2022 (3) TMI 356 - HC - VAT and Sales Tax

Initiation of assessment proceedings - It is the case of the writ-applicant that although no proceedings were pending, yet on the basis of the objections of the AG Audit, the impugned notice dated 26.07.2019 came to be issued under Section-34(8A) of the VAT Act read with Section-9(2) of the Central Sales Tax Act, 1956 proposing to initiate the assessment proceedings for the F.Y. 2009-10 - HELD THAT - The issue raised in the present writ-application is no longer res-integra in view of the judgment and order passed by a Coordinate Bench of this Court in the case of RAAJRATNA METAL INDUSTRIES LTD. AND 1 OTHER (S) VERSUS STATE OF GUJARAT AND 1 OTHER (S) 2019 (7) TMI 468 - GUJARAT HIGH COURT where it was held that the powers under sub-section (8A) of Section 34 of the VAT Act would be available when a certain claim or a transaction has not been subjected to audit assessment under sub-section (2) of Section 34 of the VAT Act. It is also clear that to invoke the provision of sub-section (8A) of Section 34 of the VAT Act, some proceedings must be pending. The Sub-section (8A)(a) can be invoked during the course of any proceedings under the Act, 2003. To put it in other words, it is only in the course of any proceedings pending against the dealer under the Act, if it comes to the notice of the authority that the tax has been evaded or the tax liability has not been disclosed correctly or excess tax credit has been claimed in respect of any period or periods, then the authority can initiate assessment of the dealer in respect of such transaction or claim - In the case on hand, the Commercial Tax Officer-(3), Unit-9, Ahmedabad wants to reopen the assessment for the F.Y.2009-10. The authority wants to undertake the assessment under Section- 34(8A) of the Act on the strength of the AG Audit. The impugned notice issued by the authority is without jurisdiction. This writ-application succeeds and is hereby allowed.

Summary

Issues:
1. Validity of the impugned Notice dated 26.7.2019 under Section-34(8A) of the VAT Act read with Section-9(2) of the Central Sales Tax Act, 1956.
2. Jurisdiction and legality of the impugned notice.
3. Stay on the implementation, operation, and execution of the impugned Notice dated 26.7.2019.
4. Interpretation of Section-34(8A) and Sub-section (10) of Section-34 of the Act, 2003.
5. Reopening of assessment for F.Y. 2009-10 based on AG Audit objections.
6. Requirement of pending proceedings for invoking Section-34(8A) of the VAT Act.
7. Application of the judgment in the case of Raajratna Metal Industries Ltd. & Others Vs. State of Gujarat & Others.

Analysis:
1. The writ-applicant sought relief through a writ-application challenging the impugned Notice dated 26.7.2019, arguing that it was without jurisdiction and illegal. The Company, engaged in water treatment projects, was previously registered under the VAT Act and had filed Income Tax Returns for F.Y. 2009-10. The impugned notice was issued based on AG Audit objections, proposing to initiate assessment proceedings for the same year.

2. The High Court analyzed Section-34(8A) of the Act, 2003, which allows assessment if tax evasion or incorrect tax liability is detected during pending proceedings. The Court emphasized that the authority can only initiate assessment during ongoing proceedings against the dealer. The Commercial Tax Officer sought to reopen the assessment for F.Y. 2009-10 based on AG Audit findings, without specifying the pending proceedings prompting the action.

3. The Court referred to a previous judgment to clarify that the power under Section-34(8A) cannot be used to correct errors in audit assessment orders. It highlighted that the provision requires pending proceedings for its invocation. The writ-applicant argued that since scrutiny audit assessment had already been conducted for the same period under Section 34(2) of the VAT Act, initiating a new assessment was without jurisdiction and illegal.

4. Relying on the precedent, the Court held that the impugned notice lacked jurisdiction and was quashed. The judgment emphasized that initiating a fresh assessment for the same period, after a conscious decision in a previous assessment, amounted to an unauthorized review. Consequently, the impugned notice dated 26.07.2019 was set aside, and all related proceedings were terminated.