2023 (3) TMI 795 - HC - VAT and Sales Tax

Audit assessment under Section 34(2) of the Value Added Tax Act, 2003 - main plank of the challenge to the notice and the consequential order dated 1.9.2022 and 16.9.2022 respectively that the powers were invoked under Section 34(8A) of the Act despite the fact that no proceedings were pending - HELD THAT - Section 34 of the Act deals with the audit assessment. It says that subject to the provisions of Sub section (2), the amount of tax due from registered dealer shall be assessed in the manner provided, separately for each year during which the registered dealer is liable to pay tax. The clinching aspect is that the condition precedent for exercising powers under Section 34(8A) has not been satisfied, namely that any proceedings under the Act are not pending so as to invest the authority with the power to proceed under Sub section (8A) of Section 34. When the Section expressly contemplates that the assessment under the said provisions could be resorted to only during the proceedings under the Act, the powers has to be exercised in that manner only and upon fulfillment of the said condition. In the facts of the case there is no gainsaying that any proceedings are not pending so as to justify the assessment proceedings under Section 34(8A) of the Act. When learned Assistant Government Pleader was confronted with the aforesaid aspect and non-compliance of the condition precedent for exercise of powers of assessment, he was entirely at his receiving end. Since the basic condition during the course of any proceedings under the Act of Sub section (8A) of Section 34 of the Act is not satisfied and no proceedings under the Act are pending, the impugned notice dated 1.9.2022 and the assessment order dated 16.9.2022 stands without jurisdiction. It is an incurable jurisdictional defect and illegality rendering the notice and the order liable to be set aside - Petition allowed.

Summary

Issues involved:
The issues involved in this judgment include challenging a notice and consequential order passed under Section 34(8A) of the Gujarat Value Added Tax Act, 2003, based on the lack of pending proceedings to justify the assessment proceedings.

Summary:

Challenge to Notice and Consequential Order:
The petitioner, a public limited company, sought to set aside a notice dated 1.9.2022 and the consequential order dated 16.9.2022 under Section 34(8A) of the Act. The petitioner objected to the notice and order, citing the conclusion of audit assessment for the year 2013-14 and the absence of pending proceedings to permit the authority to exercise powers under Section 34(8A).

Legal Provisions and Interpretation:
Section 34(8A) of the Act empowers the authority to initiate assessment during any proceedings under the Act if tax evasion or incorrect disclosures are found. The assessment under this provision is issue-based and transaction-related, falling under the audit assessment framework of Section 34. The time limit of four years from the end of the assessable tax year applies to assessments under Section 34(8A).

Precedent and Judicial Interpretation:
In a previous case, it was held that the pendency of proceedings is a prerequisite for exercising powers under Section 34(8A). The court emphasized that the assessment must be conducted during proceedings under the Act, and mere internal scrutiny does not constitute pending proceedings as envisioned in the provision.

Jurisdictional Defect and Conclusion:
The court found that the condition precedent of pending proceedings was not satisfied in the present case, rendering the notice and order without jurisdiction. As a result, the notice dated 1.9.2022 and the assessment order dated 16.9.2022 were set aside, and the petition was allowed, making the rule absolute.