Re-Assessment under DVAT Act must be based on some Objective Material which persuades the AO to Re-Open an Assessment: Delhi HC [Read Judgment]

In a recent ruling, the two-judge bench of the Delhi High Court quashed a re-assessment order passed under section 24 of the Delhi Value Added Tax Act on ground that such an order is not valid in the absence of some objective materials based on which the assessing officer reached into a conclusion that there is a need to re-open the assessment already completed.

In the instant case, the petitioners approached the High Court impugning the re-assessment proceedings initiated against them on ground that the earlier assessment has attained finality and therefore, there is no room for a re-assessment in the absence of any valid reason.

While allowing the appeal, the Court, placed reliance on the decision in Jagdish Cold Storage Ice Factory vs. The Commissioner of Sales Tax & Ors. In this case, the Court had made an opinion that like in the case of Section 147-148 of the Income Tax Act, the interpretation of Section 24 which confers the right to reopen an assessment is not a plenary power but is dependent upon some objective material which persuades the AO to reopen the assessment.

Diving deeply into the facts of the case, the Court observed that “In the present case, it is quite evident that Tribunal’s earlier observation with regard to classification based on the material before it was conclusive. Apparently, the revenue accepted it. What was remitted after the decision of the Tribunal which emanated from the determination under Section 49, was the tax on verifying statutory forms given and that too in the form of a remand by the First Appellate Authority. The materials available with this Court on the record point to the fact that the Sales Tax Officer took this opportunity of a limited remand to issue a notice under Section 24. Neither the order of the AO nor of the STO nor indeed that of the Tribunal throw any light as to on what material persuaded the STO to revisit the entire issue. Thus, it is evident that the STO virtually reviewed the decision of the Commissioner under Section 49 which, merged with the order of the Tribunal, as it were, based on no new material much less any significant material which could have permitted an authority to validly reopen assessment under Section 24.”

Read the full text of the Judgment below.