2018 (2) TMI 1483 - HC - VAT and Sales Tax

Reopening of assessment - Section 24 of the Delhi Sales Tax Act, 1975 - Held that - the original records relating to the present case have been misplaced or weeded out and hence it is not possible to establish and show that the assessing authority had recorded reasons to believe in writing before issuing notice dated 9th November, 1999 under Section 24 of the Act. As the respondents are unable to show and establish that reasons to believe were recorded in writing, we have to allow the present writ petition and quash the impugned notice dated 9th November, 1999 initiating proceedings under Section 24 of the Act. Petition allowed - decided in favor of petitioner.

Issues Involved:
1. Validity of the notice issued under Section 24 of the Delhi Sales Tax Act, 1975.
2. Requirement of recording "reasons to believe" before issuing a notice under Section 24.
3. Impact of the Commissioner's order in a separate case on the petitioner's case.
4. Compliance with procedural requirements for reopening assessment.

Detailed Analysis:

1. Validity of the Notice Issued under Section 24 of the Delhi Sales Tax Act, 1975:

The petitioner, M/s Garware Wall Ropes Limited, challenged the notice dated 9th November 1999 issued by the Sales Tax Officer for the Assessment Year 1995-96 under Section 24 of the Delhi Sales Tax Act, 1975. The court noted that the original records relating to the case were misplaced or weeded out, making it impossible to establish that the assessing authority had recorded 'reasons to believe' in writing before issuing the notice.

2. Requirement of Recording "Reasons to Believe" Before Issuing a Notice under Section 24:

Section 24 of the Act mandates that the Commissioner must have 'reasons to believe' that the turnover of a dealer has escaped assessment or has been under-assessed before issuing a notice. The court referenced previous judgments, including M/s Classic Engineering Company vs. The Commissioner of Sales Tax and Shruti Fasteners Limited vs. Commissioner of Value Added Tax, which emphasized that recording the reasons is a mandatory requirement. The absence of recorded reasons invalidates the reassessment proceedings.

3. Impact of the Commissioner's Order in a Separate Case on the Petitioner's Case:

The Revenue argued that the reopening under Section 24 was based on a specific direction given by the Commissioner in an order dated 26th October 1999, related to M/s Bahubali Plastics Private Limited. The court noted that the petitioner's case was not directly involved in the litigation/order concerning M/s Bahubali Plastics. The petitioner's counsel argued that the Commissioner's observations could not be construed as directions under Section 49 of the Act to justify reopening. The court did not need to decide on the applicability of Section 49, as the requirement to record "reasons to believe" was not met.

4. Compliance with Procedural Requirements for Reopening Assessment:

The court reiterated that the jurisdictional pre-condition of recording "reasons to believe" in writing is essential for the validity of a notice under Section 24. Even assuming the Commissioner's order in the case of M/s Bahubali Plastics was under Section 49, the mandatory requirement of Section 24 was not satisfied. Consequently, the notice dated 9th November 1999 was deemed void and bad in law.

Conclusion:

The court allowed the writ petition, quashing the impugned notice and the reassessment order. The proceedings pursuant to the notice and the order were treated as null and void. The writ petition was allowed with no order as to costs.

← Previous Next →