2018 (3) TMI 1416 - HC - VAT and Sales Tax

Whether in absence of any assessment order passed in the original proceeding under Section 21(7) of the VAT Act, the assessing officer has power and jurisdiction to reassess the said deemed reassessment by resorting to reassessment proceeding under Section 22(1) of the VAT Act and further the consequential question would be, whether in that case, the assessing officer is justified in levying penalty under Section 22(2) of the VAT Act? Held that - order of assessment employed in Section 22(1) of the VAT Act clearly denotes that there must be formal adjudication by the assessing officer after taking into account the return and statutory compliances and the documents furnished by the petitioner - In order to attract Section 22(1) of the VAT Act, there must be order of assessment made by the assessing officer in contradistinction to Section 21(2) which is a deemed assessment and which in case of the petitioner, it has been done is a legal fiction. The legislature is quite competent to create a legal fiction, in other words, to enact a deeming provision for the purpose of assuming existence of a fact which does not really exist. In sum and substance, in order to invoke jurisdiction under Section 22(1) of the VAT Act or to initiate proceedings for reassessment there must be an order of assessment duly passed by the assessing officer and it must be in existence as a condition precedent to invoke Section 22(1) and the limitation prescribed is five calendar years from the date of commencement of such proceedings, whereas the deemed assessment order under Section 21(2) is only reassessable under Section 21(3) of the VAT Act within one calendar year from such year. In case there is no order of assessment passed under Section 21(7) of the VAT Act, it cannot be subject to reassessment proceeding under Section 22(1) of the VAT Act. Penalty - whether the penalty imposed invoking Section 22(2) of the VAT Act is sustainable? - Held that - it has already been held that there is no order of assessment as the assessing officer did not pass any assessment order and thus, there is failure on the part of the assessing officer to pass the original assessment order. For the reason that the order of reassessment is to be held without jurisdiction and without authority of law, therefore, the order imposing penalty passed upon reassessment cannot stand and accordingly, it deserves to be quashed. Order of assessment quashed - petition allowed.

Summary

Issues Involved:
1. Maintainability of writ petitions challenging reassessment orders.
2. Power and jurisdiction of the assessing officer to reassess deemed assessments under Section 22(1) of the VAT Act.
3. Justification of penalty imposed under Section 22(2) of the VAT Act.

Issue-wise Detailed Analysis:

1. Maintainability of Writ Petitions:
The court first considered whether the writ petitions challenging the reassessment orders under Section 22(1) of the VAT Act were maintainable. The respondents argued, citing the Supreme Court decision in *Commissioner of Income Tax v. Chhabil Dass Agarwal*, that such writ petitions were not maintainable. However, the petitioner relied on the Supreme Court's judgment in *Calcutta Discount Co. Ltd. v. Income-Tax Officer*, which held that the High Court has the power to issue an order prohibiting an executive authority from acting without jurisdiction. The court noted that the principle laid down in *Calcutta Discount* was followed in subsequent cases, including *The Commissioner of Income-tax, Gujarat v. M/s. A. Raman and Co.* and *Jeans Knit Private Ltd. v. Deputy Commissioner of Income Tax*. Consequently, the court held that the writ petitions were maintainable to challenge the reassessment orders under Section 22(1) of the VAT Act.

2. Power and Jurisdiction to Reassess Deemed Assessments:
The main legal question was whether, in the absence of an original assessment order under Section 21(7) of the VAT Act, the assessing officer had the power to reassess the deemed assessment under Section 22(1) of the VAT Act. The court examined Sections 21(2), 21(3), and 22(1) of the VAT Act. Section 21(2) provides for deemed assessment if no order of assessment is passed. Section 21(3) allows the Commissioner to select such deemed assessments for reassessment within one calendar year. Section 22(1) permits reassessment if there is an existing order of assessment. The court emphasized that the existence of an original assessment order is a jurisdictional fact and a condition precedent for invoking Section 22(1). Since no original assessment order was passed, the deemed assessment under Section 21(2) could only be reassessed under Section 21(3) within one calendar year. The court concluded that the reassessment proceedings initiated under Section 22(1) were without jurisdiction and authority of law, thus quashing the reassessment orders.

3. Justification of Penalty Imposed:
The court then considered the validity of the penalty imposed under Section 22(2) of the VAT Act. Section 22(2) allows for the imposition of a penalty where the omission leading to reassessment is attributable to the dealer. However, the court found that since no original assessment order was passed, there was no omission attributable to the dealer. The reassessment order itself was held to be without jurisdiction. Therefore, the penalty imposed based on the reassessment was also unsustainable and was quashed.

Conclusion:
The court quashed the reassessment orders and the penalties imposed in all three cases, allowing the writ petitions and leaving the parties to bear their own costs.