2022 (8) TMI 823 - HC - VAT and Sales Tax

Validity of assessment order - time limitation for completion of assessment under Section 32 of the DVAT Act - reasons to beleive - In the petitioner s case, with respect to the financial year in issue i.e., FY 2011-2012, the four-year period expired on 31.03.2016 - HELD THAT - The Commissioner simply appended his signature on the note prepared on 03.08.2017, without independently applying his mind, as to how the intelligence note which was suggestive of the fact that the petitioner had infracted the CENVAT Credit Rules, 2004, would have a bearing on the matter concerning the petitioner which related to transactions under the CST Act and the DVAT Act. The problem got compounded as the Commissioner did not advert to any of the aspects which are prerequisites for triggering the extended period of limitation i.e., as to how the concealment, omission or failure of the petitioner to disclose material particulars, resulted in his formation of belief that tax had not been paid by the petitioner. Reasons are the link between the material that is brought to the notice of the Commissioner and the formation of the belief that tax has not paid by the assessee. Reasons have to be bona fide and honest. Reasons are required to have a rational nexus with formation of belief. Belief should be based on material which relevant and cogent. As a matter of fact, the law casts an obligation on the revenue to inform the assessee in no uncertain words as to the charge against him i.e., as to whether it is a case for concealment, or omission or failure to disclose material particulars or a sum of one or more infractions. There are too many infractions committed by the respondent/revenue in the instant matter; in particular, there has been no, independent, application of mind as to whether this was a case, in which, the extended period of limitation could have been invoked - Petition disposed off.

Summary

Issues Involved:
1. Validity of the impugned assessment orders passed under the DVAT Act and CST Act.
2. Application of the extended period of limitation for assessment.
3. Independent application of mind by the Commissioner for invoking the extended period.
4. Compliance with procedural requirements under Section 59(2) of the DVAT Act.

Detailed Analysis:

1. Validity of the Impugned Assessment Orders:
The petitioner challenged three assessment orders dated 13.09.2018 under Sections 32 and 33 of the DVAT Act and CST Act, seeking their annulment. These orders pertained to the Financial Year (FY) 2011-2012. The Court noted that the respondent/revenue initially passed assessment orders on 18.01.2018, which were set aside by the Court on 31.08.2018, allowing the revenue to issue appropriate orders in accordance with the law. Consequently, the impugned assessment orders were issued.

2. Application of the Extended Period of Limitation:
The normal assessment period under Section 32 of the DVAT Act is four years, which expired on 31.03.2016 for FY 2011-2012. The respondent/revenue received an intelligence report on 19.08.2015, which led to an internal note on 03.08.2017 and its approval by the Commissioner on 09.10.2017, invoking the extended period of limitation. However, the Court found that the intelligence report was received well before the expiry of the normal period, and no action was taken until much later, making the invocation of the extended period untenable.

3. Independent Application of Mind by the Commissioner:
The Court emphasized that the Commissioner must independently apply his mind to the material suggesting concealment, omission, or failure to disclose material particulars before invoking the extended period. The Commissioner merely signed the internal note without independently assessing its relevance to the transactions under the CST and DVAT Acts. The Court cited precedents stressing that reasons must be bona fide, honest, and have a rational nexus with the belief that tax has not been paid.

4. Compliance with Procedural Requirements under Section 59(2) of the DVAT Act:
The notice issued to the petitioner on 11.10.2017 under Section 59(2) did not mention the Commissioner's approval or the reasons for seeking detailed information. The law requires the revenue to clearly inform the assessee of the charge against them, which was not done in this case. The Court noted that the notice lacked reference to the concealment, omission, or failure to disclose material particulars, further invalidating the assessment orders.

Conclusion:
The Court found multiple infractions by the respondent/revenue, including the lack of independent application of mind by the Commissioner and procedural lapses under Section 59(2). The impugned assessment orders were set aside, and the writ petition was disposed of accordingly. The pending application was also closed.