THE HON’BLE MRS. JUSTICE S.SUJATHA THE HON’BLE Dr. …judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/... · 2017-12-21 · in the high court of karnataka dharwad bench

IN THE HIGH COURT OF KARNATAKA

DHARWAD BENCH

DATED THIS THE 7TH DAY OF DECEMBER, 2017

PRESENT

THE HON’BLE MRS. JUSTICE S.SUJATHA

AND

THE HON’BLE Dr. JUSTICE H. B. PRABHAKARA SASTRY

STA No.100018/2014 C/w. S.T.A. Nos. 100014/2014,

100015/2014, 100016/2014, 100017/2014, 100020/2014, 100021/2014, 100022/2014 & 100019/2014

IN STA No.100018/2014 :

BETWEEN:

M/S. PUSHKAR DRESS MANUFACTURERS, NO.19, WARD NO.3, JAIN CLOTH MARKET, BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:

THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)

THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 17.06.2014 PASSED IN ZAC O3/DVG/SMR.44/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 19, 20 & 21/13-14 DATED 9.10.2013 PASSED BY FAA AND RESTORING

R

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THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956. IN STA No.100014/2014

BETWEEN:

M/S. ZEE LINE CREATIONS, 32/2, 5TH WARD, GOWLER HATTI, BELLARY-583101 REP. BY ITS PROPRIETOR M.RAMESH S/O M. SHATRUGNA RAO, BELLARY. … APPELLANT (BY SRI.NARAYAN G.RASALKAR, ADV.) AND:

THE STATE OF KARNATAKA REP BY THE PRINCIPAL SECRETARY, DEPARTMENT OF FINANCE VIDHANA SOUDHA, BENGALURU-560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)

THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 18.06.2014 PASSED IN ZAC O3/DVG/SMR.48/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 13, 14 & 15/13-14 DATED 10.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.

IN STA No.100015/2014

BETWEEN:

M/S. P.L. WEAR, 104, KALLAMMA STREET, REP. BY ITS PROPRIETOR, MORIDEVI W/O LALITKUMAR, AGE:40 YEARS, BELLARY-583101. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.)

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AND:

THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1, GANDHINAGAR, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)

THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 19.06.2014 PASSED IN ZAC O3/DVG/SMR.43/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE, APPEAL IS HEREBY ALLOWED.

IN STA No.100016/2014

BETWEEN:

M/S. RAJKURPA GARMENTS, POPPULA BAZAR, BELLARY-583101, REP. BY ITS PROPRIETOR, BHAWRARAM S/O JAYAROOPRAM, AGE:38 YEARS, DIST:BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:

THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 GANDHINAGAR, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)

THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 18.06.2014 PASSED IN ZAC O3/DVG/SMR.50/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 43, 44 & 45/13-14 DATED 06.09.2013 PASSED BY FAA AND RESTORING

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THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.

IN STA No.100017/2014

BETWEEN:

M/S. PAVAN ENTERPRISES, NO.90/1, 2ND FLOOR, UTTARKAR COMPLEX, BRAHMIN STREET, BELLARY. REP. BY ITS AUTHORISED SIGNATORY AMBARAM S/O UMARAMJI CHOWDHARY, BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:

THE STATE OF KARNATAKA REP ITS PRINCIPAL SECRETARY, DEPARTMENT OF FINANCE, VIDHANA SOUDHA, BENGALURU-560001. … RESPONDENT (BY SRI. M. KUMAR, AGA)


IN STA No.100020/2014

BETWEEN:

M/S. POOJA INTERNATIONAL, NO.1, WARD NO.2, FIRST FLOOR, CHOUDHARY MARKET, GOWLERAHATTI, BELLARY. REP. BY ITS PROPRIETOR, CHAMPARAM S/O RATNARAMAJI.

5

BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:

THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 GANDHINAGAR, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)


IN STA No.100021/2014

BETWEEN:

M/S. SUNDER CREATIONS, 29 B/5, TANK BUND ROAD, MANIYAR LANE, BELLARY. REP. BY PROPRIETOR S. SUNITHA BAI W/O S. SATISH KUMAR. … APPELLANT

(BY SRI. NARAYAN G. RASALKAR, ADV.)

