Mutuality of interest test governs related-person turnover; reassessment set aside for ignoring remand directions.

A reassessment order invoking clause (iv) of the Explanation to section 2(1)(s) of the Andhra Pradesh General Sales Tax Act was unsustainable because the assessing authority failed to follow the Tribunal's remand directions. The Tribunal had required a fresh inquiry into whether the alleged related person shared mutuality of interest with the dealer, applying the Supreme Court's ruling in Atic Industries, and not merely whether sales were predominantly to that concern. A subordinate authority was bound by the limits of the remand and could not disregard the governing legal test. The reassessment order was set aside and the matter remanded for fresh orders in accordance with law.

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Issues: Whether the reassessment order invoking clause (iv) of the Explanation to section 2(1)(s) of the Andhra Pradesh General Sales Tax Act, 1957 could stand when the assessing authority did not follow the Tribunal's direction to examine the question of related person on the basis of mutuality of interest and the Supreme Court's ruling in Atic Industries.

Analysis: The Tribunal had earlier held that, to attract the expanded definition of turnover under section 2(1)(s)(iv), the Revenue had to establish mutuality of interest between the dealer and the alleged related person, and not merely the fact that sales were made predominantly to that concern. It remitted the matter only for a fresh determination on that basis and directed the assessing authority to follow the governing legal test. The reassessment order, however, proceeded on a contrary view that the Supreme Court decision had no relevance and did not apply the Tribunal's instructions. A subordinate authority was bound to act within the limits of the remand and could not disregard the legal parameters fixed by the appellate forum.

Conclusion: The reassessment order was unsustainable and was set aside, with the matter remanded for fresh orders in accordance with law and the Tribunal's directions; the result was in favour of the assessee.

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