The division bench of the Jharkhand High Court has ruled that there must be finality in the assessment process and repeated reassessment proceedings, driven by the directives of the audit party, cannot occur and if the assessing authority is allowed to initiate repeated re-assessment proceedings against an assessee merely on the dictate of the audit party, there would not be finality of assessment.
Brief Facts:
The petitioner is in the business of manufacturing sponge iron, M.S. billets, and TMT bars. The petitioner has been challenged by a re-assessment passed by the Assessing Authority pursuant to an audit objection raised by the office of the Accountant General. The reassessment order was passed in the exercise of the power under Section 42(3) of the Jharkhand Value Added Tax Act, 2005. The present writ petition has been filed to quash the order of re-assessment.
Contentions of the Petitioner:
The learned counsel for the petitioner contended that the re-assessment orders have been passed beyond the statutory period of limitation prescribed under the JVAT Act. Section 42(3) of the JVAT Act is only a provision that provides the circumstances under which re-assessment proceedings can be initiated. The only enabling provision for carrying out reassessment proceedings is contained under Section 40, read with Section 40(4) of the JVAT Act, which prescribes a period of limitation of five years. Since the re-assessment orders have been passed beyond the statutory period, they are without jurisdiction.
Contentions of the Respondent:
The learned counsel for the respondent argued that a straightforward reading of Section 42(3) indicates that it's an independent provision allowing re-assessment initiation based on objections by the Comptroller and Auditor General of India, whether concerning facts or legal aspects. They emphasized the use of the term 'shall,' making it mandatory for the designated authority to re-assess the dealer following such objections. Comparatively, in Section 40(1) of the JVAT Act, the prescribed authority must establish a 'reason to believe,' based on information or other means, to proceed with dealer re-assessment. In Section 42(3), the necessity to establish a 'reason to believe' is omitted, and it's obligatory for the Assessing Authority to re-assess a dealer. The counsel also argued that the Legislature intentionally did not set a time limit for Section 42(3), as it stands as an independent provision for enabling re-assessment within the Act.
Observations of the Court:
The Hon'ble Court noted that concerning Sections 42(1) and 42(2) of the Jharkhand Value Added Tax Act (JVAT Act), the Legislature intentionally included a non-obstante clause to extend the limitation period. However, for Section 42(3), the Legislature chose not to extend the limitation period following an audit objection. This omission was a conscious decision, considering that re-assessment proceedings could otherwise be initiated under Section 40(1) when information is received by the Audit Party, with the only additional requirement being to record "reasons to believe." In Section 42(3), the only thing dispensed with is the necessity to record "reasons to believe." The non-obstante clause was not included in Section 42(3) to extend the limitation period from the date of receiving an audit objection. As a result, the limitation period would be governed by Section 40(1) in conjunction with Section 40(4) of the JVAT Act.
By placing reliance on principles laid down by Hon’ble Apex Court in the case of ‘Bhatinda District Cooperative Milk Producers Union Ltd.’ the Hon’ble High Court of Jharkhand observed that while Section 42(3) doesn't specify a limitation period, this doesn't imply that the suo-motu power can be exercised at any time. Within the framework of the JVAT Act, specific limitation periods ranging from three to five years have been set for various assessments, including audit assessments, scrutiny assessments, re-assessment proceedings, and more.
The decision of the Court:
The present writ petition was allowed and the reassessment order dated 08.03.2022 passed by the Assessing Authority-Deputy Commissioner of Commercial Taxes was quashed and set aside.
Case Title: M/s. Rungta Mines Limited vs. State of Jharkhand & Ors.
Coram: Hon’ble Mr. Justice Subhash Chand
Case No.: W.P. (T) No.3311 of 2022
Advocate for the Applicant: Sumeet Gadodia
Advocate for the Respondent: Rajiv Ranjan
Read Judgment @LatestLaws.com
Picture Source :
