2018 (10) TMI 347 - HC - VAT and Sales Tax

Revision of assessment - rejection of claim of exemption for interstate purchase of building materials - Section 3B(2)(b) of the TNGST Act, 1959 - Held that - A careful perusal of notice of proposal dated 11.06.2008, would indicate that the same does not reveal any material details or particulars as to how the Assessing Officer proposed to disallow the exemption already granted in respect of purchases made through interstate sale to the tune of ₹ 1,80,16,025/-. Except stating that on examination of assessement on records, it is seen that turnover of ₹ 1,80,16,025/-, being the interest purchase of building materials, were wrongly allowed exemption, the said notice does not disclose as to what materials found in the assessment records had driven the Assessing Officer to make such proposal for disallowing the exemption. The reasons given for disallowing exemption, would show that such reasonings were not referred in the form of proposal, when notice was issued on 11.06.2008 - the assessee cannot be put to surprise with certain reasons in the assessment order, when crux of such reasons, in the form of grounds, is not stated in the notice of proposal. At the same time, at this stage, this Court is not expressing any view on the correctness or otherwise of the reasons assigned by the Assessing Officer in the impugned order, as this Court is inclined to interfere with the same only on the reason that the same was passed strictly not by following the principles of natural justice. This Court is of the view that the matter has to go back to the Assessing Officer once again for redoing the revision of assessment on merits and in accordance with law - petition allowed by way of remand.

Summary

Issues:
1. Revision of assessment order for assessment year 2004-05 disallowing exemption for interstate purchase of building materials.
2. Validity of the impugned order revising the assessment.
3. Compliance with principles of natural justice in the revision process.

Analysis:

Issue 1: Revision of assessment order for assessment year 2004-05 disallowing exemption for interstate purchase of building materials
The petitioner, a Limited Company engaged in civil construction and a registered dealer, challenged the order revising the assessment for the year 2004-05, which disallowed the exemption granted for interstate purchase of building materials. The Assessing Officer initially allowed the exemption under Section 3B(2)(b) of the TNGST Act, 1959, but later proposed to revise the assessment by rejecting the exemption claim. The petitioner contended that the original assessment had already verified and allowed the exemption, and there was no valid reason to alter this conclusion through revision.

Issue 2: Validity of the impugned order revising the assessment
The petitioner argued that the impugned order revising the assessment was based on reasons extraneous to the notice of proposal issued by the Assessing Officer. The petitioner's counsel highlighted that the notice of proposal did not provide sufficient details or particulars regarding the proposed disallowance of the exemption, making it difficult for the petitioner to effectively respond and defend their case. The Assessing Officer's reasons for disallowing the exemption were not included in the initial notice, leading to a lack of natural justice in the revision process.

Issue 3: Compliance with principles of natural justice in the revision process
The High Court observed that the Assessing Officer's reasons for disallowing the exemption were not adequately disclosed in the notice of proposal, creating a situation where the petitioner could not effectively respond. The Court emphasized that the principles of natural justice require that the grounds for revision should be clearly communicated to the assessee in advance to enable a fair opportunity for defense. As a result, the Court set aside the impugned order and directed the Assessing Officer to redo the assessment process, ensuring that a fresh notice of proposal with detailed particulars is issued to the petitioner for a proper response and personal hearing.

In conclusion, the High Court allowed the writ petition, remitted the matter back to the Assessing Officer for a fresh assessment, and instructed the Assessing Officer to follow the principles of natural justice in the revision process. The Court also directed the Assessing Officer to consider any amount deposited during the pendency of the writ petition in the fresh assessment.