2017 (9) TMI 326 - HC - VAT and Sales Tax

Classification of goods - leaf springs - whether leaf springs are classifiable under Schedule-II Part-IV of the M.P. VAT Act liable to tax @12.5% or as iron and steel under Entry 30 (v) of Part II of Schedule II? - jurisdiction of the authority to reassess merely on the basis of change of opinion - sub-section (3) of Section 21 of M.P. VAT Act - obligation on the part of Assessing Authority to pass an order within one year from the date of initiation of proceedings - Held that - in view of the provisions of sub-section (3) of Section 21 of M.P. VAT Act, it can be said that impugned order of re-assessment does not get invalidated even if it is passed beyond the period of one year from the date of initiation of proceedings with the issuance of show cause notice - contention made on behalf of the petitioner that it was beyond jurisdiction of the Assessing Authority to have passed the order of re-assessment after expiry of one year from the date of issuance of show cause notice is answered in the negative. Whether the change of opinion can be the basis for re-assessment? - Held that - the law is settled that mere change of opinion in absence of any other material will not be sufficient for reassessment - re-assessment of tax is permissible only when it has been under assessed or has escaped assessment, or has been assessed at a lower rate, or any wrong deduction has been made while making the assessment or a rebate of input tax has incorrectly been allowed, while making the assessment or is rendered erroneous and prejudicial to the interest of revenue. Consequent to or in the light of any judgment or order of any Court or Appellate Board, which has become final. Thus, except these circumstances no other grounds available for the Commissioner to reassess the tax - in the present case, it was only on the basis of opinion formulated by order dated 5.6.2007 the Commissioner has re-assessed the tax of the period 2006-07 which cannot be upheld. Therefore, the demand raised for additional sum being the difference i.e. 8.5% amounting to ₹ 47754454/- is set aside. Consequently the demand carried for said amount is also quashed. Sub section (3) stipulates that any order passed by the Commissioner under sub-section (1) and (2) shall have a prospective effect and shall be binding on the authorities referred to in Section 3 in all proceedings under this Act except appeals - the order passed on 5.6.2007 was applicable for next financial year i.e. 2007-2008 and not 2006- 2007 - For this reason also the impugned order cannot be upheld. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Jurisdiction of the authority to reassess based on change of opinion.
2. Validity of the reassessment order passed beyond the stipulated period.

Detailed Analysis:

1. Jurisdiction of the Authority to Reassess Based on Change of Opinion:
The petitioner challenged the reassessment primarily on the grounds that it was beyond the jurisdiction of the authority to reassess merely based on a change of opinion. The petitioner cited various judgments to support this contention. Notably, in the case of *Deputy Commissioner of Income Tax vs. Simplex Concrete Piles (India) Limited* (2013), it was held that a subsequent reversal of the legal position by a higher court does not authorize the department to reopen an assessment that was closed based on the law as it stood at the relevant time. Similarly, in *Binani Industries Limited vs. Assistant Commissioner of Commercial Taxes* (2007), it was stated that reopening an assessment due to a mere change of opinion is impermissible. The court further referenced *Commissioner of Income Tax vs. Kelvinator of India Limited* (2010), emphasizing that the Assessing Officer has no power to review, only to reassess, and reassessment must be based on tangible material, not a mere change of opinion.

2. Validity of the Reassessment Order Passed Beyond the Stipulated Period:
The petitioner argued that the reassessment order passed beyond one year from the date of initiation of proceedings was invalid. However, the court noted that the repeated adjournments sought by the petitioner contributed to the delay. It was held that the delay cannot be attributed to the authority but to the petitioner. The court referenced the Supreme Court decision in *Sales Tax Officer, Special Circle, Ernakulam vs. M/s Sudarsanam Iyengar and Sons* (1970), which established that assessment proceedings are pending from initiation until terminated by a final order. The court concluded that the order of reassessment does not get invalidated even if passed beyond one year from the date of initiation of proceedings, considering the adjournments sought by the petitioner.

Conclusion:
The court held that the reassessment based on a mere change of opinion without any new material is impermissible. The reassessment order dated 19.12.2014 was quashed as it was based solely on the opinion formulated by an order dated 5.6.2007, which was not applicable to the assessment year 2006-07 but for the subsequent financial year. Consequently, the demand raised for the additional tax amounting to ?4,77,54,454/- was set aside. The petition was allowed, and the reassessment order was invalidated on both grounds of jurisdiction and timing.