Reassessment cannot be used to reopen input tax credit alone, and proceedings must comply with natural justice.
Section 29 of the Uttar Pradesh Value Added Tax Act, 2008 is described as a turnover-escaped-assessment provision and not an independent route to reopen only input tax credit. The text distinguishes input tax credit from turnover-based reassessment and states that wrongly claimed credit is dealt with under the regular assessment framework and the reversal mechanism in Section 14. It also states that reassessment must comply with natural justice: a notice, hearing and completion of proceedings within an unduly compressed timeframe, with the matter effectively closed at the first hearing, does not provide a fair and reasonable opportunity to respond.
Issues: (i) Whether reassessment proceedings could be initiated under Section 29 of the Uttar Pradesh Value Added Tax Act, 2008 solely to recompute or reverse input tax credit. (ii) Whether the reassessment proceedings and resultant order were vitiated for want of reasonable opportunity and fair procedure.
Issue (i): Whether reassessment proceedings could be initiated under Section 29 of the Uttar Pradesh Value Added Tax Act, 2008 solely to recompute or reverse input tax credit.
Analysis: The statutory scheme treated input tax credit as an allowance distinct from turnover of sale or purchase and from the rate-based computation of tax. The regular assessment provisions specifically enabled examination of admissibility of input tax credit, and Section 14 provided the mechanism for reversal of wrongly claimed input tax credit. By contrast, Section 29 was confined to escaped turnover, under-assessment of turnover, wrong rate of tax, or wrongly allowed deductions or exemptions in relation to turnover. A reassessment proceeding could not, therefore, be used as an independent jurisdictional route to reopen only input tax credit or reverse input tax credit when no escapement of turnover had first been established.
Conclusion: Reassessment for the sole purpose of reversing input tax credit was without jurisdiction and is held against the revenue.
Issue (ii): Whether the reassessment proceedings and resultant order were vitiated for want of reasonable opportunity and fair procedure.
Analysis: The notice, hearing, and completion of reassessment occurred within an unduly compressed timeframe. The assessee was given only a very short period to respond, and the proceedings were effectively closed at the first hearing itself. Such a course did not afford a fair and reasonable opportunity to meet the proposed reassessment and was inconsistent with the requirements of natural justice.
Conclusion: The reassessment proceedings were vitiated for breach of natural justice and are held against the revenue.
Final Conclusion: The impugned reassessment action could not be sustained either on jurisdiction or on procedure, and the writ petition succeeded with the reassessment order set aside.
Ratio Decidendi: Reassessment under a turnover-escaped-assessment provision cannot be invoked to reopen input tax credit alone unless the statute expressly authorises that course, and any such proceeding must also satisfy the minimum requirements of a fair hearing.