By TIOL News Service

NEW DELHI, MAR 22, 2017: THIS appeal is against the final judgment and order dated 17.11.2006 passed by the Division Bench of the High Court of Jharkhand at Ranchi whereby the High Court dismissed the petition filed by M/s Larsen & Toubro Ltd, the appellant- Company while upholding the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur.

Facts:

(a) The appellant -Company is involved in manufacturing, trading, leasing and construction business throughout the country. At the relevant time, the appellant -Company was involved in the execution of civil work contracts for its client, viz., Tata Iron & Steel Company Ltd. (TISCO) and had been filing its returns under the Bihar Finance Act, 1981 ('the State Act') and also under the Central Sales Tax Act, 1956 ('the Central Act') in the Commercial Taxes Department, Urban Circle, Jamshedpur.

(b) For the Assessment Year (AY) 1991-92, the appellant -Company filed returns under the State Act. However, the assessment proceedings in relation to the above period, i.e., AY 1991-92 was completed in the year 1996 and an assessment order dated 24.01.1996 was passed by the assessing authority.

(c) After the assessment proceedings, an audit team of the Auditor General, Bihar, audited the assessment order dated 24.01.1996 and found that the dealer was allowed exemption of Rs . 3,12,47,916/-, being the amount of goods consumed by the appellant -Company during the course of execution of works contract. The appellant -Company claimed that such goods were purchased on payment of tax but no declaration in Form IX-C along with other evidence was submitted whereas the production or declaration of Form IX-C was mandatory, hence, the claim was not allowable and the said fact was conveyed to the assessing authority.

(d) On 28.09.2000, the office of Commissioner of Commercial Tax, Urban Circle, Jamshedpur, served a show cause notice to the appellant -Company to state as to why tax should not be levied on it for the amount of Rs . 3,12,47,916/- which was wrongly exempted from being taxed under the provision of the State Act.

(e) After affording an opportunity of hearing to the appellant -Company, a re-assessment order dated 27.02.2006 was passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur whereby an additional demand of Rs . 35,72,475/- was created against the appellant -Company.

(f) Being aggrieved by the re-assessment order dated 27.02.2006, the appellant -Company preferred a writ petition before the High Court. A Division Bench of the High Court, vide order dated 17.11.2006, dismissed the petition filed by the appellant-Company while upholding the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur.

(g) Aggrieved by the order dated 17.11.2006, the appellant -Company has preferred this appeal by way of special leave before the Supreme Court.

Point for consideration:

The only point for consideration is whether on the information given by the audit team of the Auditor General, Bihar, the Assessing Authority was satisfied that reasonable ground exists to believe that a part of the turnover of the appellant -Company has escaped assessment within the meaning of Section 19 of the State Act based on which the assessing officer can re-open the assessment?

Findings: The Supreme Court observed,

Sub-Section (1) of Section 19 of the State Act very clearly prescribes that the competent authority, upon information, if satisfied that reasonable ground exists to believe that any turnover of a registered dealer or a dealer to whom grant of registration certificate has been refused in respect of any period has, for any reason, escaped assessment or any turnover of any such dealer assessed under sub-Section (5) of Section 17 has been under-assessed or assessed at a rate lower than that which was correctly applicable, may, within eight years from the date of order of assessment, proceed to assess or reassess the amount of tax in respect of such turnover.

According to the Oxford Dictionary, 'information' means facts told, heard or discovered about somebody/something. The Law Lexicon describes the term 'information' as the act or process of informing, communication or reception of knowledge. The expression 'information' means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or having a bearing on the assessment. A mere change of opinion or having second thought about it by the competent authority on the same set of facts and materials on the record does not constitute 'information' for the purposes of the State Act. But the word "information" used in the aforesaid Section is of the widest amplitude and should not be construed narrowly. It comprehends not only variety of factors including information from external sources of any kind but also the discovery of new facts or information available in the record of assessment not previously noticed or investigated.

There is a catena of judgments of the Supreme Court holding that assessment proceedings can be reopened if the audit objection points out the factual information already available in the records and that it was overlooked or not taken into consideration. Similarly, if audit points out some information or facts available outside the record or any arithmetical mistake, assessment can be re-opened.

A fact which was already there in records doesn't by its mere availability becomes an item of "information" till the time it has been brought to the notice of assessing authority. Hence, the audit objections were well within the parameters of being construed as 'information' for the purpose of section 19 of the State Act.

The expression 'information' means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. On the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to re-opening of assessment, if for any reason, the whole or any part of the turnover of the business of the dealer has escaped assessment or has been under assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor assessing authority proceeded, were same.

The question still is as to whether in the present case, the assessing authority was satisfied or not.

The last para of the audit report read as, "On being pointed out in audit, it was stated that since the goods had not been transferred to contractee co-under the provisions of works contract, but it had been consumed and so it does not come under the purview of taxation. The reply is not tanable in view of the above judgements and hence the case needed to be reviewed."

From a perusal of the last paragraph of the report of the audit party, it is clear that the Assessing Officer was of the opinion that as the goods had not been transferred to appellant -Company but had been consumed, so it does not come under the purview of taxation. In other words, the Assessing Officer was not satisfied on the basis of information given by the audit party that any of the turnover of the appellant -Company had escaped assessment so as to invoke Section 19 of the State Act. From the above, it also appears that the assessing officer had to issue notice on the ground of direction issued by the audit party and not on his personal satisfaction which is not permissible under law.

Held: the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur is without jurisdiction and the High Court was not right in dismissing the petition filed by the appellant -Company.

Appeal is allowed and the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur as well as the order dated 17.11.2006 passed by the Division Bench of the High Court of Jharkhand set aside.

(See 2017-TIOL-129-SC-MISC)