Allahabad High Court Holds Assessing Authority Responsible for Proving Escaped Assessment: Quashes Reassessment Order against Flipkart

Allahabad High Court Holds Assessing Authority Responsible for Proving Escaped Assessment: Quashes Reassessment Order against Flipkart

The reassessment order against Flipkart has been quashed by the Allahabad High Court, emphasizing that the responsibility to demonstrate escaped assessment rests with the assessing authority.

The bench, comprising Justices Saumitra Dayal Singh and Shiv Shanker Prasad, has noted that the onus of establishing the presence of documented reasons rested entirely on the department. The petitioner was not required to furnish any material, nor was there an obligation to aid in the formulation of the reasons. In seeking to reassess the petitioner for the fiscal year 2012–13, the assessing authority assumed the responsibility to present both the pertinent material that might have led to the formation of a reason—to believe that any turnover had escaped assessment—and also to record the relevant reasons regarding the belief in the escapement of turnover from assessment. The burden thus cast was not discharged.

Flipkart, the petitioner, challenged the proposal issued by the Additional Commissioner under Section 29(7) of the Uttar Pradesh Value Added Tax Act, 2008, along with the subsequent order granting permission to the petitioner's assessing authority to reassess for the Assessment Year 2012–2013 within the extended period of limitation specified under Section 29(7). The petition was admitted, and the operation and impact of the order, as well as the consequential notice, were suspended.

The assessee argued that the mere absence of a deliberate assessment by the assessing authority does not automatically constitute a reason to believe that any portion of the turnover had escaped assessment for the fiscal year 2012–13. Without any available material to the assessing authority or the Additional Commissioner, which could have led to the formation of a belief that any part of the petitioner's turnover had escaped assessment, there could be no basis for entertaining such a belief. In essence, it was argued that there is neither pertinent material nor any reason to believe that any portion of the turnover had evaded assessment by the petitioner.

The tax department argued that the assessing authority did not commit an error in proposing to reassess the petitioner for the fiscal year 2012–13, as no portion of the turnover for that assessment year had been subjected to taxation.

The court, while allowing the writ petition, observed that the assessing authority neither possessed pertinent evidence nor recorded any rationale indicating that any segment of the petitioner's turnover had evaded assessment. As a result, the assessing authority lacked jurisdiction to reassess the petitioner for the fiscal year 2012–13