2017 (11) TMI 1088 - HC - VAT and Sales Tax

Validity of assessment order and notices - it was alleged that the petitioner has not fulfilled the conditions so stipulated in Notification dated 20.8.2010 as well as the conditions so provided under Section 13(1)(f) of the U.P. VAT Act - input tax credit - Section 29 of the VAT Act - Held that - no fresh information, material or fact or reason has been recorded by the assessing authority to establish the satisfaction of any of the required pre-conditions of the applicability of the provisions of Section 29 of the VAT Act. Section 29 of the VAT Act provides for reassessment of tax on turnover escaping from assessment. It lays down that if the assessing authority has reason to believe that the whole or any part of a turnover of a dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under the Act. In the present set of facts, particularly when admittedly the transaction has properly been examined and verified and where there is no fresh material available with the assessing authority, re-assessment proceedings are nothing but are roving and fishing inquiry of the matter, which is not permissible under the law nor it is permissible under Section 29 of the VAT Act. In the assessment orders the assessing authority has properly examined the entire material and thereafter has allowed input tax credit on the sale price by accepting the credit notes, which are issued by the seller and once this aspect has been considered and examined, there was no occasion to the assessing authority to seek permission for re-assessment for re-opening the matter and in view of the aforesaid reasons the writ petitions stand allowed - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Legality of the re-assessment proceedings initiated by the respondents.
2. Validity of the order granting permission for re-assessment under Section 29(7) of the U.P. VAT Act.
3. Examination of whether the conditions under Section 29(1) of the VAT Act were met for initiating re-assessment.

Detailed Analysis:

1. Legality of the Re-assessment Proceedings:
The petitioner challenged the re-assessment proceedings initiated by the respondents, arguing that the original assessment was conducted after a thorough examination of all relevant documents and records. The petitioner contended that there was no fresh material to justify the re-opening of the case. The court noted that the original assessment orders were passed after due scrutiny and verification of the petitioner’s books of accounts, including credit notes issued by the seller company. The court emphasized that re-assessment proceedings cannot be initiated on the same material without any new evidence or information.

2. Validity of the Order Granting Permission for Re-assessment:
The petitioner argued that the order granting permission for re-assessment was based on a mere change of opinion and not on any new material. The court referred to previous judgments, including Varun Beverages Ltd. Vs. State of U.P. and M/s. Bharat Heavy Electricals Limited Vs. State of U.P., which held that re-assessment cannot be justified on the basis of a change of opinion. The court highlighted that the Additional Commissioner granted permission for re-assessment without considering the detailed reply submitted by the petitioner. The court concluded that the order granting permission was bad in law and liable to be quashed.

3. Examination of Conditions Under Section 29(1) of the VAT Act:
The court examined whether the conditions stipulated under Section 29(1) of the VAT Act were met for initiating re-assessment. Section 29(1) requires the assessing authority to have "reason to believe" that the turnover has escaped assessment, been under-assessed, assessed at a lower rate, or that deductions or exemptions have been wrongly allowed. The court found that none of these conditions existed in the present case. The court emphasized that the belief of escapement must be based on reasonable grounds and relevant material, which was absent in this case. The court referred to the judgment in M/s. Aryawart Chawal Udyog, which stated that re-assessment proceedings cannot be initiated based on a change of opinion or non-application of mind during the original assessment.

Conclusion:
The court concluded that the re-assessment proceedings were not justified as there was no fresh material or new information to warrant re-opening the case. The court quashed the orders granting permission for re-assessment and the consequential notices issued by the assessing authority. The writ petitions were allowed, and the court held that the re-assessment proceedings were an abuse of the process of law.