2020 (11) TMI 660 - HC - VAT and Sales Tax

Court dismisses challenges to pre-assessment notices, stresses transparency in sharing assessment materials.

Om Electronics Versus State Tax Officer, Chennai

The court dismissed the Writ Petitions challenging pre-assessment notices for various Assessment Years, emphasizing the need for transparency in sharing ... Validity of pre-assessment notices - alleged mismatch between the details contained in the annexures to the petitioners' returns - HELD THAT:- These Writ Petitions are pre-mature. It is true that the Officer has called upon the petitioner/assessee to appear and submit such details as may be available with it to substantiate the alleged mismatch between the details contained in the annexures to the petitioners' returns vis-a-vis the details contained in the annexures to the returns filed by the supplying/purchasing party dealers. This Court in M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [2017 (3) TMI 536 - MADRAS HIGH COURT] has held that cases of mismatch should be addressed in a scientific manner and has also directed the setting up of a central mechanism to facilitate sharing of data inter se assessing officers to rule out mismatch of factual particulars. It appears that this central mechanism is yet to be constituted. What is relevant is that there should be a complete and total transparency in regard to the materials/data relied upon by the Department in framing of assessments and the sharing of the materials with the assessee prior to completion of assessment. I hardly need to reiterate that the ratio of the decision in JKM Graphics binds the Department strictly. The Commissioner has, in Circular No.3 of 2018 dated 18.01.2018 directed all assessing officers to keep assessments involving the issue of mismatch pending till such time a central mechanism is put in place. In the present matter, Ms.Madhiri, on instructions, confirms that the details of third party dealers have, in fact, been, collated and are available with the Officer. In such circumstances, proceedings may well proceed and no longer await setting up of a central sharing mechanism, as its purpose stands achieved in this matter - Writ Petitions are dismissed as pre-mature. Issues:Challenging pre-assessment notices for multiple Assessment Years based on violation of court principles.Analysis:The Writ Petitions were filed challenging pre-assessment notices for various Assessment Years, contending that they violated principles set by the court in a previous case. The court noted that the Officer had called for the petitioner to provide details to substantiate alleged mismatches between returns. The court referred to a previous case which emphasized addressing mismatches scientifically and establishing a central mechanism for data sharing among assessing officers to avoid factual discrepancies. However, the court observed that this central mechanism was yet to be established.The court highlighted that pending the establishment of the central mechanism, Assessing Authorities could still obtain case-specific details and share them with the assessee for their response. Transparency in sharing materials relied upon by the Department for assessments prior to completion was deemed crucial. The court emphasized that the decision in the previous case bound the Department strictly. The Commissioner had issued a circular directing assessing officers to keep assessments involving mismatches pending until the central mechanism was in place. Nevertheless, officers were instructed to make efforts to collect details from third-party dealers, address any mismatches, and finalize assessments in compliance with the previous court decision and the law.In the present case, it was confirmed that details of third-party dealers had been collected and were available to the Officer. Consequently, the court allowed proceedings to continue without waiting for the central sharing mechanism to be established, as the purpose had been fulfilled in this instance. The Writ Petitions were dismissed as premature, with the petitioner instructed to appear before the Assessing Officer on a specified date. Further proceedings were to be conducted in line with the principles outlined in the previous case and the current order. No costs were imposed, and connected Miscellaneous petitions were also dismissed.