2019 (3) TMI 1708 - HC - VAT and Sales Tax

Exercise of statutory jurisdiction for reaching a just conclusion - reassessment in case of an objection either under Section 26(3) of the Act on an internal audit or under Section 33 of the Act - whether or not the law permits the Assessing Authority to routinely carry out multiple reassessment proceedings perhaps we would not express ourselves for the present but would definitely reserve our opinion for expression in an appropriate case? HELD THAT - In the instant case the notice for reassessemt has been issued by the Assessing Authority on 20.12.2011 vide Annexure-1 to I.A No. 01 of 2019 to reopen the proceeding under Section 31 of the Act which is hopelessly time barred because no departmental audit could be held beyond 31.12.2010. A plain reading of the appellate order at Annexure-4 would confirm that whereas it is on the limited issue whether or not the Tax Free Sales as claimed by the petitioner was rightly disallowed but the Assessing Authority has gone beyond the terms of the remands to pass an assessment order which takes into fold additional issues. The third issue which renders the exercise illegal is that in the order so passed on remand impugned at Annexure-5 the Assessing Authority has failed to explain the materials which surfaced subsequently and were not available at the time of the original assessment. The order is silent on such discussion and thus it was rightly canvassed by Mr. Samdarshi that the order impugned is a second opinion on same set of facts. The entire proceedings initiated by the Assessing Authorities beginning from the stage of issuance of notice on 20.12.2011 vide Annexure-1 to I.A No. 01 of 2019 and culminating in the order of assessment dated 25.03.2017 impugned at Annexure-5 is a gross abuse of statutory jurisdiction and is held per se illegal - petition allowed.

Summary

Issues Involved:
1. Multiple reassessment proceedings by the Assessing Authority under the Value Added Tax Act, 2005.
2. Limitation period for initiating reassessment proceedings.
3. Scope of remand by the Appellate Authority.
4. Change of opinion by the Assessing Authority.

Issue-wise Detailed Analysis:

1. Multiple Reassessment Proceedings:
The court observed that the Assessing Authority under the Value Added Tax Act, 2005, frequently engages in multiple reassessment proceedings, leading to repeated orders of reassessment. The court refrained from expressing a definitive opinion on whether the law permits such routine multiple reassessments but reserved the right to do so in an appropriate case.

2. Limitation Period for Reassessment:
The court found that the initiation of the reassessment proceedings was "hopelessly barred by limitation." The assessment year in question was 2006-2007, ending on 31st March 2007. The original assessment order was passed on 11.11.2009. An objection under Section 26(3) of the Act led to a reassessment notice issued on 20.12.2011. According to Section 26(3), the audit must be conducted within 36 months from the due date, which, as per Section 24(3), would be 31st December 2007. Therefore, the departmental audit had to be conducted by 31.12.2010. The reassessment notice issued on 20.12.2011 was thus time-barred.

3. Scope of Remand by the Appellate Authority:
The Joint Commissioner (Appeals) had remitted the matter to the Assessing Authority to examine the limited aspect of Tax Free Sales. However, the Assessing Authority misinterpreted this remand and reopened the matter on additional issues beyond the scope defined by the Appellate Authority. The court noted that the Assessing Authority's action was an "adventurous exercise" and beyond the terms of the remand.

4. Change of Opinion by the Assessing Authority:
The court highlighted that the Assessing Authority's order on remand failed to explain any new materials that surfaced subsequently and were not available at the time of the original assessment. The order was silent on such discussion, making it a case of a second opinion on the same set of facts. The court cited the Supreme Court's judgment in Aryaverth Chawal Udyog, emphasizing that a mere change of opinion on the same material cannot justify reopening assessment proceedings. The standard of reason must be that of an honest and prudent person acting on reasonable grounds.

Conclusion:
The court quashed the entire proceedings initiated by the Assessing Authorities, starting from the issuance of the notice on 20.12.2011 and culminating in the order of assessment dated 25.03.2017. The court deemed the proceedings a "gross abuse of statutory jurisdiction" and declared them per se illegal. The writ petition was allowed, and I.A.No. 1/2019 was disposed of. The court clarified that it had not expressed any opinion on the issue pending before the Commercial Taxes Tribunal, which should be concluded on its own merits.