Case: Mentha and Allied Products Ltd vs. State of U.P. And 3 Others. WRIT TAX No. – 683 of 2023

In a recent case before the Allahabad High Court (the court), a manufacturer of ‘Mentha Oil’ (the petitioner) was denied input tax credit (ITC) by the Assessing Authority because the petitioner bought raw materials from unregistered dealers. Even though most of the ITC was allowed, a portion it. Later, the petitioner was informed that an reassessment was underway for the tax year 2014-15 under Section 29(7) of the UPVAT Act, even though the time limit for the same had passed. The petitioner challenged the fairness of reassessment as it should been done earlier if necessary. The petitioner also maintained that the reassessment does not come under the ambit of reassessment and raised an issue regarding unreasonable time frame provided to them by the assessing authority to provide conclusive response.
The court affirmed that the Assessing Authority acted too quickly and unfairly and provided the petitioner with insufficient time to respond. The court stressed that everyone, regardless of status, deserves fair treatment and elaborated that ITC is different from figuring out taxes on sales or purchases and should be handled during regular assessments, not reassessments.
The court clarified that reassessment under Section 29 has specific conditions, like having a good reason to believe there was a mistake in the tax calculation. But this does not apply to ITC. As it was contented by the court that ITC is not part of the turnover that reassessment covers. It should be dealt with in regular assessments, where any mistakes can be rectified.
In the end, the court ruled that the Assessing Authority did not possess the right to reassess under Section 29 and that their actions were unfair. The court granted the petition in favour of the petition.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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