2015 (11) TMI 1429 - HC - VAT and Sales Tax

Court Invalidates Reassessment Orders for Lack of Reasons

The Court found that the reassessment orders for the Assessment Years 2000-01, 2001-02, and 2002-03 were unsustainable due to the lack of recorded reasons ... Validity of reassessment proceedings - Whether the Tribunal was justified in upholding the reassessment orders when before issuing the notice in form ST-15, no reasons have been indicated/recorded by the Ld. VATO on the order sheet - Held that:- VATO was authorised to reopen the assessment, it is plain that the jurisdictional requirement under Section 24 (1) of the DSTA that reasons must be recorded by the VATO himself, as the officer issuing the notice of reassessment on the ground that there were “reasons to believe” that the whole or any part of the turnover of a dealer in respect of any period had escaped assessment to tax, was not complied with. All that was said by the VATO was that he was issuing notices for reopening of the assessment under Section 24 (1) DSTA “as per direction of higher authorities.” This is not a mere procedural irregularity that can be condoned by remanding the matter to the VATO for a fresh reassessment proceeding. It goes to the very root of the matter since what is sought to be done under Section 24 of the Act is to re-open an assessment. - Court concludes that in the present case the jurisdictional requirement of the VATO having to record the “reasons to believe” preceding the issuance of the show cause notice to the Assessee under Section 24 (1) DSTA was not complied with. Consequently, the entire re-assessment proceedings are bad in law. - Impugned order is set aside - Decided in favour of assessee. Issues:Appeals under Section 81 of the Delhi Value Added Tax Act, 2004 read with Section 45 of the Delhi Sales Tax Act, 1975 against the common order dated 9th/13th July 2010 passed by the Appellate Tribunal Value Added Tax for Assessment Years 2000-01, 2001-02, and 2002-03.Detailed Analysis:Background Facts:The appeals were filed by the Assessee against the common order passed by the Appellate Tribunal Value Added Tax for the Assessment Years 2000-01, 2001-02, and 2002-03. The dispute arose from complaints received against the Assessee regarding the filing of sales tax returns using false 'C' forms and tax evasion.Questions of law:The Court framed questions of law related to the validity of reassessment orders, the limitation period for reassessment proceedings, and the jurisdiction of the Assessing Authority to issue notices under Section 24 of the Delhi Sales Tax Act, 1975 after its repeal.Question (i):The Court found that the VATO did not formally record 'reasons to believe' prior to initiating proceedings under Section 24 of the DSTA, as required by law. The jurisdictional requirement of recording reasons by the VATO himself was not complied with, rendering the reassessment proceedings invalid.Legal Position:The Court cited precedents emphasizing the necessity of recording reasons before reopening assessments. Circulars issued by authorities stressed the importance of documenting reasons for reopening assessments. Failure to record reasons undermines the Assessee's right to challenge the decision and violates legal provisions.Conclusion:The Court held that the reassessment orders for the AYs 2000-01, 2001-02, and 2002-03 were unsustainable due to the lack of recorded reasons by the VATO. The appeals were allowed, and the impugned orders were set aside. The subsequent orders based on the unsustainable reassessment were also required to be set aside.This detailed analysis highlights the procedural irregularities in the reassessment proceedings and the legal principles governing the recording of reasons for reopening assessments, leading to the Court's decision to set aside the orders.