceedings.

Judgment and Decision

After considering the arguments and legal precedents, the court held that the Deputy Commissioner of Sales Tax, who was involved in the audit process, could not be the assessing officer to maintain fairness and avoid bias. The court set aside the order of assessment dated August 1, 2014, and remanded the matter for fresh assessment by an authority not connected with the tax audit of the petitioner. The court emphasized the need for transparency and adherence to natural justice principles in assessment proceedings. The fresh assessment was directed to be completed within eight weeks, ensuring a fair opportunity for the petitioner-company. The court disposed of the writ petition without costs, focusing solely on the question of jurisdiction and authority of the assessing officer.

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