KGST- Assessment cannot be reopened after 14 years unless fresh receipt of materials for tax evasion
Case Law Details
K. Sasilal Vs Fast Track Assessment Team No. 2 (Kerala High Court)
The issue under consideration is whether escaped assessment by way of fast track assessment can be taken almost 14 years later will be sustained u/s 17D?
In the given case the petitioner, K. Sasilal was served with a notice for the re-assessment of the proceedings under Section 17D of the Kerala General Sales Tax Act, 1963 pertaining to the method of fast track completion of the assessment, noticing the escaped turnover based upon certain observation of the order. The notice also reflected in the sensor audit of the respondent authority to furnish the copies of audit objection and sanction order. But, without providing the documents as sought for, issued another notice under Section 17D of the Act, 1963.
The petitioner contended that as per Section 17D, the assessment completed shall not be re-opened unless there is a fresh receipt of materials pertaining to tax evasion, and the outer time limit as provided under Section 19 of the assessment of sale turnover would apply, which prescribed the period of five years from the expiry of the year to which the tax relates and not beyond.
Hence, the High Court of Kerala quashed the reassessment proceedings under section 17D of the Kerala General Sales Tax Act (KGST), 1961 since the provision does not prescribe any time limit and no additional material to undertake the fast track assessment was presented by the department.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Petitioner in the writ petition is aggrieved by the proceedings initiated by the 1st respondent under the erstwhile Kerala General Sales Tax Act (KGST Act) for the period 2004-2005. As per the averments, the petitioner filed true and correct returns and paid tax and other dues for the assessment year and continuing business on migration to the GST regime with effect from 01.07.2017.
2. The petitioner was served with a notice dated 20.11.2019 for re-assessment of the proceedings under Section 17D of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as the ‘Act, 1963’) pertaining to method of fast track completion of assessment, noticing the escaped turn over of Rs. 17,81,824/- based upon certain observation of the order. The aforementioned notice also reflected in the sensor audit dated 28.11.2019 of the 3rd respondent. Vide Ext.P3 dated 06.12.2019, request was submitted to the first respondent to furnish the copies of audit objection and sanction order. But, without providing the documents as sought for, issued another notice under Section 17D of the Act, 1963 dated 13.01.2020 evident from Ext.P4.
3. Learned counsel appearing on behalf of the petitioner submitted that as per Section 17D, the assessment completed shall not be re-opened unless there is a fresh receipt of materials pertaining to tax evasion, and the outer time limit as provided under Section 19 of the assessment of sale turnover would apply, which prescribed the period of five years from the expiry of the year to which the tax relates and not beyond. Ext.P4 proceedings having been initiated beyond the prescribed period of 5 years, the same cannot stand the test applicability of Section 19 of the Act,1963, which has already been appreciated and noticed in Philips India Ltd. vs. Assistant Commissioner [(2016) 96 VST 229. The outer time limit for assessment under Section 17(3) of the Act, 1963 for assessment year 2004-05 expired on 31.03.2010 shall be completed on 31.03.2011. The outer limit as per the amendment made to Section 17 was only after 31.03.2014, whereas in the instant case more than 14 years have elapsed.
4. This Court vide order dated 06.03.2020 called upon counsel for the respondents to take instruction and in the meantime operation of Ext.P7 was ordered to be kept in abeyance.
5. Dr. Thushara James, the learned Government Pleader submits that once Section 17(D) of the Act, 1963 do not envisage any period of limitation, the argument of Sri.K.N.Sreekumaran that the applicability of Section 19 of the Act, 1963 would not apply and impugned order noticing the escaped turn over cannot be said to be erroneous or barred by law of limitation.
6. I have heard learned counsel for the petitioner and also the learned Government Pleader.
Section 17D of the KGST ACT reads as follows:-
17D. Fast Track method of completion of Assessment:-
(1) Notwithstanding anything contained in any other law for the time being in force or any other provisions of this Act all assessment
(2) pending under the Act as on the 1st day of April, 2007 shall, subject to the provisions of sub section (2), be completed under the fast track method.
(a) The assessment under sub-section (1) shall be completed in the following manner, namely:-
The assessment shall be completed by a ‘team’ comprising of a team of officers which shall be constituted by the Commissioner.
(b) In the case of files relating to Special Circles, there shall be three Assistant Commissioners in the team, headed by a Deputy Commissioner. In the case of Ordinary Circles, the team shall be headed by an Assistant Commissioner and comprise three Commercial Tax Officers as members.
(c) All files of the dealer pertaining to an assessment year shall be clubbed with assessment filed and taken up for disposal.
(d) No assessment completed by the teams shall be re-opned unless there is fresh receipt of materials pertaining to tax evasion.
Provided that the assessment may be reopened with the prior permission of the Commissioner:
(e) The assessment shall be completed fairly by a summary proceeding and in cases where the returns are not acceptable, the following criteria may be adopted for determining their tax liability namely-
(i) In case where the dealer had compounded the offence under section 47, or penalty under section 45A or 29A has been levied, the assessment may be completed on an addition proportionate to the period of suppression with reference to the quantum of suppression detected, limiting the tax effect on such addition to a maximum of three times of the compounding fee paid or tax effect of suppression detected, whichever is higher, and in case where a pattern or suppression has not been established, to an amount equal to the suppression detected.
