Case Law Details
Yellalinga Electricals Vs Additional Commissioner of Commercial Taxes (Karnataka High Court)
The Karnataka High Court considered Review Petition No. 483/2025 challenging the order dated 19.03.2025 passed in STA No. 1/2024 and also decided STA No. 2/2024 filed under Section 66(1) of the Karnataka Value Added Tax Act, 2003 (KVAT Act).
In the review petition, the petitioner contended that the Coordinate Bench had proceeded on an erroneous factual premise while dismissing STA No. 1/2024. It was submitted that the earlier judgment relied upon the Tribunal’s observation that, despite production of an FIR relating to the loss of books of account for the financial years 2016-17 and 2017-18, the petitioner failed to produce the books of account even at the appellate stage. The petitioner further contended that the amounts reflected in Form 26AS, based on Form 16 issued by the concerned revenue authorities, had not actually been received and that the turnover adopted for assessment did not represent the actual receipts from the concerned authorities.
The High Court observed that the Coordinate Bench had already considered these submissions in detail while deciding STA No. 1/2024. Referring to the Supreme Court’s decisions in Sanjay Kumar Agarwal v. State Tax Officers and Parison Devi v. Sumitri Devi, the Court reiterated that review jurisdiction is confined to correcting an error apparent on the face of the record and cannot be used for rehearing or re-deciding the case. Applying those principles, the Court held that no apparent error existed in the judgment dated 19.03.2025 and dismissed the review petition as devoid of merit.
The Court thereafter considered STA No. 2/2024, filed against Order No. 376440610 AD SMR in No. ZAC-1/KLB/SMR-03/2023-24 dated 27.03.2024 passed by the Additional Commissioner of Commercial Tax (Zone)-1 for the assessment year 2016-17 and the consequential proceedings dated 17.04.2024 issued by the Assistant Commissioner of Commercial Taxes, Audit, Kalaburagi, demanding tax of ₹1,87,84,298, interest of ₹2,32,26,245 and penalty of ₹18,82,156.
The appeal raised several substantial questions of law, including issues relating to refund allegedly availed through a consultant’s personal cheque, alteration of an order by a successor officer, proceedings initiated under Section 64(1) of the KVAT Act, determination of turnover based on VAT-100 returns without books of account, disallowance of deductions towards labour and like charges, denial of input tax credit for want of documentary evidence, levy of VAT at 14.5% with consequential interest and penalty, and recovery of refund based on Form VAT-156.
The appellant, an electrical contractor executing electrical and civil contract works for Government authorities, challenged reassessment and assessment orders passed under Sections 38(5), 39(1), 36, 72(2) and 74(4) of the KVAT Act for the tax periods April 2016 to March 2017 and April 2017 to June 2017. The appellant stated that appeals under Section 62(1) of the KVAT Act had been partly allowed by the Joint Commissioner of Commercial Taxes (Appeals) by order dated 19.04.2023, with a direction to issue a revised demand notice in Form VAT-180 for the assessment year 2017-18 (up to June 2017), subject to verification of tax deducted at source in respect of ₹1,32,960.
The appellant submitted that the impugned order violated the principles of natural justice as no effective opportunity had been granted to present the case and that the authorities proceeded despite being informed, through an FIR, of the theft of books of account and other records. It was contended that adequate opportunity to reconstruct and produce the records had not been provided.
The respondent contended that the issues in the appeal were substantially identical to those decided in STA No. 1/2024 and that, unless the earlier judgment was reviewed or recalled, its findings governed the present appeal.
The High Court held that, with the dismissal of the review petition, the order dated 19.03.2025 in STA No. 1/2024 stood affirmed. The Court noted that the earlier judgment had rejected the contention regarding lack of opportunity after recording that the appellant had failed to produce the books of account despite being granted time following registration of the FIR. It also referred to the earlier observations that the tax consultant acted as the assessee’s agent and that the assessee had signed the returns and records filed before the revenue authorities.
Finding that the facts and grounds raised in the present appeal were substantially similar to those considered in STA No. 1/2024, the Court agreed with the earlier view, held that the issues were squarely covered by the previous judgment, found no merit in the appeal, and dismissed it.