AND:

THE STATE OF KARNATAKA, REP BY PRINCIPAL SECRETARY, TO DEPT. OF FINANCE, VIDHANA SOUDHA, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)

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IN STA No.100022/2014

BETWEEN:

M/S. MASCO GARMENTS, NO.6, WARD NO.8, GOPI CHANNAPPA STREET, BELLARY-583101. REP. BY ITS PROPRIETOR BHOMARAM S/O KOLARARAOJI CHOWDHARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.)

AND:

THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 BANGALORE 560 009. …RESPONDENT

(BY SRI. M. KUMAR, AGA)

THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 18.06.2014 PASSED IN ZAC O3/DVG/SMR.49/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 47/13-14 DATED 10.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 24.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.

IN STA No.100019/2014

BETWEEN:

M/S. MAHAVEER COTTON JEANS, D.NO.35, KASAI STREET, BEHIND HRG BUILDING, NEAR JAIN MARKET, BELLARY-583101. … APPELLANT

(BY SRI. NARAYAN G. RASALKAR, ADV.)

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AND:

THE STATE OF KARNATAKA REP BY THE SECRETARY TO GOVERNMENT, FINANCE DEPARTMENT, VIDHANA SOUDHA, BANGALORE 560 001. … RESPONDENT (BY SRI. M. KUMAR, AGA)


THESE APPEALS COMING ON FOR ADMISSION, THE SAME

HAVING BEEN HEARD AND RESERVED ON 22.11.2017, THIS DAY, S.SUJATHA J., DELIVERED THE FOLLOWING:

JUDGMENT

Since common issues are involved in these matters,

the same are heard together and disposed of by this

common judgment.

2. These appeals arise against the order passed by the

Addl. Commissioner for Commercial Taxes, Zone-III,

Bengaluru, whereby the orders of the First Appellate

Authority is set aside restoring the re-assessment order

8

passed by the prescribed Authority for the assessment

period 2005-2006.

3. In all these cases, re-assessment orders were passed

under Section 9 (2) of the CST Act, read with Section 36(1)

and 72(2) of the Karnataka Value Added Tax Act, 2003 (for

short ‘the KVAT Act’) for the tax periods April, 2005 to

March, 2006, levying Central Sales Tax at 10%, penalty

and interest, in the absence of statutory forms furnished

by the assessees. Being aggrieved, the assessees preferred

appeal before the Joint Commissioner of Commercial

Taxes (Appeals), Davanagere Division, Davanagere, (First

Appellate Authority - for short ‘FAA’) who allowed the

appeals on the issue of limitation.

4. The Addl. Commissioner of Commercial Taxes

exercising the powers under Section 64 (1) of the KVAT

Act, initiated revision proceedings to revise the order of the

FAA as it was erroneous and prejudicial to the interest of

9

the Revenue. After issuance of notice and hearing the

assessees, revisional order was passed setting aside the

order of the FAA and restoring the re-assessment order of

the Assessing Authority. Being aggrieved, the assessees

are in appeal.

5. The learned counsel Shri Narayan G.Rasalkar,

appearing for the appellant would contend that the order

of the FAA was neither erroneous nor prejudicial to the

interest of the Revenue, since the order of re-assessment

was passed beyond the period of limitation under Section

40 of the KVAT Act, as it stood prior to 31.03.2011

relating to the assessment period 2005-2006. Inviting the

attention of this Court to Section 32 of the KVAT Act, the

learned counsel submitted that the assessees are liable to

maintain the books of accounts only for five years. Any

order passed subsequent to the period mentioned in

Section 32 of the Act to keep the books of accounts, is

arbitrary and illegal. The revisional authority overlooking

10

these aspects exercised the power under Section 64 of the

KVAT Act to revise the order of FAA who had verified the

provisions of Sections 40 and 32 of the KVAT Act, in the

right perspective while allowing the appeal. The order of

the FAA being justifiable, there was no occasion for the

Addl. Commissioner to revise the said order, the same

being not erroneous nor prejudicial to the interest of the

Revenue, the FAA has followed the provisions of the Act as

it stood during the relevant period. The impugned

reassessment proceedings were initiated by the prescribed

authority by issuing notice in VAT 275, without

jurisdiction. The assessment period 2005-2006 being the

first year of the KVAT coming into force, there was

confusion in the minds of the assessees as well as the

authorities. Filing of returns manually, was the cause for

the initiation of re-assessment proceedings.

