M/s Jagdish Cold Storage and Ice Factory vs The Commissioner of Sales Tax and Others

Madan B. Lokur, J.—Rule DB. The grievance of the Petitioner is that after a regular assessment was completed by the Respondents, it was reopened without recording any reasons. Learned counsel says that this is clearly impermissible in view of Section 24 of the Delhi Sales Tax Act, 1975. Reliance has been placed by learned Counsel on a Division Bench judgment of this Court in the case of Samagya Consultants Pvt. Ltd. Vs. Commissioner of Sales Tax and Another, .

Learned counsel for the Petitioner has placed on record (Annexure P-2) the notice issued for reopening and all that it says is that the Sales Tax Officer has reason to believe that the turn over of the petitioner''s business for the period 1992-93 has escaped assessment to tax. No reason has been given why the Sales Tax Officer has come to this prima facie conclusion.

The order sheet of the case has also been placed before us as Annexure P-3 where what is recorded is that a call memo is issued to the Petitioner. No reason has been recorded why a call memo should be issued to the Petitioner. The case of the Petitioner, therefore, is that before issuing a notice, no reasons were recorded for reopening the completed assessment and even in the notice, no reasons have been given for reopening the completed assessment.

Learned counsel for the petitioner has also placed reliance upon Circular No. 7 of 2001-02 dated 3rd March, 2001. This Circular issued by the Commissioner of Sales Tax makes a reference to M/s. Samagya Consultant Pvt. Ltd. and after quoting the relevant passages from the decision it has been stated as follows:

Therefore, it is emphasised upon all the Assessing Authorities that the aforesaid observations of the Hon''ble Delhi High Court be strictly adhered to and before issuing the notice in form ST-15 under the aforesaid provision of Section 24, the reasons therefore invariably recorded on the Order-sheet. Non compliance will be viewed seriously.

In other words, even the Commissioner of Sales Tax had interpreted the judgement of this Court to mean that there must be a reason recorded on the file of the Assessing Officer which has prompted him, at least prima facie, to seek reopening of a completed assessment.

On these facts, the Petitioner submits that the reopening of its assessment for the year 1992-93 be set aside.

A notice was issued by this Court and the Respondents have filed their counter affidavit. It has been stated in the counter affidavit that while the recording of reasons before initiating proceedings for reassessment is a requirement under the Income Tax law, it is not a requirement under the Delhi Sales Tax, 1975.

We are of the view that this understanding of the law is totally contrary to the decision of this Court and is also completely contrary to the Circular issued by the Commissioner of Sales Tax who said that non-compliance with the decision of this Court would be viewed seriously.

It is rather unfortunate that inspite of this mandate recorded by the Commissioner, the Respondents have chosen to take a stand that it is not necessary to record reasons before issuing a notice for reopening a completed assessment. It is well settled in law that circulars issued by governmental authorities are binding upon the subordinate authorities. There is absolutely no reason, in this particular case, for the respondents to act in a manner contrary to the Circular issued by the Commissioner. That apart, we have gone through M/s. Samagya Consultant Pvt. Ltd. The Division Bench has specifically recorded that there must be an existence of reason on which belief is founded before a notice is issued. It is not necessary for the notice to state the reasons, but there must be existence of those reasons.

An Assessing Officer cannot view the reopening of a completed reassessment as a mechanical task because it can have serious consequences for the assessee and that is why it has been specifically mentioned in the Income Tax Act that there must be reasons to believe that a completed assessment must be reopened. This is also the interpretation given by this Court to Section 24 of the Delhi Sales Tax Act, 1975. The power to reopen an assessment is quite clearly not a plenary power, even though the power is wide. Therefore, it is mandatory upon the Assessing Officer to have some material on record and also to consider that material and thereafter record reasons why a completed assessment is sought to be reopened.

In our opinion, the decision in M/s. Samagya Consultant Pvt. Ltd. fully applies to the facts of the case. There is no doubt, on going through the record before us, that reasons have not been recorded by the Assessing Officer before issuing a notice to the petitioner and on this ground alone, the notice must fall and subsequent proceedings must be quashed.

We do so accordingly. While allowing the writ petition and granting the relief prayed for by the petitioner, we award cost of Rs. 3000/- to the Petitioner. The costs be paid within six weeks from today.