2022 (12) TMI 715 - HC - VAT and Sales Tax

Validity of assessment order - reversal of Input Tax Credit (ITC) - mismatch of particulars set out in the annexures accompanying the petitioner's returns and the other dealers' returns of turnover - it is alleged that the procedure dealing with mismatch as set out by the Principal Secretary/Commissioner, Commercial Taxes in Circular No.5 of 2020-2021 dated 24.02.2021, not followed - HELD THAT - There is merit in the challenge to the impugned orders of assessment and hence the same are set aside. Yet another issue that arises relates to non-maintenance of books of accounts. According to the petitioner, this issue has been explained before the Assessing Authority who was not taken proper note of the same. Insofar as the larger issue is set aside, this issue is also set aside. Matter to be adjudicated do-novo. Petition closed.

Summary

Issues Involved:
1. Challenge to orders of assessment under the Tamil Nadu Value Added Tax Act, 2006 for the periods 2014-15 and 2015-16.
2. Reversal of Input Tax Credit (ITC) due to mismatch of particulars in returns.
3. Non-compliance with the procedure for dealing with mismatches as per Circular No.5 of 2020-2021.
4. Non-maintenance of books of accounts.

Detailed Analysis:
1. The judgment addresses the challenge to the orders of assessment under the Tamil Nadu Value Added Tax Act, 2006 for the periods 2014-15 and 2015-16. The major issue raised pertains to the reversal of Input Tax Credit (ITC) based on discrepancies in the particulars provided in the annexures accompanying the petitioner's returns and other dealers' returns of turnover.

2. The court notes that the Assessing Authority did not adhere to the procedure outlined in Circular No.5 of 2020-2021 issued by the Principal Secretary/Commissioner, Commercial Taxes. The Circular sets out a detailed procedure to be followed in cases of mismatch, categorizing them into various types such as ITC mismatches, transaction mismatches, and cases of evasion or omission.

3. The Circular specifies steps for the Original Assessing Authority to follow, including listing pending mismatch cases, verifying transactions, issuing notices to dealers, seeking details from the Other End Assessing Authority, and conducting assessments based on findings. The process involves ensuring natural justice principles, providing opportunities for objections and hearings, and completing the assessment within a stipulated timeframe of 180 days.

4. In light of the non-compliance with the prescribed procedure and the lack of proper maintenance of books of accounts, the court finds merit in setting aside the impugned orders of assessment. The petitioner is directed to be called upon for a fresh assessment following the Circular's guidelines within twelve weeks from the date of the order, ensuring adherence to the law and principles of natural justice.

5. The judgment concludes by allowing the Writ Petitions, without imposing costs, and closing the connected Miscellaneous Petitions. The decision emphasizes the importance of following prescribed procedures and maintaining proper records to ensure fair and lawful assessments under the tax laws.