Reassessment proceedings cannot be initiated casually,

the reasons for reassessment and additional information

not showing the correct tax liability in particular month by

11

way of evidence has to be disclosed with tax proposition.

No such reasons or material was disclosed in the

reassessment notices. The reason being incomplete and

summoning the accounts cannot be the basis for the

initiation of reassessment proceedings. The authority

ought to have called for the original assessment

records/returns/C-forms filed from Local VAT Officer who

has concluded the deemed assessments.

6. The learned counsel further submitted that during

the pendency of the proceedings, the constitutional

validity of the amendments made to Section 40 of the

KVAT Act extending the time limit to pass the

reassessment for the assessment year prior to 2006-2007

to eight years was challenged before this Court in series of

writ petitions. This Court in case of CIFTECH

SOLUTIONS PRIVATE LIMITED, VS. STATE OF

KARNATAKA [2015 (83) KLJ 270 (HC)], upheld the

constitutional validity of the amendment and permitted

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the petitioners to file appeals in regard to their

contentions afresh. It is before the amendment was

brought into existence, their right in the form of

preventing the authorities to take up reassessment,

expired as per the provisions of Section 40. Section 40 as

existed during relevant period if considered, despite

upholding the validity of amendment made to the

provisions of Section 40, the ‘right’ of the appellant

seeking ‘right of limitation’ does not get extinguished by

the amendment. Notwithstanding the bar of limitation, a

base for upholding the impugned reassessment for 2005-

2006 by the authorities, still barred by the provisions of

Section 32 of the KVAT Act, would preclude the

authorities to proceed with the reassessment demanding

the production of books of accounts whose retention

period as prescribed has already expired. Section 32 of

the KVAT Act is not amended in co-extensive with

amendment to Section 40.

13

7. In support of his contentions, learned counsel placed

reliance on the following judgments:

i) COMMERCIAL TAXES OFFICER VS.

ZORASTER & CO., (1993 (89) STC 462),

ii) MAHAVEER DRUG HOUSE VS. ASSISTANT

COMMISSIONER OF COMMERCIAL TAXES,

ASSESSMENTS-II, (1991 (82) STC 388).

8. Learned Additional Government Advocate

supporting the impugned order submitted that notice

under Section 9 of CST Act read with Section 38(2) of the

KVAT Act was issued to reassess the assessees for the tax

periods in question to which the assessee did not respond.

On receipt of the original file from the office of the

Assessing Authority, LVO, it was noticed that dealer had

filed original C-Forms only to certain extent and rest of the

turnover effected towards the interstate sales were not

covered by C-Forms. Accordingly, the said transaction

was subjected to tax at 10% against which the assessees

14

preferred appeals before the FAA primarily, on the ground

of limitation. The FAA holding that re-assessment made

was barred by limitation, allowed the appeals. In view of

amendment brought to Section 40 (1) of the KVAT Act by

Act No.54/2013 with effect from 01.04.2005 and the

constitutional validity of the said amendment being

upheld by this Court in the case of Ciftech Solutions

supra, the order of the Appellate Court is erroneous and

prejudicial to the interest of the Revenue. Thus, the Addl.

Commissioner was justified in invoking the revisional

powers under Section 64 (1) of the Act.

9. Heard the leaned counsel appearing for the parties

and perused the material on record.

10. The points that arise for consideration in these

appeals are:

i) Whether the Additional Commissioner of

Commercial Taxes was justified in invoking the

powers under Section 64 (1) of the KVAT Act to

15

revise the order of the Appellate Authority

passed under Section 62 of the Act?

ii) Whether the re-assessment proceedings

initiated by the prescribed authority under the

Act are barred by limitation as provided under

Section 40 of the Act?

iii) Whether the reassessment proceedings

initiated by the prescribed authority are barred

by Section 32 of the Act?

11. Section 64(1) of the Act reads thus:

“(1) The Additional Commissioner may on his

own motion call for and examine the record of any

order passed or proceeding recorded under this Act

and if he considers that any order passed therein by

any officer, who is not above the rank of a Joint

Commissioner, is erroneous in so far as it is

prejudicial to the interest of the revenue, he may, if

necessary, stay the operation of such order for such

period as he deems fit and after giving the person

concerned an opportunity of being heard and after

making or causing to be made such inquiry as he

deems necessary, pass such order thereon as the

circumstances of the case justify, including an order

16

enhancing or modifying the assessment, or canceling

the assessment or directing a fresh assessment.

