2023 (5) TMI 1074 - HC - VAT and Sales Tax

Court quashes tax demand notice for lack of jurisdiction & untimely communication

The court set aside the revisional order and tax demand notice due to the Revisional Authority's lack of jurisdiction. The assessment was revised after ... Delayed Service of SCN - whether the impugned order dated 03.02.2020 (Annexure P-4), which was served upon the petitioner on 29.12.2021 i.e. after 22 months, would render the revisional order without jurisdiction? HELD THAT:- This aspect has already been considered by Hon’ble the Supreme Court in STATE OF ANDHRA PRADESH VERSUS KHETMAL PAREKH & M. RAMAKISHTAIAH AND CO. [1994 (2) TMI 260 - SUPREME COURT]. In that case, the Andhra Pradesh High Court had allowed the revision filed by the assessee on the ground that the Deputy Commissioner had passed the said order on 06.01.1973, but it was served on the assessee only on 21.11.1973. The High Court had accepted the submission of the assessee that the order, which was served beyond the period of limitation, could not have been passed before expiry of limitation on 06.01.1973. The order could have been communicated within a reasonable period. The High Court further held that the respondent-assessee was not bound by that order. The Hon’ble Supreme Court dismissed the appeal filed by the State of Andhra Pradesh and held that in the absence of any explanation whatsoever, the Court must presume that the order was not made on the date it purported to have been made. Reference can also be made to a decision given by Hon’ble the Supreme Court in AJANTHA INDUSTRIES AND OTHERS VERSUS CENTRAL BOARD OF DIRECT TAXES AND OTHERS [1975 (12) TMI 1 - SUPREME COURT], wherein it has been held that non-communication of order is a serious infirmity. The ratio of the above said judgments is directly applicable to the facts of the present case - In the present case, the assessment order was passed on 03.02.2014 (Annexure P-1) and notice for re-assessment was issued on 13.09.2019 (Annexure P-2). Even though, the final order was passed on 03.02.2020 (Annexure P-4), it was received by the petitioner on 29.12.2021 i.e. after 22 months of passing thereof. In the written statement filed on behalf of the respondents, no explanation has been given, as to why this delay took place and who was responsible for such a long delay in communicating the impugned order to the assessee. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a revisional order, though purportedly passed within the statutory limitation period, becomes without jurisdiction if it is communicated to the assessee after an unexplained and prolonged delay. 2. Whether non-communication or delayed communication of a revisional order, when the assessee no longer retains records by statutory expiry, vitiates the order as being beyond limitation and violative of principles of natural justice. 3. Whether the existence of an alternative appellate remedy (appeal under the Act) precludes the High Court from entertaining extraordinary writ jurisdiction in respect of a claim that the revisional order was not validly communicated and is therefore without jurisdiction. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Jurisdictional effect of delayed communication of a revisional order Legal framework: The statutory scheme prescribes a period within which a revisional order must be passed and communicated to the assessee; delay in communication of an order raises questions as to whether the order was in fact made on the date it purports to have been made. Precedent Treatment: The Court relied on higher court authorities which hold that unexplained delay in service/communication of an order gives rise to a presumption that the order was not made on the date shown and may render the order invalid; the ratio has been followed in subsequent decisions applying the presumption where communication occurred substantially after the purported date of order. Interpretation and reasoning: The Court applied the presumption arising from unexplained delay. Although the revisional order bore a date within limitation, it was communicated 22 months later without any explanation from the Revenue for that delay. The absence of explanation triggered the established presumption that the order might have been made after the limitation period and therefore was invalid. Presence of the assessee's representative in the departmental office on the purported date of passing the order did not rebut the presumption as knowledge of an order cannot be presumed from mere physical presence when the order was not served. Ratio vs. Obiter: Ratio - unexplained prolonged delay in communication of a purportedly timely order can render the order without jurisdiction because the Court will presume the order was not actually made within the period it purports to have been made. Obiter - factual observations concerning the presence of an assessee's representative at the departmental office on the date the order was signed. Conclusions: The revisional order, though dated within limitation, was communicated after 22 months with no explanation; therefore the order is vitiated for want of jurisdiction and is liable to be set aside. Issue 2 - Effect of statutory record-retention limits and natural justice on delayed communication Legal framework: Statutory provisions prescribe retention periods for books of account; if records are lawfully destroyed after the prescribed period, the Revenue's belated communication of an adverse order may work substantial prejudice and offend principles of natural justice. Precedent Treatment: Courts have held that non-communication of orders that have detrimental effects and that deprive parties of opportunity to meet allegations is a serious infirmity and can render such orders arbitrary and ineffective. Interpretation and reasoning: The assessee was not required by statute to retain books beyond a specified period; because the revisional order was communicated long after that period, the assessee was prejudiced in its capacity to produce records to defend the assessment. The Court reasoned that such prejudice, coupled with unexplained delay, rendered the revisional action inequitable and beyond permissible exercise of power. Ratio vs. Obiter: Ratio - when statutory retention periods result in lawful destruction of records, delayed communication of an adverse order that prevents production of evidence may invalidate the order as violative of natural justice and beyond competent jurisdiction. Obiter - remarks on the precise interplay between particular statutory sections regarding record retention and revision timing, insofar as factual application may vary. Conclusions: Delay in communication that causes substantive prejudice because the assessee no longer possesses records (lawfully destroyed) strengthens the conclusion that the revisional order is invalid and must be set aside. Issue 3 - Availability of alternative remedy and exercise of writ jurisdiction Legal framework: Writ jurisdiction is extraordinary and normally withheld where an adequate alternative statutory remedy exists; however, where a fundamental jurisdictional defect is alleged, writ relief may be permissible. Precedent Treatment: Authorities establish that existence of an alternative remedy does not automatically bar writ relief when jurisdictional infirmity or gross illegality is shown. Interpretation and reasoning: The Court considered the respondent's contention that the assessee had an alternative remedy of appeal against an order imposing interest. The Court nonetheless entertained the writ petition because the challenge was to jurisdictional validity of the revisional order itself on grounds of delayed communication and prejudice arising from statutory record disposal - a core jurisdictional defect not amenable to mere appellate correction. Ratio vs. Obiter: Ratio - where a writ challenges the jurisdictional validity of an order (for example, on grounds of non-communication and resultant prejudice), the availability of an appellate remedy does not preclude High Court intervention. Obiter - procedural guidance on when a statutory appeal may be considered adequate in other fact patterns. Conclusions: The presence of an appellate remedy did not bar the High Court from entertaining the petition challenging the revisional order's validity because the petition raised a jurisdictional defect rooted in unexplained delay and prejudice. Overall Conclusion and Relief The Court concluded that the revisional order, though dated within the statutory period, was communicated after an unexplained delay of 22 months and, taken with the assessee's lawful non-retention of records after the prescribed period, amounted to a jurisdictional infirmity and violation of principles of natural justice. The revisional order and the consequential order imposing interest were set aside. Cross-reference: the Court's conclusion on Issue 1 and Issue 2 jointly informed the decision to exercise writ jurisdiction despite availability of alternative appellate remedy (Issue 3).