2008 (5) TMI 619 - HC - VAT and Sales Tax

Whether the original assessment order dated March 23 2005 passed by the assessing officer merged with the appellate order dated December 26 2005 by operation of doctrine of merger? Whether the appellate authorities in exercise of their power to enhance the assessment can take into consideration the fresh or new material which was not before the assessing officer but has come to light only after completion of the assessment while disposing of the appeal arising out of the original assessment? Whether by exercising power of revision the Commissioner can consider any new or fresh material which was not before the assessing officer but came to light only after completion of the assessment? Held that - The original assessment order passed by the assessing officer merged with the appellate order by application of doctrine of merger. In spite of that the assessing officer assumes jurisdiction under rule 12(8) of the CST (O) Rules to assess the turnover escaped assessment from the original assessment by issuing notice under that rule on the basis of new/fresh material which was not the subject-matter in the original assessment but comes to light only after completion of original assessment. The appellate authorities while disposing of the appeal arising out of an assessment order cannot take into consideration any fresh or new material which was not before the assessing officer but subsequently comes to light after completion of the assessment for the purpose of enhancement of the assessment. We are of the considered view that by exercising power of revision the Commissioner cannot consider any new or fresh material which was not before the assessing officer and comes to light only after passing of the original assessment order. In the present case the challenge is not only to the notice issued under rule 12(8) of the CST (O) Rules but also to the order of assessment made on the said notice. Since the assessment had already been made challenge to the legality of the notice is really without any relevance.

Issues Involved:
1. Jurisdiction of the assessing officer in reopening the assessment.
2. Applicability of the doctrine of merger.
3. Authority of appellate authorities to consider new material for enhancement.
4. Authority of the Commissioner in revision to consider new material.

Detailed Analysis:

Issue 1: Jurisdiction of the Assessing Officer in Reopening the Assessment
The petitioner challenged the ex parte reassessment order dated February 15, 2007, issued by the Sales Tax Officer under Rule 12(8) of the CST (O) Rules for the assessment year 2001-02. The petitioner argued that the assessing officer lacked jurisdiction to reopen the assessment since the original assessment order had merged with the appellate order. The court examined Rule 12(8), which allows reassessment if there is a reason to believe that turnover has escaped assessment or been under-assessed. The court found that the assessing officer had indicated reasons for reopening the assessment, satisfying the condition precedent for initiating proceedings under Rule 12(8). The court concluded that the assessing officer had jurisdiction to reassess based on new material discovered post-original assessment.

Issue 2: Applicability of the Doctrine of Merger
The petitioner argued that the original assessment order merged with the appellate order, and thus, the assessing officer could not reassess the turnover. The court explained that the doctrine of merger depends on the nature of the appellate or revisional order and the scope of the statutory provisions. The court noted that the subject matter of the reassessment was different from the original assessment and had not been considered by the appellate authority. Therefore, the doctrine of merger did not apply in this case, allowing the assessing officer to reassess based on new material.

Issue 3: Authority of Appellate Authorities to Consider New Material for Enhancement
The petitioner contended that the appellate authority could consider new material for enhancement. The court rejected this argument, stating that the statute does not empower the assessing officer to appeal or bring new material to the appellate authority. The appellate authorities can only decide on issues adjudicated in the assessment order and cannot consider new material that was not before the assessing officer. Thus, the appellate authorities cannot take into account new material for enhancement purposes.

Issue 4: Authority of the Commissioner in Revision to Consider New Material
The court addressed whether the Commissioner could consider new material in revision. It held that the Commissioner, while exercising suo motu revisional power, could only consider the order of the subordinate authorities and not new material that was not part of the original assessment. The statute provides specific provisions like Rule 12(8) for dealing with escaped turnover, and the Commissioner cannot utilize new material against a dealer in revision.

Conclusion:
The court dismissed the writ petition, stating that the assessing officer had jurisdiction to reassess based on new material discovered after the original assessment. The doctrine of merger did not apply as the subject matter of reassessment was different. Appellate authorities could not consider new material for enhancement, and the Commissioner could not consider new material in revision. The petitioner was advised to prefer a statutory appeal against the assessment order along with a petition for condonation of delay.

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