12. This provision contemplates that the Addl.

Commissioner is empowered to call for and to examine the

record of any order passed or proceeding recorded under

this Act and on such examination if it is found that any

order passed by any Officer who is not above the rank of a

Joint Commissioner, revision powers can be exercised

provided such order is erroneous in so far as it is

prejudicial to the interest of the Revenue. That means,

the essential factors viz., ‘erroneous’ and ‘prejudicial to the

interest of Revenue’ should co-exist in an

order/proceeding to take up for revision. It is apparent

that the Appellate Authority was of the view that

reassessment proceedings initiated by the prescribed

authority is barred by limitation.

13. Section 40 of the KVAT Act has undergone several

changes by way of amendments as under:

17

“Sec.40. Period of limitation for assessment.-

(1) An assessment under Section 38 or re-

assessment under Section 39 of an amount of tax due

for any prescribed tax period shall not be made after the

following time limits.-

(a) Four years after the end of the prescribed tax

period; or

(b) three years after evidence of facts, sufficient in

the opinion of the prescribed authority to justify

making of the reassessment, comes to its

knowledge.

whichever is later:

Provided that an assessment or

reassessment relating to any tax period ending

31st day of March, 2007 shall be made within a

period of five years after the end of the prescribed

tax period.

(2) If any tax is, not paid by a dealer who has

failed to get registered though liable to do so or

fraudulently evaded attracting punishment under

Section 79, an assessment or re-assessment may

be made as if in sub-section(1) reference to four

years was a reference to eight years.

(3) xxxx xxxx xxxx”

In the parent Act, the period of limitation for

finalization of original assessment, both deemed and

18

scrutiny was five years from the end of the tax period, as

per the provisions of Sec.40(1)(a) of the KVAT Act, 2003.

By Act No.12 of 2011, the words “four years” was

substituted w.e.f. 01.04.2011. At the same time, the

proviso to Sub Sec. 1 of Sec. 40 of the KVAT Act, 2003,

was inserted by Act No.12 of 2011 w.e.f., 01.04.2011

which read as under :

“Provided that an assessment or

reassessment relating to any tax period ending

31st day of March, 2007 shall be made within a

period of five years after the end of the

prescribed tax period.”

From the above insertion of the proviso w.e.f.

01.04.2011, it is obvious that any assessment or re-

assessment relating to any tax period ending 31.03.2007

shall be made within a period of five years. By virtue of

insertion of this proviso, it is obvious that the period of

limitation for concluding assessment or reassessment for

19

any tax period prior to 31.03.2007 gets extended by the

time prescribed therein.

14. This provision is further amended by Karnataka Act,

No.17/2012 as under:

“(1) An assessment under Section 38 or re-

assessment under Section 39 of an amount of tax due

for any prescribed tax period shall not be made after five

years after the end of the prescribed tax period.

Provided that an assessment or reassessment

relating to any tax period upto the period ending 31st

day of Mrach, 2007 shall be made within a period of

eight years after the end of the prescribed tax period:

Provided further that an assessment or reassessment

relating to any tax period commencing from the 1st day

of April, 2007 upto the period ending 31st day of March,

2012 shall be made within a period of seven years after

the end of the prescribed tax period.

(2) Notwithstanding anything contained in sub-section

(1), if any tax is, not paid by a dealer who has failed to

get registered though liable to do so or fraudulently

evaded attracting punishment under Section 79, an

assessment or reassessment may be made within eight

years from the end of the prescribed tax period:



day of March, 2007 shall be made under this sub-

20

section within a period of ten years after the end of the


By virtue of this amendment, an assessment or

reassessment relating to any tax period upto the period

ending 31.03.2007 shall be made within a period of ten

years, after the end of the prescribed tax period. By

Karnataka Act No.54/2013, this Section is further

amended retrospectively with effect from the first day of

April, 2005, and the same reads thus:.