Cases Discussed
- SANJAY KUMAR AGARWAL Vs. STATE TAX OFFICERS (SC), 2023 SCC ONLINE SC 1406
- PARSION DEVI Vs. SUMITRI DEVI (SC), (1997) 8 SCC 715
- Sajjan Singh v. State of Rajasthan (SC), 1964 SCC OnLine SC 25
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The review petition is directed against the order dated 19.03.2025 passed by the Co-ordinate Bench of this Court in STA No.1/2024, wherein the Co-ordinate Bench of this Court dismissed the appeal.
2. We have heard Sri T.R.Sathyanarayana, learned counsel for the review petitioner and Smt.Jyoti M.Maradi, learned HCGP for the respondent. Perused the entire material on record.
3. It is the principal contention of the learned counsel for the review petitioner that the Co-ordinate Bench, while dismissing STA No.1/2024, proceeded primarily on the basis that sufficient opportunity had been afforded to the assessee to produce the relevant documentary evidence, including the books of account, despite he failed to do so. In this regard, reliance was placed upon the observations made by the Tribunal in paragraph No.30 of the impugned order, wherein it was recorded that the Departmental Authorised Representative (DAR) had produced a copy of the FIR lodged before the jurisdictional Police Station concerning the loss of the books of account pertaining to the financial years 2016–17 and 2017– 18, and that notwithstanding the same, the appellant had failed to produce the books of account even at the appellate stage.
4. Learned counsel for the review petitioner would further contend that the aforesaid reasoning proceeds on an erroneous factual premise. It is submitted that the petitioner had not, in fact, received the amounts reflected in Form No.26AS in respect of the works entrusted during the relevant tax period, though the said entries were based upon Form No.16 issued by the concerned revenue authorities. It was further contended that the turnover adopted by the respondent for the purpose of assessment does not represent the actual receipts of the petitioner from the concerned authorities and, therefore, the very basis on which the turnover has been determined is factually unsustainable.
5. Upon a careful perusal of the order impugned in the present review petition, passed by the Co-ordinate Bench of this Court in STA No.1/2024, it is evident that the review petitioner had advanced elaborate submissions on the aforesaid aspects of the matter. The said contentions have been duly considered and dealt with in detail by the Co-ordinate Bench while rendering its decision.
6. The Hon’ble Apex Court in the case of SANJAY KUMAR AGARWAL Vs. STATE TAX OFFICERS – 2023 SCC ONLINE SC 1406 by referring the case of Sajjan Singh v. State of Rajasthan – 1964 SCC OnLine SC 25, has held in paragraph 10 as under:
“10. It is also well-settled that a party is not entitled to seek a review of a judgment delivered by this Court merely for the purpose of a rehearing and a fresh decision of the case. The normal principle is that a judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so.”
7. Further, in the said judgment, the Hon’ble Apex Court by referring to PARSION DEVI Vs. SUMITRI DEVI – (1997) 8 SCC 715 has held in paragraph 11 as under:
“Under Order 47 Rule 1CPC a judgment may be open to review inter alia if there is a mistake or an error apparent on the face of the record. An error which is not self-evident and has to be detected by a process of reasoning, can hardly be said to be an error apparent on the face of the record justifying the court to exercise its power of review under Order 47 Rule 1CPC. In exercise of the jurisdiction under Order 47 Rule 1CPC it is not permissible for an erroneous decision to be “reheard and corrected”. A review petition, it must be remembered has a limited purpose and cannot be allowed to be “an appeal in disguise”.”
8. Applying the above dictum laid down by the Hon’ble Apex Court to the facts and circumstances of this case, we are of the view that there is no apparent error on the face of the record/order dated 19.03.2025 passed by the Co-ordinate Bench of this Court in STA No.1/2024.