(ii) In case where tax evaded cannot be quantified, the assessment may be completed on an addition equal to five percent of the taxable turnover conceded by the dealer as per his returns or accounts, subject to tax effect of a minimum five thousand rupees/- and a maximum of one lakh rupees.
(iii) In case where statutory forms and declarations in support of claim of concessional rate of tax or exemption have not been filed or are partially filed, or where the forms have been misused, the assessment may be completed by disallowing such claims, to the extent of the defect in such forms, assessing it under this Act.
(iv) In case of contracts where option for compounding under the provisions contained in section 7 of this Act, as it then existed have been filed, and where returns and tax deduction certificate issued by the awarder have been produced, assessment may be completed accepting the awarder’s certificate.
(v) In case of contracts in respect of which tax is paid under section 5 of this Act, and where returns and statement of accounts have been filed, but the returns are found to be incorrect or incomplete, assessments may be completed determining additional tax payable at twenty per cent of tax payable subject to a minimum of ten thousand rupees:
Provided that the amnesty scheme envisaged in section 23(B) shall also be applicable to assessment completed as per this section.
(f) The team shall be competent to offer reasonable concessions after recording the reasons thereof on the estimation of suppression of turnover on account of any offences detected against the dealer, and also on the interest payable up to a maximum of fifty percent of that payable, in cases where the dealer offers immediate payment of the dues.
(g) The hearings shall be open and in public view, The date and venue of the sitting shall be intimated in advance to the dealers concerned. Information shall also be published through the local media.
(h) No adjournment in the cases listed at a session shall be permitted except under exceptional circumstances.
(i) If a dealer fails to appear, the assessment shall be finalized ‘ex-parte’ following the principles of natural justice.
(3) All assessment under fast track method shall be by unanimous decisions signed by all team members.
(4) Notwithstanding anything contained in any other law for the time being in force the officers on the team shall be absolved from personal liability on account any assessment order issued in good faith.
(5) Notwithstanding anything contained in any other provisions of this Act, appeals against the assessment orders issued under fast track method shall lie to the Sales Tax Appellate Tribunal and no such appeal shall lie unless the dealer has paid the entire tax amount”.
Section 19 of the KGST Act reads as follows;-
19. “Assessment of escaped turnover:-
(1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been assessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made therefrom, the assessing authority may, at any time within five years from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such turnover after issuing a notice on the dealer and after making such enquiry as it may consider necessary:
Provided that before making as assessment under this sub-section the dealer shall be given a reasonable opportunity of being heard.
Provided further that the time limit mentioned in this sub-section shall not apply where the turnover which escaped assessment relates to any business done by such dealer as benamidar or through a benami or where it relates to dealer, who being liable to get himself registered under this Act and the rules made there under has failed to do so.
(2) In making as assessment under sub-section (1), the assessing authority may, if it is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer, direct the dealer to pay, in addition to the tax assessed under sub-section (1) a penalty as provided in section 45A.
Provided that no such penalty shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition.
Explanation:- Notwithstanding anything contained in the Indian Evidence Act, 1872, the burden of proving that the escape from assessment was not due to willful non-disclosure of assessable turnover by the dealer shall be on the dealer.
(3) The powers under sub-section (1) may be exercised by the assessing authority even though the original order of assessment, if any, passed in the matter, has been the subject matter of an appeal or revision.
(4) In computing the period of limitation for the purpose of this section, the time during which the proceedings for assessment remained stayed under the orders of a Civil court or other competent authority shall be excluded.”
7. On perusal of the aforementioned provisions, particularly Section 19 of the Act, 1963 empowers the assessing authority may, at any time within five years from the expiry of the year to which the tax relates, proceed to determine the best of its judgement in respect of the turn over alleged to have escaped assessment to tax.
8. There was an amendment in Section 17 whereby the assessment relating to year up to and including 2004-05 running as on 31st March, 2010 or to be completed on or before 31.03.2011. The said proviso reads as follows:-
“Provided also that the assessment relating to the years up to and including the year 2004-05 pending as on 31st March, 2010 shall be completed on or before the 31st day of March, 2011″
9. However, in the instant case the Ext.P2 notice was issued on 20.11.2019 followed by an assessment order dated 14.12.2009 and Ext.P4 notice, Ext.P7 order commanding the petitioner to pay the penalty and interest under the KGST Act, 1963. There is no justification for this department or a material placed on record as per the provision of Section 17D, I am of the firm opinion that in the absence of any statutory period referred to Section 17D escaped assessment way of fast track assessment can be taken almost 14 years later. The reasonable period can be extended upto the period referred to other provisions regarding the escaped assessment under Section 19.
10. Even from perusal of the assessment order and the notice there is no reference to the additional material forming an opinion to undertake the fast track assessment.
For the reason aforementioned, I am of the view that the order impugned in Ext.P1 and demand in Ext.P7 are not sustainable. Accordingly the Ext.P1 assessment order 14.12.2009 and Ext.P7 demand notice dated 10.02.2020 are quashed. The writ petition is allowed.
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