Supreme Court Upholds State’s Right to Reassess Taxes Despite Pending Revisions: Andhra Pradesh vs. S. Pitchi Reddy (2022)

Date of the Judgment: January 3, 2022

Citation: 2022 INSC 22

Judges: M. R. Shah, J. and B.V. Nagarathna, J.

Can a tax authority reassess taxes when a revision of the order to reassess is pending? The Supreme Court of India recently addressed this question in a case involving the State of Andhra Pradesh and several tax assessees. The core issue was whether the Assessing Officer could proceed with a fresh assessment after the case was remanded by the Appellate Authority, even when a suo moto revision of the remand order was pending before the Commissioner of Commercial Taxes. The Supreme Court, in this judgment, held that the High Court should not have intervened and the assessees should have availed the appellate remedy. The judgment was delivered by a two-judge bench comprising Justice M. R. Shah and Justice B.V. Nagarathna.

Case Background

The respondents in these appeals were registered dealers under the Value Added Tax (VAT) regime. The Assessing Officer (Commercial Tax Officer, Brodipet Circle, Guntur) had initially passed assessment orders for various assessment years on July 25, 2012, determining the tax liabilities of the dealers. Aggrieved by these orders, the dealers filed appeals before the Appellate Deputy Commissioner (CT), Guntur. The First Appellate Authority remanded the cases back to the Assessing Officer for fresh assessment.

Subsequently, the Commissioner of Commercial Taxes initiated suo moto revisional proceedings against the remand order passed by the First Appellate Authority. While these revisional proceedings were pending, the Assessing Officer issued show cause notices to the dealers, proposing fresh assessments based on the remand. The dealers objected, arguing that the Assessing Officer lacked jurisdiction to proceed with fresh assessments while the revisional proceedings were pending. Despite these objections, the Assessing Officer passed fresh assessment orders.

Instead of appealing these fresh assessment orders before the First Appellate Authority, the dealers directly filed writ petitions before the High Court of Judicature at Hyderabad for the State of Telangana and State of Andhra Pradesh. The High Court allowed the writ petitions, quashing the fresh assessment orders on the sole ground that the Assessing Officer should not have proceeded with the fresh assessment while the suo moto revisional proceedings were pending.

Timeline

Course of Proceedings

The High Court of Judicature at Hyderabad for the State of Telangana and State of Andhra Pradesh entertained the writ petitions filed by the dealers against the fresh assessment orders. The High Court quashed the fresh assessment orders, stating that the Assessing Officer should not have proceeded with the fresh assessment while the suo moto revisional proceedings against the remand order were pending before the Commissioner of Commercial Taxes. The State of Andhra Pradesh, aggrieved by this decision, appealed to the Supreme Court.

Legal Framework

The judgment primarily revolves around the interpretation of the powers of the Assessing Officer under the relevant tax laws of Andhra Pradesh and the principles governing the exercise of revisional jurisdiction by the Commissioner of Commercial Taxes. The specific sections of the Andhra Pradesh Value Added Tax Act, 2005, or the rules framed thereunder, which were considered by the Court, have not been mentioned in the judgment.

Arguments

The arguments in the case were primarily centered around the jurisdiction of the Assessing Officer to proceed with fresh assessments when the remand order itself was under revision. The State argued that:

• The High Court should not have entertained the writ petitions directly, as the dealers had an alternative remedy of appeal before the First Appellate Authority.
• The fresh assessment orders were a consequence of the remand by the First Appellate Authority, and the Assessing Officer was bound to comply with the remand order.
• The pendency of suo moto revision proceedings against the remand order did not invalidate the fresh assessment orders.
• The High Court did not examine the merits of the fresh assessment orders.

The dealers, on the other hand, contended that:

• The Assessing Officer lacked the jurisdiction to pass fresh assessment orders while the suo moto revision of the remand order was pending before the Commissioner of Commercial Taxes.

The judgment does not specify any authorities relied upon by either party.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in the judgment. However, the core issue that the Court addressed was:

1. Whether the High Court was justified in quashing the fresh assessment orders passed by the Assessing Officer on the ground that suo moto revisional proceedings were pending before the Commissioner of Commercial Taxes against the order of remand passed by the First Appellate Authority.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The judgment does not mention any specific cases, books, or legal provisions relied upon by the Court.

Judgment

The Court did not cite any specific authorities. Therefore, the table for “How each authority was viewed by the Court?” is not applicable.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that alternative remedies should be exhausted before invoking the writ jurisdiction of the High Court. The Court also emphasized that the Assessing Officer was bound to comply with the remand order passed by the First Appellate Authority, and the pendency of suo moto revisional proceedings against the remand order did not invalidate the fresh assessment orders. The Court’s focus was on procedural propriety and adherence to the established hierarchy of legal remedies.

The Supreme Court held that the High Court should not have entertained the writ petitions directly. The Court emphasized that the dealers should have availed the alternative remedy of appeal before the First Appellate Authority. The Court stated that the fresh assessment orders were a consequence of the remand by the First Appellate Authority, and the Assessing Officer was bound to comply with the remand order. The Court also noted that the pendency of suo moto revision proceedings against the remand order did not invalidate the fresh assessment orders. The Court observed that the High Court did not examine the merits of the fresh assessment orders.

The Supreme Court stated: “Firstly, the High Court ought not to have directly entertained the writ petitions challenging the fresh assessment orders. The respective dealers – assessees ought to have availed the alternative remedy of appeals before the First Appellate Authority which were availed earlier when the earlier assessment orders were passed.”

The Court further added: “Secondly, because the fresh assessment orders were passed consequent upon the remand of the case by the First Appellate Authority pending the revisional proceedings against the order of remand, merely on that ground alone the fresh assessment orders could not have been set aside.”

The Court also stated: “In view of the above, the judgment and orders passed by the High Court quashing and setting aside the fresh assessment orders in the writ petitions under Article 226 of the Constitution of India are unsustainable.”

There were no minority opinions in this judgment.

Key Takeaways

• Assessees must exhaust alternative remedies like appeals before approaching the High Court under Article 226 of the Constitution of India.
• An Assessing Officer is bound to comply with the remand order of the Appellate Authority.
• The pendency of suo moto revisional proceedings against a remand order does not invalidate fresh assessment orders passed pursuant to that remand.

Directions

The Supreme Court quashed and set aside the judgment and orders passed by the High Court. The Court did not give any specific directions but implied that the assessees should now pursue their appeals before the First Appellate Authority.

Specific Amendments Analysis

There is no specific amendment analysis in this judgment.

Development of Law

The ratio decidendi of this case is that the High Court should not entertain writ petitions when an alternative remedy of appeal is available, and that an Assessing Officer is bound to comply with the remand order of the Appellate Authority even if a revision of the remand order is pending. This judgment reinforces the principle of exhaustion of alternative remedies and clarifies the powers of the Assessing Officer in cases of remand.

Conclusion

The Supreme Court allowed the appeals filed by the State of Andhra Pradesh, setting aside the High Court’s decision. The Court emphasized the importance of exhausting alternative remedies before approaching the High Court and clarified that the Assessing Officer was correct to proceed with fresh assessments even while a revision of the remand order was pending.