In the case of M/S Garware Wall Ropes Ltd, Delhi High Court recently held that the re-assessment by invoking section 24 of the Delhi Sales Tax Act without stating ‘reasons to believe’ in writing is bad in law.
Assessee in the present case M/S Garware Wall Ropes Ltd which was registered under the Delhi Sales Tax Act, 1975 and the Central Sales Tax Act, 1956 and engaged in the business of business of manufacture and sale of all kinds of ropes, cardage strings and twines has duly filed its return of income for the relevant assessment year and the Assessment was completed accordingly.
Thereafter, a notice has been issued by the Sales Tax Officer under section 24 of the Delhi Sales Tax Act, 1975 for reassessment without stating any reasons.
Thereafter, the Assessee approached the Court by challenging the validity of the notice that has been issued by the Sales Tax Officer for the purpose of re-assessment processing.
After considering the facts and circumstances, the Hugh Court justice Sanjiv Khanna and Justice Chander Shekar observed that “the recording of the reasons by the assessing authority officer before issuing a notice of reassessment under Section 24 of the DST Act is mandatory and the violation of this requirement would result in invalidating the entire reassessment proceedings”.
The Court further observed that it has been specifically mentioned in the Income Tax Act that there must be reasons to believe that a completed assessment must be reopened. This is also the interpretation given by this Court to Section 24 of the Delhi Sales Tax Act, 1975. The power to reopen an assessment is quite clearly not a plenary power, even though the power is wide. Therefore, it is mandatory for the Assessing Officer to have some material on record and also to consider that material and thereafter record reasons why a completed assessment is sought to be reopened.”
While perusing the available materials on records it is clear that in the present case the authority is unable to show and establish that reasons to believe were recorded in writing.