Reassessment Order passed under KVAT Act merely on Tax Evasion Report is Invalid: Orissa HC rules in favour of Hindustan Tyre House [Read Order]
The court remitted the matter to the assessing authority for making a fresh adjudication and passing an appropriate order by the law after allowing the petitioner to hear it
Reassessment Order – KVAT Act – Tax Evasion Report Orissa HC rules – Hindustan Tyre House – TAXSCAN
Reassessment Order – KVAT Act – Tax Evasion Report Orissa HC rules – Hindustan Tyre House – TAXSCAN
In a recent case of M/s.Hindustan Tyre House, the Orissa High Court has held that reassessment orders cannot merely be based on a tax evasion report or an audit report. The court remitted the matter to the assessing authority for making a fresh adjudication and passing an appropriate order by the law after allowing the petitioner to hear it.
The petitioner assessee has sought to quash the order of assessment or reassessment passed by the department in Form VAT 312 and the notice of demand in Form VAT 313. The notice issued by the department in Form 307 further issues directions restraining the department from collecting the tax and penalty as involved in the order of assessment along with the demand notice.
Based on the fraud case, it was contended that if the authority proposed to take steps and issue notice, he should have formed an opinion as required under Section 43 of the Orissa Value Added Tax (OVAT) Act. Without forming an opinion, the issuance of a demand notice to the petitioner and the order of assessment or reassessment cannot be sustained in the eyes of the law.
It was found that when a fraud case report has been received from DCST, Vigilance, Sambalpur in respect of the petitioner-dealer and the period in question and follow-up action, i.e., assessment or reassessment, has been taken, Section 43 of the OVAT Act is required to be complied with, which states that an opinion has to be formed by the assessing authority before passing the order, and, as such, no opinion has been formed by the assessing authority while dealing with the fraud case, as stated in the docket note.
The division bench of Justice B.R. Sarangi and Justice G. Satapathy has observed that it is not enough if the Assessing Officer refers to the tax evasion report or an audit report; he has to independently apply his mind and record his satisfaction that there has been an escapement of tax. It is the mandatory minimum requirement of Section 43 of the OVAT Act.
The court held that since the assessing authority has not formed an opinion, as required under Section 43 of the OVAT Act, the demand notice cannot be sustained in the eyes of law. It is liable to be quashed. The court remitted the matter to the assessing authority for making a fresh adjudication and passing an appropriate order.
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