2021 (4) TMI 18 - HC - VAT and Sales Tax

High Court sets aside bank account attachment, citing procedural error in TNVAT Act application

M/s. K.R.T. Motors (P) Ltd. Versus The Assistant Commissioner (CT), The Branch Manager

The High Court of Madras ruled in favor of the petitioner, setting aside the impugned order and the attachment of the bank account. The court held that ... Best Judgement Assessment - Section 22(4) and (5) of TNVAT Act - HELD THAT:- There is no doubt that action has been taken under Section 22(4) and Section 22(5) of TNVAT Act. To do so, action could have been initiated only after 31.10.2016. But then, show cause notice was issued in the month of August 2016 itself. In this case, the petitioner has been filing their returns on self assessment basis under Section 22 of the Act. The dealer will be deemed to have been assessed on 31st day of October. The case on hand pertains to the assessment year 2015-16 - the petitioner is deemed to have been assessed on 31.10.2016. This writ petition was filed on 27.12.2016. It has been disposed of today ie., 02.03.2021. The period from 27.12.2016 to 02.03.2021 will be excluded for the purpose of computing the limitation. The attachment of the petitioner's account lying with the second respondent bank was pursuant to the order passed by the first respondent. Since the order passed by the first respondent itself has been set aside, the attachment also stands raised - Petition allowed. Issues:1. Validity of the notice issued under Section 22(4) and (5) of TNVAT Act.2. Legality of attaching the petitioner's bank account.3. Compliance with statutory requirements for initiating action.Analysis:Issue 1: Validity of the notice under Section 22(4) and (5) of TNVAT ActThe petitioner, a registered dealer, received a notice proposing action under Section 22(4) and (5) of the TNVAT Act due to allegedly incomplete and incorrect returns. The impugned order was passed after the petitioner submitted a reply and a personal hearing was conducted. The court noted that the action under Section 22(4) and (5) could only be initiated after 31.10.2016, but the show cause notice was issued in August 2016. As the petitioner had been filing returns on a self-assessment basis, they were deemed to have been assessed on 31.10.2016 for the assessment year 2015-16. The court held that the action was premature and quashed the impugned order, remitting the matter back to the first respondent for fresh orders in compliance with the law.Issue 2: Legality of attaching the petitioner's bank accountThe petitioner's bank account with the second respondent was attached based on the order passed by the first respondent, which was set aside along with the impugned order. Since the court quashed the original order, the attachment was deemed lifted. The court clarified that the period from the filing of the writ petition to the judgment date would be excluded for computing limitations. The writ petition was allowed with no costs, and the connected miscellaneous petition was closed.Issue 3: Compliance with statutory requirements for initiating actionThe court emphasized that the action taken by the assessing authority was premature as it was initiated before the cutoff date and without waiting for the filing of the Form WW report, which was submitted by the petitioner before the due date. The court highlighted the necessity of adhering to statutory requirements before taking any action under the TNVAT Act. The judgment provided a clear direction for the first respondent to follow the legal procedures and reassess the petitioner accordingly.In conclusion, the High Court of Madras ruled in favor of the petitioner, setting aside the impugned order and the attachment of the bank account. The judgment underscored the importance of procedural compliance and adherence to statutory timelines in tax assessment matters, providing a significant legal precedent for similar cases.