COMMISSIONER OF INCOME TAX (LTU) vs. RURAL ELECTRIFICATION CORPORATION LIMITED

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ITA/5/2016HC DelhiDLHC01553847201511 January 2016Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MR. JUSTICE VIBHU BAKHRU3 pages
AI SummaryAllowed

What did the High Court hold?

The Tribunal ruled that the STO's invocation of powers under Section 24 for reassessment was unwarranted, as there was no new material to justify it beyond existing documents. The STO's opinion was based on the assessee paying a lower tax rate.

What were the facts?

The assessee obtained an opinion regarding sales tax treatment of different products, leading to a Tribunal ruling that cooking hoods with ducting technology attracted 8% duty, while others attracted 12%. The Sales Tax Officer (STO) later invoked powers under Section 24 of the Act for reassessment.

What were the issues?

Whether reassessment under Section 24 of the Act was valid when based on existing materials and not new information, akin to a notice under Section 147/148 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 24

AI-generated summary — verify with the full judgment below

$~16 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ST.APPL. 5/2016 M/S FRANKE FABER INDIA PVT. LTD. ..... Petitioner Through: Mr. Ruchir Bhatia, Adv. versus COMMISSIONER, TRADE & TAXES, DELHI ..... Respondent Through: Mr. Gautam Narayan, ASC with Mr. R.A. Iyer, Adv. and Mr. V.P. Singh, AVATO. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI O R D E R % 28.11.2016 Admit. The question of law urged is: “whether in the circumstances of the case re- assessment under Section 24 of the Income Tax Act, 1961 (in short the Act) for the period in question i.e. 2003-04 is valid?” The assessee had sought and obtained opinion under Section 49 of the Act which led to an appeal before the Sales Tax Appellate Tribunal (in short the Tribunal). The Tribunal ruled that the two types of products i.e. cooking hoods which entailed use of ducting technology on the one hand and the others which re-circulate air had

to be treated differently for the purposes of sales tax; whereas the former attracted 8% duty the latter attracted 12% duty. The remit after the Tribunal’s order by the First Appellate Authority was enlarged by the STO who invoked his powers under Section 24 of the Act. In an appeal decided today (i.e. ST. APPL. 4/2016) the Court held that the utilisation of power under Section 24 of the Act in the circumstances of the case was unwarranted. In the present case as well, as against a concluded assessment which appears to have been premised upon the previous years’ decision of the Tribunal, the STO invoked his powers again under Section 24 – though independently. Although the original notice of the STO under Section 24 of the Act has not been produced, the learned standing counsel submits that the notice is not available and has been since weeded out the materials on the record in the form of the order of the Tribunal amply bear out that the STO merely formed an opinion that the appellant was paying a lower rate of tax i.e. 8% on the cooking hoods which used the ducting technology. It has been held in Hoshyar Singh Suresh Chandra Sarees Pvt. Ltd. vs Commissioner, Sales Tax, New Delhi & Anr. (2004) 136 STC 173 that a valid “reason to believe” under Section 24 of the Act is akin to a notice under Section 147/148 of the Act which has to indicate some new materials apart from the existing documents on the record to justify the assessment. In the present case, those ingredients are absent.

Consequently, the impugned order of the Tribunal has to be and is, therefore, set aside. The appeal is allowed. S. RAVINDRA BHAT, J NAJMI WAZIRI, J NOVEMBER 28, 2016/kk

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