2016 (7) TMI 880 - HC - VAT and Sales Tax

Reversal of input tax credit - the supplier dealers Registration Certificates have been cancelled with retrospective effect - Held that - In fact, the respondent has also recorded the fact that the petitioner has accounted for the purchases and made payment through cheques or banks. If that is the case, if there is any doubt, the respondent could have called for the bank statement. Without doing so, the question of completing the assessment by stating that Bank Statement and Moment details were not given, is not tenable since there was no request made by the respondent to produce any of the documents and thus the impugned orders have been passed in violation of principles of natural justice as the respondent has proceeded to complete the assessment on totally different grounds than what was mentioned in the pre-revision notice. Accordingly, the petitioner is entitled to succeed. - Writ petition allowed - Decided in favor of assessee.

Summary

Issues:
Challenge to Assessment Orders under Tamil Nadu Value Added Tax Act, 2006 for multiple years based on cancellation of other end dealers' Registration Certificates - Reversal of Input Tax Credit - Failure to provide specific reasons for disallowance of documents - Violation of principles of natural justice - Remand for fresh consideration.

Analysis:
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, challenged Assessment Orders for various years based on the reversal of Input Tax Credit due to the cancellation of other end dealers' Registration Certificates. The petitioner contended that they had provided necessary documents and objections regarding the transactions in question. However, the respondent completed the assessment without requesting additional documents or clarifications, leading to a violation of natural justice principles. The court observed that the respondent had not specified reasons for rejecting the documents submitted by the petitioner, indicating that the documents were seemingly accepted. The court held that the assessment was completed on different grounds than those mentioned in the pre-revision notice, highlighting a procedural flaw.

The judgment criticized the respondent's approach, stating that the assessment should have been more thorough and transparent. The court emphasized the importance of Assessing Officers adopting an assessee-friendly approach and ensuring clarity in communication during assessments involving complex facts. The court highlighted a recurring issue where Assessing Officers appeared convinced with the dealer's submissions during personal hearings but proceeded to complete assessments on new grounds not disclosed to the assessee earlier. As a result, the court directed the matter to be remanded for fresh consideration, emphasizing the need for Assessing Officers to follow proper procedures and communicate effectively with taxpayers.

In the final decision, the court allowed the writ petitions, quashed the impugned orders, and remanded the matter to the respondent for a fresh assessment in compliance with the law. No costs were awarded, and the connected miscellaneous petitions were closed. Additionally, the court directed the Principal Commissioner/Commissioner of Commercial Taxes to issue a circular to Assessing Officers on conducting assessments in a fair and transparent manner, highlighting the importance of seeking necessary information and avoiding procedural irregularities in assessment proceedings.