2022 (8) TMI 78 - HC - VAT and Sales Tax

Initiation of re-assessment proceedings/revision - Jurisdiction - information received from a third party dealer could be relied upon for purposes of re-assesment under Section 21 of the U.P. Trade Tax Act even when the copies of the information received had neither been supplied nor opportunity of cross examination afforded in spite of specific requests being made to the assessing authority by the applicant or not - relevant material on record or not,to believe that any part of the turnover had escaped assessment of tax - Whether the Tribunal was justified in upholding the remand of the case to the assessing authority, without dealing with the issue of validity of initiation of re-assessment proceedings, when the said issue was specifically raised by the applicant and the appellate authority failed to address the same? HELD THAT - There can be no doubt that that the ground raised in the context of re-assessment proceedings goes to the root of the matter. Unless jurisdiction is shown to exist on the date of initiation of re-assessment proceedings, the entire edifice of the assessment that arises in such re-assessment proceedings may never be sustained. It is equally true, for such issue to be decided, an objection must be raised at the initial stage itself. Here the assessee is quite right in submitting that such objection was raised before the assessing authority itself as is clear from the written objection filed by the assessee before the assessing authority and the recital made in the assessment order dated 30.3.2011. In the present case, the appeal authority has reached a firm conclusion that the assessee was not confronted with the adverse material and was not given any opportunity to cross examine the third party from whom Central Excise authorities may have seized certain documents. Thereafter, the appeal authority has remitted the matter to the assessing authority to pass fresh order after giving such opportunity to the assessee. Thus, the matter has been made pending before the original authority - It also cannot be denied that the assessee had raised objection before the assessing authority and the assessing authority had not considered the same. The only error that appears to have crept in the order of the appeal authority as has been confirmed by the Tribunal is not to have made specific observation to compel the assessing authority to deal with the objection as to jurisdiction - Once the matter is engaging the attention of the original authority, it is advisable that the assessee may raise a preliminary issue of lack of jurisdiction as well. Only if the authority is satisfied as to existence of its jurisdiction, it may proceed to give effect to the directions issued by the first appeal authority as confirmed by the Tribunal. Revision disposed off.

Summary

Issues:
1. Validity of relying on information from a third party dealer for reassessment under Section 21 of the U.P. Trade Tax Act without providing copies of the information or opportunity for cross-examination.
2. Existence of relevant material to believe that turnover had escaped assessment of tax.
3. Justification of upholding remand of the case without addressing the validity of the initiation of reassessment proceedings.

Analysis:
1. The assessee, a manufacturer of MS Ingots, challenged the order of the Commercial Tax Tribunal regarding reassessment proceedings initiated under Section 21 of the U.P. Trade Tax Act. The Tribunal dismissed the appeal and confirmed the first appeal authority's decision to remit the matter to the assessing authority for reassessment. The main contention was the reliance on information from a third party dealer without providing copies or opportunity for cross-examination. The Tribunal did not address the objection raised by the assessee regarding the validity of initiating reassessment proceedings based on third-party information. The lack of jurisdiction to initiate reassessment proceedings was a crucial issue raised by the assessee, which was not adequately addressed by the authorities, leading to the matter being remanded without resolving the jurisdictional aspect.

2. The reassessment notice was issued to the assessee without disclosing any facts or reasons for initiating reassessment proceedings. The assessee raised objections regarding jurisdiction, lack of cogent material, limitation, and merits during the proceedings. However, these objections were not addressed by the assessing authority or the appellate bodies. The entire reassessment was based on material obtained from a search conducted by Central Excise authorities against another entity, which did not yield adverse material against the assessee. The failure to address the objections raised by the assessee regarding the lack of jurisdiction and reliance on third-party information without providing an opportunity for cross-examination raised significant concerns about the validity of the reassessment proceedings.

3. The Tribunal's decision to uphold the remand without addressing the validity of initiating reassessment proceedings and the lack of jurisdictional clarity was deemed unjustified. The failure to make specific observations compelling the assessing authority to deal with the jurisdictional objections was identified as an error in the appellate process. The importance of addressing jurisdictional issues at the initial stage of reassessment proceedings was emphasized, and the need for thorough consideration of objections raised by the assessee was highlighted. The unresolved questions and lack of clarity on jurisdictional matters led to the revisions being disposed of without a conclusive decision on the raised issues.

In conclusion, the judgment highlighted the significance of addressing jurisdictional objections, providing opportunities for cross-examination, and ensuring the validity of reassessment proceedings based on reliable and relevant material. The failure to address these fundamental aspects in the appellate process raised concerns about the procedural fairness and adherence to legal requirements in tax assessment matters.