“(1) An assessment under Section 38 or

reassessment under Section 39 of an amount of tax

due for any prescribed tax period shall not be made

after five years after the end of the prescribed tax

period:



day of March, 2007 shall be made within a period of

eight years after the end of the prescribed tax period:

Provided further than an assessment or

reassessment relating to any tax period commencing

from the 1st day of April, 2007 upto the period ending

31st day of March, 2012 shall be made within a period

of seven years after the end of the prescribed tax

period.

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(2) Notwithstanding anything contained in sub-

section (1), if any tax is, not paid by a dealer who has

failed to get registered though liable to do so or

fraudulently evaded attracting punishment under

Section 79, an assessment or reassessment may be

made within eight years from the end of the prescribed

tax period:



day of March, 2007 shall be made under this sub-

section within a period of ten years after the end of the


15. The constitutional validity of this provision was

challenged before this Court and the same has been

upheld in the case of Ciftech Solutions supra. Hence,

without any hesitation, it can be held that amendment to

Section 40 has retrospective effect with effect from

01.04.2005 enhancing the period of limitation provided

under Section 40 of the Act.

16. The contention of the assessee that a completed

assessment cannot be reopened after the prescribed

period by virtue of the said period having been enlarged by

22

amending the law requires to be negated in the light of the

judgment of the Hon’ble Apex Court in the case of

ADDITIONAL COMMISSIONER (LEGAL) AND ANOTHER

VS. JYOTI TRADERS AND ANOTHER (1997 (47) KLJ

107 (SC) wherein the Hon’ble Apex Court has held, when

the provision of law is explicit, it has to operate fully and

there could not be any limits to its operation and if the

language expressly so states or clearly implies,

retrospectively must be given to the provision. It is apt to

refer to the factual context of the case. Under sub-section

(1) of Section 21 of the Uttar Pradesh Trade Tax, 1948

before its amendment, the Assessing Authority may, after

issuing notice to the dealer and making such inquiry as it

may consider necessary, had the power to assess or

reassess the dealer according to law. Sub-section (2)

provided that except as otherwise provided in the said

section no order for any assessment year shall be made

after the expiry of 4 years from the end of such year.

However, after the amendment, a proviso was added to

23

sub-section (2) under which Commissioner of Sales Tax

authorizes the Assessing Authority to make assessment or

reassessment before the expiration of 8 years from the end

of such year notwithstanding that such assessment or

reassessment may involve the change of opinion. The

proviso came into force with effect from 19.02.1991. In

that context it was held that, it was immaterial if a period

for assessment or reassessment under sub-section (2) of

Section 21 before the addition of the said proviso had

expired. It was the completion of assessment or

reassessment under Section 21 which was to be done

before the expiration of eight years of that particular

assessment year. It was held that sub section (2) of

Section 21 of the Act does not put any embargo on the

Commissioner of Sales Tax not to reopen the assessment

if period, as prescribed earlier, had expired before the

proviso came into operation. Earlier the

assessment/reassessment could have been completed

within four years of that particular assessment year and

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now by the amendment adding proviso to Section 21(2) of

the Act it is eight years. The only safeguard being that it is

after satisfaction of the Commissioner of Sales Tax. The

proviso is operative from 19-2-1991 and a bare reading of

the proviso shows that the operation of this proviso relates

and encompasses back to previous eight assessment

years.

17. In the present set of facts, the proviso to Section 40

have been amended with effect from 01.04.2012 by Act

No.17/2012 and subsequently by Act No.54/2013

retrospective effect was given with effect from 01.04.2005

and the constitutional validity of the same having been

upheld, the arguments of the learned counsel that the

reassessment proceedings are barred by limitation is

wholly untenable.

18. As regards the contentions of the learned counsel

with reference to Section 32 of the Act, it is apt to refer to

the said provision which reads thus:

25

“32. Period of retention of accounts.-

(1) Every dealer required under this Act to keep

and maintain books of account or other records

including tax invoices relating to his purchases and

sales shall retain them until the expiration of five years

after the end of the year to which they relate or for such

other period as may be prescribed or until the

assessment reaches finality, whichever is later.

(2) Where such dealer is a party to an appeal or

revision under this Act, he shall retain, until the appeal

or revision and any appeal therefrom is finally disposed

of, every record and accounting document that pertains

to the subject matter of the appeal or revision.”

