Re-Assessment solely on Ground of Reversal of Legal Position by Apex Court Judgment is invalid: Patna HC [Read Judgment]

scrutiny assessment - ITAT - Scrutiny - CBDT - Taxscan

In a writ petition filed by the Samsung India Electronics Pvt. Ltd and its dealers, the Patna High Court held that re-assessment under section 31 of the Bihar Value Added Tax Act, 2005 is invalid when the same is solely based on the Apex Court decision which resulted in a change in the legal position. Quashing the proceedings, the Court opined that reassessment cannot be made on a mere change of opinion.In order to initiate re-assessment under the Act, the requirements of  s. 31 of the Act must strictly complied with.

The petitioner is engaged in the business of manufacture of consumers electronic IT and telecom products including mobile phones, electronic goods, home appliances etc. the petitioners urged that they are selling a composite pack of mobile phone along with mobile charger and other accessories. It was specifically pointed out that the charger is provided free of cost with the mobile phones. The returns filed by the petitioners were initially accepted by the authorities. In the meanwhile, Apex Court pronounced a decision in Nokia India Pvt Ltd, wherein it was held that the mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone and further held that the battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be separately sold.

Consequently, the revenue initiated re-assessment against the petitioners. The petitioners challenged the proceedings mainly on ground that the assessment was solely on the basis of the apex Court decision. The petitioners vehemently contended that while proceeding with the same, no other material has been relied by the Department to prove that there is a ‘reason to believe’ that the petitioners had escaped incomeand therefore, the re-assessment in not sustainable since the requirements of s. 31 is not satisfied. Moreover, Section 31 of the

Act cannot be invoked in absence of concealment, omission or failure to disclose full and correct particulars of any sale made with an intentto evade payment of tax.

It was further contended that the judgment is an authority only for what it decides and not what can be deduced therefrom.

According to them, the Apex Court decision in the said case is not applicable in their case since in nokia’s case, there was an admission of the fact that the company had made information available on the website putting the mobile charger in the category of accessories which meant that in the common parlance also the mobile battery charger is understood as an accessory. It is submitted that the petitioners neither admitted nor on their website there is any admission that the charger is an accessory.

Accepting the contentions of the petitioners, the bench noted that re-assessment under s.31 cannot made without a ‘reason to believe’ that the assessee has concealed or escaped the income and further held that reassessment cannot be made on a mere change of opinion.

The bench further noted thatreassessment of 8 periods against the petitioners initiated under Section 31 of the Act based on the decision of the Supreme Court in the case of Nokia India and no other materials were there with the Department to proceed with the assessment. “The fact that there had been earlier assessment/reassessment under Section 31 or Section 33 of the Act goes to show that any further issuance of notice under Section 31 ofthe Act in such matters without anything more, except the decision of the Supreme Court in Nokia‟scase (supra) would, on the same materials, amount to a mere change of opinion by the prescribed authority in the matter. Thus, any action on the said basis would clearly be without jurisdiction and therefore without authority of law.”

“That being the position, the plea of alternative statutory remedy would also not come to the rescue of the respondents as in such matters, the Writ Court normally interferes by exercising its power under its extraordinary writ jurisdiction. The law on this point is well settled in the case of Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and others : (1998) 8 SCC1 and several other decisions.”

Read the full text of the Judgment below.

taxscan-loader