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2014 (11) TMI 880 - HC - VAT and Sales TaxDefault assessment under Section 32 of the DVAT Act - period of limitation - extended period of six years in terms of proviso to Section 34(1) of the DVAT Act - scope of the term reason to believe - Held that - on reading of the default assessment order, we do not find that there is any averment or assertion that there was concealment, omission or failure on the part of the appellant assessee to furnish material particulars. The default assessment order dated 11.05.2011, therefore, will falter and not meet the statutory requirements. It is not the case of the respondent-revenue nor has it been asserted that there is another document or note, recording reason to believe by the Commissioner/authority. The appellant assessee had filed objections under Section 74 of the Act before the Objection Hearing Authority and had specifically pleaded that the default assessment was barred by limitation. The Objection Hearing Authority, cannot record reason to believe . These, as per the statute, should be recorded by the Commissioner/competent authority and that too, before or at the time of passing of the default assessment order under section 32 of the DVAT Act. The reason is simple that the power conferred must be exercised in the manner prescribed and mandated, especially when it is a jurisdictional pre-condition and requirement. Section 34(1) postulates and prescribes upper time limit for passing of the default assessment order as four years, but extends the said period to six years on satisfaction of pre-conditions laid down in the proviso. This extended period is an exception and not the rule. So pre-conditions in the proviso must be satisfied before or with the passing of an order under Section 32 and not afterwards or by the Objection Hearing Authority. The default assessment order as recorded does not disclose and states as to why and for what reason the Commissioner/competent authority had formed the belief that there was concealment, omission or failure to disclose full material particulars. In the absence of satisfaction of the said condition and requirement, the extended period of six years cannot be invoked to pass the default assessment order. - Decided in favor of assessee.
Issues Involved:
1. Applicability of the proviso to Section 34(1) of the DVAT Act. 2. Limitation period for default assessment under Section 32 of the DVAT Act. 3. Requirement for the Commissioner to record "reasons to believe." 4. Jurisdiction of the Objection Hearing Authority in recording "reasons to believe." 5. Compliance with procedural requirements for default assessment. Detailed Analysis: 1. Applicability of the Proviso to Section 34(1) of the DVAT Act: The central issue was whether the VAT Tribunal was correct in applying the proviso to Section 34(1) of the DVAT Act, which extends the limitation period from four to six years if the Commissioner has "reasons to believe" that tax was not paid due to concealment, omission, or failure to disclose material particulars by the assessee. The Tribunal held that the extended period of six years was applicable due to the appellant's failure to submit 'C' forms quarter-wise, which constituted an omission. 2. Limitation Period for Default Assessment under Section 32 of the DVAT Act: Section 34(1) of the DVAT Act stipulates a four-year limitation period for completing assessments or reassessments. The proviso extends this period to six years if specific conditions are met. The court emphasized that the normal limitation period is four years, and the extended period is an exception that must be justified by recorded reasons to believe. 3. Requirement for the Commissioner to Record "Reasons to Believe": The court highlighted that the Commissioner must form and record "reasons to believe" that there was concealment, omission, or failure to disclose material particulars, resulting in non-payment or short payment of tax. This requirement is a jurisdictional precondition and must be satisfied to invoke the extended limitation period. The court noted that the default assessment order did not contain any recorded reasons to believe, which is a mandatory requirement under the DVAT Act. 4. Jurisdiction of the Objection Hearing Authority in Recording "Reasons to Believe": The court clarified that the Objection Hearing Authority does not have the jurisdiction to record "reasons to believe." This responsibility lies solely with the Commissioner or the competent authority, and it must be done before or at the time of passing the default assessment order. The Objection Hearing Authority's role is limited to adjudicating objections and cannot retrospectively justify the extended limitation period. 5. Compliance with Procedural Requirements for Default Assessment: The court found that the default assessment order dated 11.05.2011 did not meet the statutory requirements as it lacked specific reasons for the belief that there was concealment, omission, or failure to disclose material particulars. The assessment was made within six years but after the four-year period, without the necessary recorded reasons to justify the extended period. The court emphasized that every error or mistake in the return does not automatically invoke the proviso to Section 34(1); the conditions must be explicitly satisfied and recorded. Conclusion: The court concluded that the VAT Tribunal erred in upholding the default assessment order based on the extended limitation period without the Commissioner recording "reasons to believe." The appeal was disposed of in favor of the appellant, and the question of law was answered against the revenue. The judgment underscores the importance of procedural compliance and the necessity for the Commissioner to explicitly record reasons when invoking the extended limitation period under the DVAT Act.
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