2019 (7) TMI 1666 - HC - VAT and Sales Tax

Validity of assessment proceedings - time limitation - Section 31 of the Bihar Value Added Tax Act, 2005 - attachment of bank accounts - no scrutiny or assessment was carried out before the due date within the meaning of the explanation attached to Section 24 of the Act - HELD THAT - For a conjoint reading of Section 31 and Section 27 would confirm that while liberty has been granted to the assessing authority to proceed in the matter of reassessment based on a departmental audit made under Section 26(3) of the Act , with 4 years of the due date , the outer limit for conclusion of such obligation is found in the 3rd proviso attached to Section 27 and the reason is because the omission or failure or non-disclosure has been treated equivalent to a non-filing of the return as manifest from the legislative intent. Having observed thus, there is no infirmity in so far as the issue of limitation raised by Mr. Ranjan is concerned and the proceedings are within time. The assessing authority has completely failed on his discharge and which is confirmed from the order dated 23.10.2017 whereby proceeding has been mechanically initiated by the assessing authority on a simple consideration of the departmental audit objection and on receipt of the report. Though Mr. Chiranjiva Ranjan advocates for putting a quietus to the matter on lapse but since the initiation is within the time frame and indulgence is invited on account of procedural irregularity in the proceeding, we are persuaded to remit the matter to the assessing authority, who shall consider the audit objection and proceed in the matter in accordance with law bearing in mind the legal position settled, within a maximum period of three months from the date of receipt/production of a copy of this judgment. The assessment order dated 31.03.2018 together with the demand notice of the same date, impugned at Annexures 1 and 1/2 to the writ petition, along with the attachment notice dated 24.1.2019, impugned at Annexure 3, are quashed and set aside - Petition allowed.

Summary

Issues Involved:
1. Validity of the assessment proceedings under Section 31 of the Bihar Value Added Tax Act, 2005.
2. Whether the assessment proceedings were barred by limitation.
3. Compliance with procedural requirements under Section 31(1) of the Act and Rule 22(8)(c) of the Rules.

Detailed Analysis:

1. Validity of the Assessment Proceedings:
The petitioner challenged the assessment proceedings initiated by the assessing authority under Section 31 of the Bihar Value Added Tax Act, 2005 (the Act), arguing that they were void ab initio due to being barred by limitation. The court allowed the petitioner to question the assessment proceedings in the writ petition itself, requiring an interpretation of the statutory provisions.

2. Limitation Issue:
The matter related to the assessment year 2012-13. The petitioner filed returns on 31.08.2013, and since no scrutiny or assessment was carried out by 31.12.2013, the returns were deemed assessed under Section 26(1) of the Act. A departmental audit followed, and a notice was issued to the petitioner on 10.03.2015. The audit was completed on 25.05.2016, and a proceeding under Section 31(1) of the Act was initiated on 23.10.2017. The petitioner did not participate in the reassessment, which concluded on 31.03.2018, leading to a demand notice.

The petitioner argued that the reassessment was barred by limitation and lacked jurisdiction. The respondent contended that the assessment was within the prescribed limitation. The court noted that the audit and initiation of reassessment proceedings were within the prescribed time limits. The audit was conducted within 36 months from the due date, and the reassessment notice was issued within four years from the due date, thus within the limitation period.

3. Procedural Compliance:
The court examined whether the assessing authority complied with the procedural requirements under Section 31(1) of the Act and Rule 22(8)(c) of the Rules. The assessing authority is required to record its opinion and satisfaction before issuing a notice for reassessment. The court found that the assessing authority mechanically initiated the proceedings based on the departmental audit objection without recording the necessary opinion or satisfaction. This failure to comply with the statutory requirements rendered the reassessment proceedings invalid.

Conclusion:
The court quashed and set aside the assessment order dated 31.03.2018, the demand notice of the same date, and the attachment notice dated 24.01.2019. The matter was remitted to the assessing authority to consider the audit objection and proceed in accordance with the law within three months. The revision application pending before the Commissioner was rendered infructuous. The writ petition was allowed with the specified directions.