9. Accordingly, the review petition, being devoid of merit, is dismissed.
10. As regards the appeal, STA.No.2/2024 has been filed by the appellant under Section 66(1) of the Karnataka Value Added Tax, 2003 (for short, “the KVAT Act”) against the order No.376440610 AD SMR in No.ZAC-1/KLB/SMR-03/2023-24 dated 27.03.2024 passed by the Additional Commissioner of Commercial Tax (Zone) – 1 for the assessment year 2016 -17 and the subsequent proceedings dated 17.04.2024 by Assistant Commissioner of Commercial Taxes, Audit, Kalaburagi, by demanding the tax of Rs.1,87,84,298/- along with interest of Rs.2,32,26,245/- and penalty of Rs.18,82,156/-.
11. The appellant has raised the following substantial questions of law in the appeal:
Question No.1: Whether the then consultant issued his personal cheque to the extent of refund wrongly availed to the office of LVO -540?
Question No.2 Whether an order passed by predecessor can be altered in the order passed by the Successor in a different direction?
Question No.3: Whether proceedings instituted pursuant to a notice under section 64(1) of the KVAT issued in contravention of Rule 154 of the KVAT Rules 2005 can be sustained?
Question No.4: Validity of consideration of total turnovers as per erroneous monthly returns filed in form VAT-100 in the absence of the books of account ACCT Bidar?
Question No.5: Validity of disallowance of deduction claimed towards labour & like charges in the absence of books of account & allowing the standard deduction of 30% as per rule 3(2)(m) of the KVAT rules 2005 by the respondent and not allowing exemption towards deemed VAT collected amount & gross profit earned towards labour & like charge expenses incurred by the appellant?
Question No.6: Validity of dis-allowance of the deduction claimed towards input tax credit for non-submission of the relevant documentary evidence and the levy of VAT @ 14-.5% along with the consequential interest and penalty on the balance liability determined by the respondent?
Question No.7: Validity of demanding back the refund claimed amount along with the consequential interest and penalty based on invalid form VAT-156 filed by the then tax consultant for the tax period June-17 by the respondent ?
12. The case of the appellant is that he is the proprietor of M/s. Yellaling Electricals Contractor, Bidar, and is engaged in the execution of electrical and civil contract works awarded by various Government authorities. It is his contention that he had preferred appeals under Section 62(1) of the KVAT Act, challenging: (i) the reassessment order dated 15.02.2021 passed by the Assistant Commissioner of Commercial Taxes, Audit-I, Kalaburagi, under Section 39(1) read with Sections 36 and 72(2) of the KVAT Act for the tax periods from April 2016 to March 2017; (ii) the assessment order dated 12.11.2020 passed by the Assistant Commissioner of Commercial Taxes, LGSTO-540, Bidar, under Section 38(5) of the KVAT Act for the tax period June 2017 of the financial year 2017–18; and (iii) the reassessment order dated 05.03.2021 passed by the Assistant Commissioner of Commercial Taxes, Audit, Bidar, under Section 39(1) read with Sections 72(2) and 74(4) of the KVAT Act for the tax periods April 2016 to March 2017 and April 2017 to June 2017 pertaining to the financial years 2016–17 and 2017–18, whereby tax, interest and penalty came to be levied under the provisions of the Act.
13. It is further contended that the said appeals, upon consideration of the rival submissions and the material available on record, came to be disposed of by the Joint Commissioner of Commercial Taxes (Appeals), Kalaburagi Division, Kalaburagi, by order dated 19.04.2023, whereby the appeals were partly allowed. Under the said order, the Assistant Commissioner of Commercial Taxes (Audit), Bidar, was directed to issue a revised demand notice in Form VAT-180 for the assessment year 2017–18 (up to June 2017) determining the liability at Rs.85,40,393/-, subject to verification and confirmation as to whether tax deducted at source (TDS) at the rate of 4% or above had been deducted in respect of an amount of Rs.1,32,960/- and remitted to the concerned LVO/LGSTO, as reflected in Annexure–E to the order.
14. The principal contention urged on behalf of the appellant is that the impugned order has been passed in flagrant violation of the principles of natural justice, inasmuch as no effective opportunity was afforded to him to place his case before the authority concerned and the order has been rendered without due consideration of the material available on record. It is contended that the order passed under Section 62(6) of the Karnataka Value Added Tax Act, 2003, pertaining to the tax periods from April 2016 to March 2017, has been concluded without a proper appreciation of the factual matrix and the applicable legal provisions.
