Kwality Construction Engineers vs Assistant Commissioner (CT), Audit, VMU-II and Another

Goda Raghuram, J.—The order of assessment dated January 27, 2011 passed by the first respondent for the tax period April 1, 2006 to March 31, 2010 under the Andhra Pradesh Value Added Tax Act, 2005 is assailed in this writ petition. The petitioner, a partnership firm, is a registered VAT dealer, inter alia, in the business of executing works contracts for several Government Departments and private organizations. It opted for composition u/s 4(7)(b) /4(7)(c) of the Andhra Pradesh Value Added Tax Act, 2005. The first respondent audited the account of the petitioner on July 29, 2010, and determined under-declared tax at Rs. 45,69,573 for the relevant period and issued a show-cause notice dated October 11, 2010 proposing to levy tax to a tune of Rs. 45,69,473, alleging under-declaration. The petitioner filed its objections and requested the first respondent to drop the proposed levy. The first respondent however confirmed the levy to the extent of Rs. 7,82,966 by the impugned order of assessment.

The petitioner preferred an appeal before the second respondent on the merits of the assessment order. It was however rejected by the second respondent on the ground that the petitioner failed to file proof of payment of the admitted tax and of 12.5 percent of the disputed tax.

It is stated by Sri Bhaskar Reddy, learned counsel representing Kum K. Uma, counsel for the petitioner that against the order of the Appellate Deputy Commissioner dated September 21, 2012, the petitioner initially preferred an appeal before the STAT, Hyderabad and in para 7 of the accompanying affidavit had pleaded that in view of filing of this writ petition, the petitioner would not pursue and would withdraw the appeal preferred before the STAT against the order of the Appellate Deputy Commissioner dated September 21, 2012.

In this writ petition, inter alia, the order of assessment is challenged on the ground that the first respondent was not validly authorized to make assessment under the Andhra Pradesh Value Added Tax Act, 2005 for the period April 1, 2006 to March 31, 2010. In support of this contention, the petitioner has placed for the perusal of this court an authorization dated October 5, 2010 issued by the Deputy Commissioner (CT), Kumool Division. This authorization reads that the first respondent is authorized to assess the specified VAT dealers (including the petitioner) if required. Sri Bhaskar Reddy contends that this is not a valid authorization, it being a contingent authorization; that qua the law declared in Sri Balaji Flour Mills Vs. The Commercial Tax Officer and Others, , there needs to be application of mind by the competent authority on a consideration of the report of audit, for proceeding to assessment and the satisfaction of the competent authority must be recorded for grant of authorization for assessment. Since the authorization dated October 5, 2010 issued by the Deputy Commissioner (CT), Kumool Division delegates the discretion to assess to the first respondent instead of the Deputy Commissioner himself exercising the discretion after satisfaction as to the need for assessment on the basis of the audit report, the authorization is invalid, is the contention.

The learned Special Government Pleader for Commercial Taxes does not dispute the normative basis of the petitioner''s contention above. Even otherwise the ratio emerging from the decision of this court in Sri Balaji Flour Mills Vs. The Commercial Tax Officer and Others, clearly inheres the discretion and authority as to the appropriateness for proceeding to assessment on the Deputy Commissioner (CT), Kurnool Division (in this case) and not in the first respondent. The authorization dated October 5, 2010, which is the basis for the impugned order of assessment by the first respondent is therefore incompetent and consequently the order of assessment also would fail for the same analogy.

On the aforesaid analysis, the writ petition is allowed. The impugned order of assessment dated January 27, 2011 passed by the first respondent is quashed. It is however open to the duly and competently authorized officer to pass a fresh order of assessment in respect of the period April 1, 2006 to March 31, 2010, in accordance with law and following the due process of law. The writ petition is allowed as above at the stage of admission after hearing Sri V. Bhaskar Reddy, learned counsel representing Kum K. Uma for the petitioner/assessee and the learned Special Government Pleader for Commercial Taxes for the respondent-Revenue. There shall however be no order as to costs.