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2016 (4) TMI 273 - HC - VAT and Sales TaxPeriod of limitation - Demand notices of default assessment of tax and interest - Section 32 of the DVAT Act, 2004 - Petitioner sold IT related TFT/LCD/LED Monitors by charging VAT at 4% or 5% although the said item is not covered under the Third Schedule to the DVAT Act. Pursuant to the receipt of the assessment and penalty notices, the Petitioner sent a letter dated 24th April 2014 to the VATO stating, that no show cause notice was issued to them asking why LCD/LED/TFT Monitors should not be treated as unclassified and charged VAT at 12.5%, that they were not confronted with the determination in the case of M/s. NEC India Pvt. Ltd. Where the a dealer has not furnished returns as envisaged under Section 32 (1) (a) of the DVAT Act, then the Commissioner, for reasons to be recorded in writing, can ‘assess’ the taxable turnover using his 'best judgment' . Where in terms of Section 32 (1)(b), (c) or (d) of the DVAT Act, the dealer has furnished incomplete returns that do not satisfy the requirements of the Act or for any reason the return filed is not satisfactory then the Commissioner will ‘reassess’ to the best of his judgment the amount of net tax due for the tax period. Section 34 of the DVAT Act spells out the maximum period within either an assessment or, where the circumstances so warrant, a reassessment under Section 32 of the DVAT Act can be made. The outer limit for either is four years from “the end of the year comprising of one or more tax period for which the person furnished a return under Section 26 or 28 of the Act or the date on which the Commissioner made an assessment of the tax for the tax period whichever is earlier”. In the present case, the Assessee was filing monthly returns and, therefore, the limitation for the purposes of Section 34 of the DVAT Act would have to be reckoned from the date of the filing of the return by way of self assessment. The notices for reopening of the assessment for the months comprising the Assessment Year 2009-10 ought to have been issued before the expiry of the respective dates as shown in the above table. Barring the reopening of the assessments for February and March 2010, where the dates of the notices of default assessment were prior to the completion of four years, i.e., 26th March and 23rd April 2014, in respect of all other returns by way of self-assessment made by the Petitioner from April 2009 to January 2010, the re-opening of the assessment was sought to be done on a date after the expiry of the four-year period. Here, since the first proviso to Section 34 of the DVAT Act has not even been invoked, there was no possibility of invoking the extended period of limitation, i.e., beyond the expiry of four years. The phrase ‘whichever is earlier’ occurring in Section 34 (1) of the DVAT Act is an indication that the date on which the Petitioner makes an assessment in terms of Section 31(1)(a) of the DVAT Act is crucial for determining the expiry of the limitation of four years for completion of the reassessment. Therefore, the Court is satisfied that barring the default notices of assessment pertaining to the months of February and March 2010, all the other notices of default assessment issued for the remaining months of AY 2009-10 by the impugned notices dated 31st March 2014 are barred by limitation and deserve to be set aside. Another ground on which the default notices of assessment require to be quashed is the photocopy of the original signed order issued by the VATO was perused by the Court. It showed that none of the above alternatives were specifically tick marked by the VATO. It is, therefore, unclear as to the precise ground on which the VATO was proceeding to exercise its powers under Section 32(1) of the DVAT Act. Classification of 'Monitors' - Whether the monitors sold by the petitioner fall within the entry ‘Monitors’ in terms of Item 3 below Entry 41A of the Third Schedule - Held that:- the Court would like to observe that the determination by the Commissioner in the case of NEC under Section 84 of the DVAT Act was not binding on the present Petitioner as it was not a party to those proceedings. In the present case the DT&T has not been able to persuade the Court that LCD/LED/TFT monitors sold by the petitioner during the period under consideration is not classifiable as ‘Monitors’ under Item 3 below Entry 41A of the Third Schedule to the DVAT Act. Violation of principles of natural justice - Default notice of assessment - Held that:- the notices under Section 59(2) of the DVAT Act issued to the Petitioner asked for additional information in respect of the LCD/LED/TFT Monitors. There was no indication in the said notices regarding any erroneous classification of the monitors as forming the basis for reopening the assessments. There was also no whisper of the determination under Section 84 of the DVAT Act in the case of NEC which, as it transpired, was one of the reasons for reopening the assessments. In other words, the Assessee was not put on notice as to the grounds on which the assessments were sought to be reopened. Existence of Alternative Remedy - Held that:- in the present case the entire proceedings for the months of AY 2009-10 (barring February and March 2010) are barred by limitation. There has also been an obvious violation of the principles of natural justice. Therefore, the impugned notices of assessment dated 31st March 2014 issued to the Petitioner as well as notices of default assessment of penalty of the same date are hereby quashed. - Decided in favour of petitioner
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