2021 (6) TMI 293 - HC - VAT and Sales Tax

Validity of assessment order - reversal of Input Tax Credit - suppression of sales - mismatch of information - no pre-assessment notices served on the petitioner - HELD THAT - Though this direction was issued as early as on 01.03.2017 in the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER 2017 (3) TMI 536 - MADRAS HIGH COURT followed by the Commissioner of Commercial Taxes Department issuing a Circular in January, 2018 stating that all assessments involving the issue of mismatch are to be kept in abeyance till such mechanism is set up, nothing has transpired in this regard till date - the completion of assessment need not await the mechanism and have taken a view in other cases that the Department must collate all materials based on which the alleged mismatch is arrived at and furnish the same to the assessee for its response. Once this is done, the assessee is to be heard and a speaking order of assessment is to be passed. The impugned order is set aside on the ground that no pre-assessment notices have not been served upon the petitioner - petition allowed.

Summary

Issues:
1. Challenge to an order of assessment under the Tamil Nadu Value Added Tax Act, 2006 for the period 2015-16 regarding reversal of Input Tax Credit (ITC) and sales suppression.
2. Reversal of ITC on purchases from dealers whose registrations are stated to be cancelled.

Analysis:
1. The first issue pertains to the challenge against an assessment order dated 25.10.2019 under the Tamil Nadu Value Added Tax Act, 2006 for the period 2015-16. The assessment is based on the reversal of Input Tax Credit (ITC) and sales suppression, identified through internal web reports of the Commercial Taxes Department and cross verification of the petitioner's returns with third party dealers' annexures. The court had previously directed the establishment of an intra-departmental mechanism to address mismatches and provide the assessee with an opportunity to respond to such data. Despite this directive and a subsequent Circular issued by the Commissioner of Commercial Taxes Department, no progress was made. The court held that the completion of assessment should not be delayed due to the absence of the mechanism. It emphasized the need for the Department to provide all relevant materials to the assessee for a response before passing a speaking order of assessment. Consequently, the additions in the impugned order were set aside, and the order itself was inclined to be set aside due to the lack of pre-assessment notices served upon the petitioner.

2. Regarding the second issue of reversing ITC on purchases from dealers with cancelled registrations, the court directed the petitioner to appear before the Assessing Officer with supporting material on a specified date. The Assessing Officer was instructed to conduct a de novo assessment within six weeks after hearing the petitioner, either through video conference or physical hearing. Failure to comply with the hearing date would result in the revival of the impugned order dated 25.10.2019. The court disposed of the Writ Petition in the mentioned terms without imposing any costs.

This judgment highlights the importance of providing the assessee with an opportunity to respond to assessment-related data, ensuring the principles of natural justice are upheld throughout the process.