2015 (5) TMI 838 - HC - VAT and Sales Tax

Court quashes time-barred assessment notice, stresses on valid reasons for extension

ITD-ITD CEM JV Versus COMMISSIONER OF TRADE AND TAXES

The default assessment notice issued on 09.07.2014 was deemed time-barred as the court found that the respondent did not invoke the proviso to section ... Validity of assessment notice issued - Bar of limitation - Section 34 - Held that:- Preconditions for invoking the extended period are that the Commissioner should record reasons to believe that the tax has not been paid and that the reason for non payment of tax should be concealment, omission or failure to disclose full material particulars on the part of the assessee. In the present case no such ‘reason to believe’ has been recorded - it would be a virtually impossible task for the appellate authority to first find and decipher the unknown and unrecorded ‘reasons to believe’ and thereupon decide whether the requisite conditions for invoking the proviso under section 34(1) of the said Act were actually satisfied or not. The issue or question raised would be answered on guess work or mere probabilities as to what the ‘reason to believe’ was. It is for these reasons that the Division Bench held that the “reasons to believe” must be disclosed clearly in the record prior to the issuance of the default assessment notice/order or in the said notice/order itself. - reasons for extending the time for completing the re-assessment proceedings were not the reasons indicated in the proviso to section 34(1) but other purported reasons of pendency of cases, election duty etc. etc. Those purported reasons did not permit the respondent to invoke the extended period of limitation given in the proviso to section 34(1) of the said Act. - Default assessment notice dated 09.07.2014 is time barred and is quashed. - Decided in favour of assessee. Issues:Time-barred default assessment notice under sections 32/33 of the Delhi Value Added Tax, 2004.Analysis:1. The petitioner argued that the default assessment notice issued on 09.07.2014 was time-barred as the last date for re-assessment was 31.03.2014 as per section 34 of the Delhi Value Added Tax, 2004.2. Section 34 of the Act sets the limitation on assessment and re-assessment, allowing an extension to six years if there is a reason to believe that tax was not paid due to concealment, omission, or failure to disclose material particulars.3. The petitioner contended that the proviso to section 34(1) was not invoked by the respondent, and there was no recording of 'reason to believe' in the default assessment order, citing the H.M. Industries case.4. The respondent argued that the extended period was justified as the petitioner delayed furnishing details. However, the court emphasized the importance of recording 'reasons to believe' for invoking the extended period.5. The court referred to the H.M. Industries case, highlighting the necessity of clearly recording 'reasons to believe' to avoid ambiguity and ensure fairness in tax assessments.6. It was emphasized that the Commissioner must record reasons to believe that tax was not paid due to concealment, omission, or failure to disclose material particulars. In this case, no such recording was found, leading to the quashing of the time-barred default assessment notice.7. The court noted a document indicating reasons for seeking an extension for audit purposes, which did not align with the reasons specified in the proviso to section 34(1), further supporting the decision to quash the notice.8. Consequently, the default assessment notice dated 09.07.2014 was deemed time-barred and quashed, allowing the revenue to pursue other lawful actions.9. The writ petition was allowed with no order as to costs, concluding the judgment on the time-barred default assessment notice under the Delhi Value Added Tax, 2004.