The case of Birla Corporation Ltd. versus the State of Bihar, adjudicated by the Patna High Court, revolves around the challenge to reassessment orders issued in 2005-06 and 2006-07, invoking Section 31 of the Bihar Value Added Tax Act, 2005 (VAT Act). This article delves into the detailed analysis of the court’s judgment and its implications.
1. Assessment Year 2005-06:
2. Assessment Year 2006-07:
3. Judicial Interpretation:
4. Legal Implications:
The Patna High Court’s verdict in the case of Birla Corporation Ltd. versus the State of Bihar underscores the principle of legal certainty in tax reassessment proceedings. By upholding the significance of statutory limitations, the judgment provides clarity on the boundaries within which tax authorities must operate. This serves as a reminder of the importance of procedural adherence and respect for legal timelines in taxation matters, ensuring fairness and transparency in the administration of tax laws.
FULL TEXT OF THE JUDGMENT/ORDER OF PATNA HIGH COURT
The identical petitioner in the writ petitions challenges the order of reassessment passed in the years 2005- 06 and 2006-07, as barred by limitation under Section 31 of the Bihar Value Added Tax Act, 2005 (for brevity, the VAT Act), which reassessment order was passed in the year 2018.
2. We have to first deal with the facts arising in the individual cases. For the assessment year 2005-06, the impugned notice dated 23.03.2018 issued by the Department for reassessment is produced as Annexure-6. The petitioner had filed its return for the period 2004-06 on the due date, and as per the VAT Act, there is a self-assessment made unless it is taken up for reassessment within the limitation period provided under the statute.
3. The petitioner was issued with a show-cause notice within the limitation period, based on an objection raised on audit. The petitioner replied to the same and produced the books of accounts before the Assessing Officer. The Assessing Officer, respondent no. 2, after perusal of the records, found that there is true and fair disclosure of the purchases and sales in the books of accounts. The audit objection was found to be not sustainable and an order was passed, produced as Annexure- 1.
4. Again for the very same year, a notice was issued at Annexure-2, which was also responded to by production of the books of accounts and an objection. The Assessing Officer passed an order of reassessment on 3 1.12.2009, by Annexure-3 making additions. An appeal was filed wherein the assessment order was set aside with a direction to consider the records de novo as is produced at Annexure-4. Again, the Assessing Officer passed an order produced as Annexure-5 dated 16.03.2017, accepting the returns filed by the petitioner. It is after this that the impugned notice was issued, produced as Annexure-6, which was dated 23.03 .2018, long after the limitation period.
5. Section 26 provides for a self-assessment of tax, which is deemed on the returns being filed. This does not preclude the Department from making a reassessment, which can be as per Section 31. Section 31 provides that the prescribed authority shall, in such manner as may be prescribed, proceed to assess or reassess, as the case may be, the tax payable by such dealer within four years from the expiry of the year during which the original order of assessment or reassessment was passed. The assessment, as was noticed, with respect to a dealer, who has filed a return occurs automatically under Section 26 with power conferred on the prescribed authority to reassess it. Insofar as a dealer, who has not filed a return, the prescribed authority has a power to make an assessment, which would be the original assessment, and then also proceed for reassessment on any of the ingredients under Section 31 arising.
6. In the assessment year 2005-06, as we noticed earlier, there was a self-assessment under Section 26 and twice reassessment was attempted, once on the basis of audit objection and the other on finding some defect in the returns. The first notice for reassessment was closed by the Assessing Officer The second attempt to reassesses also was closed after a fresh consideration as directed in an appeal filed. Hence, insofar as the petitioner is concerned, there is no reassessment carried out and the limitation has to relate back to the original assessment, which is the self-assessment made under Section 26, in which event, the reassessment now attempted as per Annexure-6 is grossly delayed.
7. In the next writ petition, C.W.J.C. No. 9613 of 2018 concerned with assessment year 2006-07, the impugned order is also dated 23.03.2018. In the said assessment year also a proper return was filed within the due time, leading to a self-assessment under Section 26. A notice was issued as seen from Annexure-1 dated 22.06.2009, which was properly responded to by an objection and production of books of accounts. A reassessment was made by Annexure-2, dated 28.02.2012. An appeal was filed, which was allowed as per Annexure-3, and on the remand made in the appeal, the Assessing Officer accepted the returns filed by the petitioner, as is seen from Annexure-4 dated 16.03.2017. The impugned notice was issued subsequent to that, after the period of limitation.
8. The interpretation of the provisions under Sections 26 and 31, we made above for the assessment year 2005-06, squarely applies to the present year also.
9. We find absolutely no reason to permit the Department to proceed with the assessment.
10. We are quite conscious of the fact that the challenge in the writ petition is only against a show-cause notice However, it has to be noticed that the show-cause notice is totally without jurisdiction since the limitation prescribed as per the Statute has expired.
11. We also notice the contours of the jurisdiction under Article 226 of the Constitution of India to interfere with appellable orders laid down by the Hon’ble Supreme Court in State of H.P & Ors. v. Gujarat Ambuja Cement Limited & Anr.; (2005) 6 SCC 499. It has been held that if an assessee approaches the High Court without availing the alternate remedy, it should be ensured that the assessee has made out a strong case or that there exist good grounds to invoke the extraordinary jurisdiction. While reiterating that Article 226 of the Constitution confers very wide powers on the High Court, it was clarified that nonetheless the remedy of writ is an absolutely discretionary remedy. The High Court, hence, can always refuse the exercise of discretion if there is an adequate and effective remedy elsewhere. The High Court can exercise the power only if it comes to the conclusion, that there has been breach of principles of natural justice or that due procedure required for the decision has not been adopted. The High Court would also interfere if it comes to a conclusion that there is infringement of fundamental rights or where the orders and proceeding are wholly without jurisdiction or when the vires of an Act is challenged and when there is a clear abuse of process of law.
12. Going by the aforesaid declaration, Article 226 can definitely be invoked by the assessee, since the re-assessment notice is after the limitation period. The writ petitions, hence, are allowed, and the Assessing Officer-respondent no.2 in both the writ petitions is restrained from proceeding against the assessee based on the impugned show-cause notices.