2025 (11) TMI 1689 - HC - VAT / Sales Tax

Reassessment to reverse input tax credit under Section 29(7) UP VAT Act invalid as mere opinion change

M/s Kumar Audyogik Vikas Private Limited Versus Commissioner of Commercial Taxes

HC held that reassessment proceedings initiated under Section 29(7) of the UP VAT Act to reverse input tax credit (RITC) were invalid, as they amounted to ... Initiation of reassessment proceedings u/s 29(7) of the UP-VAT Act in respect of issue of RITC - reassessment proceedings u/s29(7) of the UP-VAT Act on the basis of mere change of opinion - reassessment proceedings have been validly initiated by the assessing authority or not - correctness in remanding the entire matter back to the assessing authority for fresh consideration on merits - HELD THAT:- The record shows that the present proceeding has been initiated against the revisionist under Section 29 (7) of the Act. By reassessment proceeding the respondent sought to reverse input tax credit availed by the revisionist. This Court in the case of Mentha and Allied Products Ltd. [2024 (5) TMI 841 - ALLAHABAD HIGH COURT] has taken the view, no re-assessment can be done for RITC. Against the said judgment the revenue filed a Special Leave Petition (Civil) Diary No. 48975 of 2024 before the Apex Court which has been dismissed. In view of the Division Bench judgment of this Court as well as order of Apex Court, the impugned order cannot sustain and is hereby quashed - revision allowed. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether reassessment proceedings under Section 29(7) of the U.P. VAT Act can be initiated for the purpose of reversing input tax credit (RITC). (2) Whether reassessment proceedings under Section 29(7) of the U.P. VAT Act, initiated to reverse ITC already accepted in the original assessment, are vitiated as a mere change of opinion. (3) Whether the Tribunal erred in upholding the validity of reassessment proceedings and in remanding the matter to the assessing authority for fresh consideration on merits. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Validity and scope of reassessment under Section 29(7) of the U.P. VAT Act for RITC / alleged change of opinion Legal framework (as discussed) The reassessment proceedings were initiated under Section 29(7) of the U.P. VAT Act for the purpose of reversing input tax credit earlier granted. The Court referred to a Division Bench decision in 'Mentha and Allied Products Ltd.' wherein it was held that no reassessment can be undertaken under Section 29(7) for RITC. It was noticed that a Special Leave Petition against that decision had been dismissed by the Supreme Court. Interpretation and reasoning The Court found from the record that the original assessment had accepted the RITC claim after considering the facts and documents. Subsequently, reassessment proceedings under Section 29(7) were initiated solely to reverse the ITC so accepted. Applying the ratio of the Division Bench in 'Mentha and Allied Products Ltd.', the Court held that such reassessment for RITC is not permissible under Section 29(7). Since the jurisdiction to reassess for RITC itself was barred by the binding precedent, the initiation of reassessment proceedings was without authority of law. The Court, therefore, did not find it necessary to independently elaborate on 'change of opinion' beyond holding that reassessment in this manner was not legally sustainable. Conclusions The Court concluded that reassessment proceedings under Section 29(7) of the U.P. VAT Act cannot be initiated for the purpose of RITC and, consequently, the reassessment orders passed to reverse ITC already granted in the original assessment are without jurisdiction and unsustainable. Issue 3: Propriety of the Tribunal's order upholding reassessment and remanding the matter Interpretation and reasoning Since the jurisdictional foundation for reassessment under Section 29(7) for RITC stood negated by the binding Division Bench judgment, any further adjudication on merits by the assessing authority was impermissible. The Tribunal, in holding that reassessment had been validly initiated and in remanding the matter for fresh consideration on merits, acted contrary to the settled legal position. Once the very initiation of reassessment was without jurisdiction, the Tribunal could not sustain or remit the matter for reconsideration. Conclusions The Court held that the Tribunal erred in holding the reassessment proceedings to be valid and in remanding the matter to the assessing authority. The impugned order of the Tribunal was quashed and all questions of law were answered in favour of the revisionist and against the revenue. The revisions were allowed.