Delhi High Court
Ansal ... vs Commissioner Of Trade ... on 17 November, 2015
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
6.
+ ST.APPL. 85/2014
ANSAL PROPERTIES&INFRSTRUCTURE LTD ..... Petitioner
Through: Mr Puneet Agarwal and Mr Deepak
Anand, Advocates.
versus
COMMISSIONER OF TRADE &TAXES,DELHI ..... Respondent
Through: Mr Peeyoosh Kalra, Advocate with Mr
Ankit Khurana, Advocate.
CORAM:
JUSTICE S. MURALIDHAR
JUSTICE VIBHU BAKHRU
ORDER
% 17.11.2015
S. Muralidhar,J:
1. This Appeal by the Assessee under Section 81 of the Delhi Value Added
Tax Act, 2004 is directed against the order dated 21 st August, 2014 passed
by the Appellate Tribunal, Value Added Tax, Delhi ('Tribunal') in Appeal
No. 88/ATVAT/09-10 for the Assessment year ('AY') 2004-05.
2. The Assessee is engaged in the real estate promotion and development
and was registered as a dealer under the Delhi Sales Tax Act, 1975 ('the
DSTA'). The Assessing Authority (AA) Ward No.96 passed an assessment
order dated 31st March, 2006 for the Assessment Period 2004-05, inter alia,
observing as under:
"In response to ST-13 for 24.02.2006 Sh. M.S. Bisht, A/R with
POA appears before me on 24.02.2006 and produced books of
accounts, ledger, sale/purchase vouchers, bank books. The same
have been checked. The dealer has filed summary, trading A/c
with audited balance sheet (balance sheet is consolidated), list of
tax paid purchases, which have been test checked Dealer filed list
of tax paid purchases for Rs.6743217/- exemption of tax paid
sales allowed on test check. No central sale. All other sales are
taxable sales under local Act. There is no sale of asset during the
assessment year. Assessment is as follows:
GTO 18918250 Tax assessed 737914
ISS 0 Tax dep. 737627
Job Work 0 Stay amt. 0
Taxable @8% 1481033
[email protected]% 6161927
Hence, the dealer is liable to pay Rs.336/- for which demand
notice is enclosed. "
3. The AA computed the deficient tax as Rs.336/- and this was paid by the
Assessee.
4.Subsequently the AA issued a notice to the Assessee under Section 24 of
the DSTA, seeking to reopen the assessment, inter alia, stating:
"Whereas I have reasons to believe that the turnover of your business
for the year 2004-2005 has been assessed at a rate lower than the rate
at which it was assessable/deduction has been wrongly under vide
assessment order dated 31.03.2006 made under section 23 of the
Delhi Sales Tax Act, 1975".
5. Following the above notice, the re-assessment order was passed on 31st
May, 2007 where it was observed that "the above said dealer has received
400 lakh during 2004-2005 as Know-How fees. This turnover has escaped
for assessment while assessing the dealer for the AY 2004-05." The said
sum of Rs.400 lakhs was sought to be assessed to sales tax at 8% along with
interest.
6. The challenge to the above order of re-assessment failed before the
Additional Commissioner who upheld it by order dated 24th March, 2009. It
was further upheld by the Tribunal by the impugned order dated 21st August,
2014.
7. While admitting this Appeal on 12th February, 2015, the Court framed the
following questions of law:
"(a) Were the reassessment proceedings justified in law;
(b) Could the reassessment - premised upon statement of
turnover - be completed on the ground that turnover had been
assessed at a lower rate than what ought to have been
originally done;
(c) Could be Appellate Tribunal - VAT (ATVAT), in the
circumstances of the case, have confirmed the demand as one
relating to transfer of right to use the goods, which was not the
case of the Revenue and if so, the correct rate of tax;
(d) Was interest leviable on the date determined by the
ATVAT or any other time?"
8. The reassessment was sought to be reviewed under Section 24 of the
DSTA. Section 24 (1) requires the Commissioner to record the 'reasons to
believe' that the whole or any part of the turnover of a dealer in respect of
any period "has escaped assessment to tax or has been under-assessed or has
been assessed at a rate lower than the rate at which it is assessable......"
9. A question was posed by the Court to the learned counsel for the
Respondent whether in the present case the law as explained by this Court in
several decisions including the recent decision in Shruti Fasteners Ltd. v.
Commissioner of Value Added Tax (decision dated 15th October, 2015 in
Sales Tax Appeal No. 7/2010 ) has been complied with in the instant case.
In the said decision this Court, after surveying the earlier cases that clarified
the legal position held that the requirement of the AA having to record
'reasons to believe' preceding the issuance of the show cause notice to an
Assessee under Section 24 (1) DSTA was mandatory. It is not enough for
the AA to merely reproduce the wording of the provision and state in the
notice to an Assessee that there is "reason to believe" that the whole or any
part of the turnover has escaped assessment. It other words the exercise of
reopening of an assessment is not a casual one. The noting has to reveal that
as part of the process of reopening the assessment, the AA applied his mind
to the relevant materials prior to arriving at the conclusion, even prima facie,
that there are 'reasons to believe' that the whole or any part of the turnover
has escaped assessment.
10. In response to the above query, Mr Peeyoosh Kalra, learned counsel for
the Respondent fairly stated that there was no recording by the AA in the
file, prior to the issuance of notice of reassessment, that there were "reasons
to believe" that the whole or part of the turnover has escaped assessment for
the assessment period in question. Therefore, the mandatory requirement of
Section 24 (1) of the DSTA has not been fulfilled in the present case.
11. While this conclusion is by itself sufficient to invalidate the re-
assessment proceedings, the Court finds that what the AA has done,
pursuant to the exercise of the power under Section 24(1) of the DSTA is to
bring to tax the know how fees which was already disclosed by the Assessee
in the balance sheet produced during the assessment proceedings. Schedule
13 of the balance sheet produced by the Assessee clearly discloses the
know-how fees in the sum of Rs.400 lakhs. The extracted passage of the
order clearly indicates that the Assessing Officer had perused the balance
sheet and thereafter framed the assessment. Consequently, what in fact the
AA did was to review his earlier order based on a change of opinion that the
said sum of Rs.400 lakhs ought to have been brought to tax. This course of
action was legally impermissible and was beyond the scope of the powers of
the AA under Section 24 (1) of the DSTA. If indeed the assessment order of
the AA was prejudicial to the interests of the revenue then it was open to the
Commissioner to seek to invoke the revisional powers under Section 46 of
the DSTA. That course was, however, not opted in the present case.
12. For the above reasons, the Court finds that the proceedings initiated
under Section 24 (1) of the DSTA by the AA was without jurisdiction and
unsustainable in law. Question (a) is answered in the negative, in favour of
the Assessee and against the Department. Consequently, questions (b) and
(c) are answered likewise. The question of levy of interest therefore does not
arise and question (d) is answered accordingly.
13. The impugned order dated 21st August, 2014 of the Tribunal and the
corresponding orders of the Additional Commissioner and the AA are
hereby set aside.
14. The appeal is allowed but in the circumstances, with no order as to costs.
The refund of the tax if any deposited by the Assessee will be made to it in
accordance with law without unnecessary delay.
S. MURALIDHAR, J
VIBHU BAKHRU, J
NOVEMBER 17, 2015
pkv
