2020 (9) TMI 221 - HC - VAT and Sales Tax

Validity of assessment order - proceedings on the basis of the proposals/reports of the Enforcement Wing/ISIC - defects with regard to mismatch in their returns vis-a-vis the other dealers - independent application of mind on the part of Assessing Officer - HELD THAT - In the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER 2017 (3) TMI 536 - MADRAS HIGH COURT , this Court had considered the claim of the dealers in connection with Input Tax Credit reversal on an alleged mismatch between their returns and the returns filed by the sellers - impugned order on this issue set aside. Independent application of mind on the part of Assessing Officer - HELD THAT - This Court, in a batch of Writ Petitions in the case of TVL. TARUN CREATION VERSUS THE COMMERCIAL TAX OFFICER, TIRUPUR. 2020 (8) TMI 689 - MADRAS HGIH COURT had held that the Assessing Officer cannot be solely guided by the proposal given by the Enforcement Wing Officers and that the Assessing Officer has to independently consider the same, without being influenced by such proposals of the higher officials - Some of the decisions in which similar views have been taken are in the cases of MADRAS GRANITES (P) LTD. VERSUS COMMERCIAL TAX OFFICER, ARISIPALAYAM CIRCLE, SALAM AND ANOTHER 2002 (10) TMI 767 - MADRAS HIGH COURT and NARASUS ROLLER FLOUR MILLS VERSUS THE COMMERCIAL TAX OFFICER 2015 (4) TMI 361 - MADRAS HIGH COURT . Also, Circular No.3 dated 18.01.2019 has empowered the Assessing Officers to henceforth independently deal with the assessment without being influenced by the proposals of the higher officials - In view of Circular No.3 dated 18.01.2019 issued by the Commissioner of State Tax, Chennai, the impugned proceedings in all these Writ Petitions, which proceeds on the basis of the proposals/reports of the Enforcement Wing/ISIC, are liable to be set aside. The impugned assessment proceedings, which culminated on the basis of the inspection conducted by the Enforcement Officers, as well as the VAT Audit and the alleged mismatch between the returns of the petitioner with the corresponding dealers, cannot be sustained - the matters are remanded back to the respondent herein for reconsideration - petition allowed by way of remand.

Summary

Issues:
1. Challenge to assessment orders based on mismatch in returns.
2. Authority of Assessing Officer in considering proposals from Enforcement Wing Officers.

Issue 1: Challenge to assessment orders based on mismatch in returns

The High Court considered the challenge to assessment orders due to mismatch in returns filed by the petitioner for the years 2010-11 to 2013-14. The Enforcement Officers of the Commercial Tax Department conducted inspections and VAT Audits, leading to the identification of defects in the returns. The Court referred to the case of JKM Graphics Solutions Private Limited, where it was highlighted that the procedure adopted by assessing officers was flawed, resulting in assessments being set aside. The Court emphasized the need for a centralized mechanism to address mismatches effectively. The Court allowed all writ petitions, setting aside the assessment orders and remanding the matters to the respective assessing officers for fresh consideration.

Issue 2: Authority of Assessing Officer in considering proposals from Enforcement Wing Officers

In another batch of Writ Petitions, the Court held that Assessing Officers cannot solely rely on proposals from Enforcement Wing Officers. The Court emphasized that Assessing Officers must independently consider such proposals without being unduly influenced. The Commissioner of State Tax issued Circular No.3 empowering Assessing Authorities to deviate from proposals if they are not in conformity with the law or established principles. The Court, in light of this circular, set aside the impugned proceedings based on proposals from Enforcement Wing/ISIC. The Court quashed the assessment proceedings and remanded them back to the Assessing Officer for reconsideration, directing a fair and independent assessment process to be followed.

In conclusion, the High Court's judgment addressed the issues of mismatch in returns and the authority of Assessing Officers in considering proposals from Enforcement Wing Officers. The Court emphasized the need for a fair and reasonable assessment process, highlighting the importance of independence and adherence to established principles. The judgment provided detailed directions for the reassessment process, ensuring a thorough enquiry and opportunity for the dealers to present their case.