There Should Be Finality To Assessment, Can’t Have Repeated Reassessment Proceeding On The Dictate Of Audit Party: Jharkhand High Court

The Jharkhand High Court has held that if the assessing authority is allowed to initiate repeated re-assessment proceedings against an assessee merely on the dictate of the audit party, there would not be finality of assessment. The assessee would have a sword of Damocles hanging over it in perpetuity.

The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that, as far as Sections 42(1) and 42(2) of the Jharkhand Value Added Tax Act (JVAT Act) are concerned, the Legislature has deliberately inserted the non-obstante clause extending period of limitation, but the Legislature has not extended the period of limitation pursuant to an audit objection under Section 42(3). It has been deliberately omitted by the Legislature as it was conscious that reassessment proceedings would have been otherwise initiated under Section 40(1) on ‘information being received by the Audit Party’, but the only further requirement was to record reasons to believe. What has been dispensed with in Section 42(3) is the requirement of recording ‘reasons to believe’ only. The non-obstante clause was not inserted in Section 42(3) extending the period of limitation from the date of receipt of audit objection, and, thus, the period of limitation would be governed by Section 40(1) read with 40(4) of the JVAT Act.

The petitioner/assessee is in the business of manufacturing sponge iron, M.S. billets, and TMT bars. The assessee has been challenged by a re-assessment passed by the Assessing Authority pursuant to an audit objection raised by the office of the Accountant General. The reassessment order was passed in the exercise of the power under Section 42(3) of the Jharkhand Value Added Tax Act, 2005.

The assessee contended that the re-assessment orders have been passed beyond the statutory period of limitation prescribed under the JVAT Act. Section 42(3) of the JVAT Act is only a provision that provides the circumstances under which re-assessment proceedings can be initiated. The only enabling provision for carrying out reassessment proceedings is contained under Section 40, read with Section 40(4) of the JVAT Act, which prescribes a period of limitation of five years. Since the re-assessment orders have been passed beyond the statutory period, they are without jurisdiction.

The department contended that since Section 42(3) does not prescribe any period of limitation, re-assessment proceedings can be initiated at any time.

The issue raised was whether Section 42(3) is an independent provision conferring power of re-assessment or is merely an additional ground conferred upon the assessing authority for carrying out reassessment proceedings.

The court noted that although the section prescribed no period of limitation, the same would not mean that suo-motu power can be exercised at any time. Under the scheme of the JVAT Act, provisions of limitation for carrying out assessments, audit assessments, scrutiny assessments, re-assessment proceedings, etc. have been prescribed to be three to five years.

Counsel For Petitioner: Sumeet Gadodia

Counsel For Respondent: Rajiv Ranjan

LL Citation: 2023 LiveLaw (Jha) 67

Case Title: Rungta Mines Limited Versus State of Jharkhand

Case No.: W.P. (T) No. 3311of 2022 With W.P.(T) 3528 of 2022

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