15. It is further submitted that, at the earliest available opportunity, the appellant had brought to the notice of the authorities that certain documents had been lost due to theft and, in support thereof, had produced a copy of the FIR registered at Bidar concerning the theft of records pertaining to the relevant assessment years. Notwithstanding the same, the authorities proceeded to conclude the proceedings without affording the appellant a reasonable opportunity to reconstruct and produce the relevant documentary evidence, including the books of account and other supporting records. With these submissions, he prays to allow the appeal by setting the order passed by the respondent.
16. Per contra, the learned High Court Government Pleader vehemently opposed the appeal and submitted that the issues arising for consideration in the present proceedings are substantially similar to those which fell for consideration before the Co-ordinate Bench of this Court in STA No.1/2024, which came to be disposed of by order dated 19.03.2025. It is further submitted that the said order is the subject matter of challenge in Review Petition No.483/2025. Further, contended that, unless this Court, in the review proceedings, recalls or reviews the order passed by the Co-ordinate Bench in STA No.1/2024, the ratio and findings recorded therein would squarely govern the present appeal. Consequently, it is submitted that the present appeal does not warrant independent consideration and is liable to be decided in terms of the judgment rendered by the Co-ordinate Bench in STA No.1/2024.
17. Having considered the rival submissions and perused the material on record, we are of the view that, in light of the dismissal of the Review Petition and the consequent affirmation of the order dated 19.03.2025 passed by the Co-ordinate Bench in STA No.1/2024, the present appeal is liable to be dismissed. The facts and grounds urged herein are substantially similar to those considered in STA No.1/2024 and are squarely covered by the findings recorded therein. The Co-ordinate Bench, at paragraphs 6 and 7 of its judgment, has observed as under:
6. The vehement submission of the learned counsel appearing for the assessee that his client was not given a reasonable opportunity to produce relevant evidentiary material such as books of accounts is liable to be rejected inasmuch as, despite granting opportunity, the assessee failed to avail the same.
The respondent at Para 30 of the impugned order has observed as under:
“30. In support of the contentions urged, the DAR of the appellant even at appeal stage has not submitted any books of account related to the actual expenses incurred towards labour & like charges for the tax periods of the financial years 2016-17 & 2017-18 (up to June-17). The DAR present has submitted copy of FIR filed before the jurisdictional police station related to loss of books of account by the appellant related to the financial years 2016-17 & 2017-18 (up to June-17 & requested to allow time to prepare & submit the relevant vouchers based on payments withdrawn from bank & paid towards labour & like charges as per bank statements. However, has not submitted any books of account even at appeal stage.”
7. The vehement submission of learned counsel for the appellant that for the fraud committed by the Tax Consultant, the assessee should not be made to suffer is too broad a proposition to accept. Ordinarily, as rightly submitted by learned AGA, Tax Consultant is an Agent of the assessee, notwithstanding the professional elements involved in the Act. It is not that the assessee had not put his signatures to the Returns and Records filed before the Revenue, in a normative way. It is also not that the Tax Consultant would have been benefited by the inflated figures stated in the Return; obviously, it was the assessee who was the beneficiary. Claiming higher contract amount by inflated figures and thereafter complaining that the Tax authorities have premised their decision on such figures, virtually amounts to defrauding the State, in two-ways. Such an assessee does not deserve any relief at the hands of this Court.
18. In the present appeal also, the appellant has contended that he was not afforded sufficient opportunity to produce relevant documents, including vouchers, bank records and other supporting material pertaining to the financial years 2016–17 and 2017–18. However, it is the specific case of the respondent that, notwithstanding the opportunity granted in view of the FIR registered regarding the loss of books of account, the appellant failed to produce the requisite material even at the appellate stage.
19. In the circumstances, we are in respectful agreement with the view taken by the Co-ordinate Bench in STA No.1/2024. Since the Review Petition challenging the said judgment has been dismissed and the issues arising in the present appeal are substantially similar, we find no merit in the appeal. Accordingly, the appeal stands dismissed.
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