(emphasis supplied)

19. The said provision directs every dealer to keep and

maintain books of accounts or other records including tax

invoices relating to his purchases and sales until the

expiration of five years after the end of the year to which

they relate or for such other period as may be prescribed

and the most relevant herein is, until the assessment

reaches finality, whichever is later. Thus, it is not only

until the expiration of 5 years the books of accounts are

required to be kept and maintained but also for such

other period as may be prescribed or until the assessment

26

reaches finality whichever is later. The phrase “until the

assessment reaches finality” has to be read in conjunction

with Sections 39 and 40 of the Act. The word

“assessment” is defined under Section 2 (5) of the Act

which reads thus:

“(5) ‘Assessment’ means an assessment made or deemed to have been made under this Act and includes a re-assessment.”

20. Thus, it is clear that assessment also includes

reassessment. The prescribed limitation for

assessment/reassessment is in terms of Section 40. The

limitation period being enlarged by the amendment carried

out under Section 40 of the Act, the same shall have a

bearing on Section 32.

21. In the present case, the period of limitation as per

the Amendment Act No.54/2013 is eight years with effect

from 01.04.2005 i.e., 30.04.2013, the date of finality of the

assessment, which would be the date of expiry of

limitation to reassess the deemed assessments made

under Section 38 of the Act for the assessment year 2005-

27

2006. Reassessment proceedings were initiated by issuing

notice dated 16.02.2013 and the reassessment order was

passed on 22.04.2013 well within the period of limitation

even as per Section 32 of the Act.

22. The Scheme of the Act is that the assessee/dealer

has to file the monthly returns as per Section 35 (1) of the

Act accompanied by the payment of tax and as per Section

38 (1) of the Act, every dealer shall be deemed to have

been assessed to tax based on the return filed by the

assessee under Section 35 except in cases where the

Commissioner may notify the dealer of any requirement of

production of accounts before the prescribed authority in

support of a return filed for any period and such authority

shall proceed to assess such dealer. Section 39 of the Act

provides for reassessment of tax where the prescribed

authority has grounds to believe that any return furnished

which is deemed as assessed or any assessment issued

under Section 38 understates the correct tax liability of

the dealer, it may, based on any information available,

28

reassess to the best of its judgment, the additional tax

payable and also impose penalty under sub section (2) or

sub section (5) of Section 72 and demand of payment of

any interest and shall make the demand under the

provisions of the Act applicable for the assessment under

the Central Sales Tax Act in terms of Section 9 (2) of the

CST Act.

23. It is the contention of the learned counsel for the

appellants that the notice issued under the KVAT Act with

Section 9(2) of the CST Act does not disclose the

information, is misconceived. The notice specifies that the

assessees had effected interstate transaction and

submitted C-Forms only to certain extent and for the

remaining transaction to which no C-forms were

submitted, reassessment proceedings were initiated to levy

tax at 10% as per the CST Act. This information was

collected after securing the files from the original

Assessing Authority. All along the appellants challenged

the reassessment order only on the ground of limitation.

29

The possibility of filing of C-Forms before the appellate

authority was not availed. Now, the attack made by the

learned counsel for the appellants on the re-assessment

order, being contrary to the provisions of the KVAT Act

cannot be accepted.

24. In the case of Mahaveer Drug House supra, on

which the relevance was placed by the learned counsel for

the appellants, it was a case where limitation under old

law expired before commencement of amended provision.

But, in the present case, the period of limitation is

enlarged with retrospective effect i.e., 01.04.2005. Hence,

the said judgment is not applicable to the facts of the

present case.

25. In the case of Zoraster & Co., supra, Rajasthan

High Court has held that retrospective amendment

extending period of limitation for reopening assessments

from four to eight years will not apply where limitation

expired before amendment. But, in the light of the

judgment of the Hon’ble Apex Court in Jyoti Traders

30

supra, this judgment would not be of any assistance to the

appellants. Moreover, the constitutional validity of the

retrospective amendment has been upheld w.e.f.

01.04.2005, which has reached finality.

26. Viewed from any angle, the revisional order passed

by the Addl. Commissioner of Commercial Taxes is

justifiable and does not call for any interference by this

Court.

Appeals stand dismissed.

Sd/-

JUDGE

Sd/- JUDGE

Jm/-

THE HON’BLE MRS. JUSTICE S.SUJATHA THE HON’BLE Dr. …judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/... · 2017-12-21 · in the high court of karnataka dharwad bench

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