TMI Blog2014 (11) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... hat too, before or at the time of passing of the default assessment order under section 32 of the DVAT Act. The reason is simple that the power conferred must be exercised in the manner prescribed and mandated, especially when it is a jurisdictional pre-condition and requirement. Section 34(1) postulates and prescribes upper time limit for passing of the default assessment order as four years, but extends the said period to six years on satisfaction of pre-conditions laid down in the proviso. This extended period is an exception and not the rule. So pre-conditions in the proviso must be satisfied before or with the passing of an order under Section 32 and not afterwards or by the Objection Hearing Authority. The default assessment order as recorded does not disclose and states as to why and for what reason the Commissioner/competent authority had formed the belief that there was concealment, omission or failure to disclose full material particulars. In the absence of satisfaction of the said condition and requirement, the extended period of six years cannot be invoked to pass the default assessment order. - Decided in favor of assessee. - ST Appl No. 32/2013 - - - Dated:- 26-9- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. In such specified circumstances, the extended period of six years is applicable. The proviso noticeably mandates satisfaction of two conditions. It refers to the formation of 'reasons to believe' by the Commissioner. The said reasons to believe , have to be formed by the Commissioner. Secondly, the said expression reasons to believe must have nexus and live link with failure to pay tax because of concealment, omission or failure to disclose material particulars by the assessee. Thus, the Commissioner is required to form an opinion in the nature of reasons to believe that there was failure, omission or concealment to disclose material particulars which had the effect of short payment or non-payment of tax. The reasons to believe and satisfaction of any of the three stipulations are a jurisdiction precondition and a mandatory requirement which must be met to apply and seek benefit of extended period of six years. 6. Section 34(1) refers to orders of assessment or reassessment under Section 32 of the DVAT Act. Therefore, the reason to believe must be formed before or at the time when the order of assessment or reassessment under Section 32 of the DVAT Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction of the condition stated in the proviso to Section 34(1) to claim benefit of the extended period of limitation. The two provisions operate independently in their own fields and have a distinct and different purpose to serve. In a given case satisfaction of conditions stated in the proviso to Section 34(1) might justify invocation of Section 32 and visa-versa, but despite every chance of overlap, satisfaction of the individual requirements of the two sections should be examined independently. The default assessment has to be made within the period of limitation prescribed under Section 34 of the DVAT Act; four years in normal circumstances or six years if the specified conditions laid down in the proviso are satisfied. 7. Whether conditions stated in Section 32(1) have been satisfied or not, is a matter relating to merits and therefore would relate to confines or four corners of jurisdiction in a different way. The default assessment can be challenged by way of filling objections, consequent adjudication and appeals. But, the proviso to Section 34(1) of the DVAT Act, for the purpose of extended period of limitation of six years does not postulate formation of believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the DVAT Act. 10. It is true that proviso to Section 34(1) does not specifically mention that reasons to believe have to be recorded in writing However, the said requirement has to be read and treated as part and parcel of Section 34(1) of the DVAT Act. The normal period of limitation as prescribed for passing of a default assessment order is four years. No reason or ground is required to be stated under Section 34(1) if assessment/default assessment is made within the said period. However, when the extended period of six years is invoked, preconditions stipulated in the proviso to Section 34(1) of the DVAT Act must be satisfied. Want of satisfaction of the preconditions would be in realm of absence of jurisdiction. The only way, the Commissioner/competent authority can show that he had applied his mind and had formed requisite reason to believe is by recording in writing that the case falls within the proviso to Section 34(1) of the DVAT Act. This may be indicated and stated so in the default assessment order or even in the record. In case, reasons to believe are not recorded or so indicated/mentioned in the default assessment order or in the record, it would lead to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal inferences which could be drawn from the primary facts. Once the assessee had disclosed the primary facts then he cannot be faulted on the ground that he has not indicated further factual and legal inference. The duty cast upon the assessee is to disclose fully and truly all material primary facts, which he should not have suppressed, misrepresented or falsified i.e. the assessee should not have concealed, failed or omitted to mention the full material facts. 12. Thus, the extended period of limitation under proviso to Section 34(1) of the VAT Act confers wide but not plenary power. The precondition for exercise if power under the proviso should be shown to be satisfied by recording of reasons in writing and reasons should be intelligible and legibly demonstrated and testify. The objectiveness in the subjective satisfaction of the competent authority in the reason to believe can be subjected to challenge, verified and tested. The Supreme Court in ITO vs. Lakshmani Mewal Das (1976) 103 ITR 437, has held that the 'reasons to believe' must show live link or nexus between the material which was not disclosed by the assessee and the formation of belief that there was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011, which is after four years but within six years. 15. We have read the default assessment order dated 11.05.2011. We are reproducing the entire order itself:- Notice of default assessment of tax and interest under section 9(2) of the CST Act. Whereas I am satisfied that the dealer has furnished incomplete return or incorrect return or furnished a return does not comply with the requirements of CST Act, 1956 read with Delhi Value Added Tax Act, 2004 for the following reasons: Present Sh. H.K. Sharma, Advocate and Mr. Oberoi, Prop. for reconciliation of sale 2006-07, Sale Summary, DVAT-30, detail of C forms filed. The GTO of the firm is ₹ 5820011/-, Inter State sale against C form for ₹ 938815/-, sale @ 10% for ₹ 20535/- and sale @ 12.5% for ₹ 13860/-, Return filed. DVAT-51 filed. Hence form value of ₹ 300465/- (consolidated in above form) disallowed, sale form filed lInd and 3rd qtr. So tax @ 6% on ₹ 300465/- is the demand in CST. Pending C form ₹ 50 175/-. So tax @ 6% on ₹ 50175/- is the demand in CST. Audited balance sheet is filed. The dealer is hereby directed to pay tax of an amount of ₹ 21038 (Twenty on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any failure. Facts were on record and available. The reasoning/order proceeds as if there was no difference between the limitation periods of four or six years; and even more the limitation period of six years would inevitably apply as a matter of routine. No attempt stands made to invoke the proviso to Section 34(1) by referring to the pre-requisites stipulated therein and to justify as to why the extended period should apply. It is devoid and bereft of reason to believe . 17. Thus, on reading of the default assessment order, we do not find that there is any averment or assertion that there was concealment, omission or failure on the part of the appellant assessee to furnish material particulars. The default assessment order dated 11.05.2011, therefore, will falter and not meet the statutory requirements. It is not the case of the respondent-revenue nor has it been asserted that there is another document or note, recording reason to believe by the Commissioner/authority. 18. As observed earlier, every error or mistake in the return which leads to short payment or non-payment of tax, would not be covered by the proviso to Section 34(1) of the DVAT Act. The said proviso wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates and prescribes upper time limit for passing of the default assessment order as four years, but extends the said period to six years on satisfaction of pre-conditions laid down in the proviso. This extended period is an exception and not the rule. So pre-conditions in the proviso must be satisfied before or with the passing of an order under Section 32 and not afterwards or by the Objection Hearing Authority. The power must be exercised by the Commissioner or the competent authority, before or at the time of passing of the default assessment order. The Objection Hearing authority cannot write or formulate the reason to believe . The statutory mandate is that the reason should be recorded by the competent authority/Commissioner and should be before or at the time of passing of the default assessment order. If and had the authority, passing the default assessment order, recorded the reasons to believe on the same lines as the Objection Hearing authority, the outcome and decision possibly would have been different. 20. It was in these circumstances that the appellant assessee had approached the Tribunal, who, without adverting and examining whether the reasons to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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