2014 (7) TMI 236 - HC - VAT and Sales Tax

Denial of input tax credit - Assessee filed Nil returns - credit on the basis of revised return was also denied - Levy of interest and penalty - works contract - construction of buildings - So it is urged by the appellant/assessee that even long after the expiry of the period in which the revised return could have been filed, the fact remains that there is no response by filing any revised returns. - first appellate authority allowed relief to the assessee - Held that - it is not in dispute that all the requirements were not fulfilled by the assessee for the period involved in the appeals - it is a case of the first appellate authority acting more loyal than the king, even though a claim had not been put forth by the assessee through the returns, the first appellate authority has ventured to allow the appeals and grant relief to the assessee, contrary to statutory provisions Even in regard to this period of April 2006 to November 2006 is concerned, the factual position is not very different - The conduct of the assessee in filing nil returns for April 2006 to November 2006 can never be accepted as bona fide, as the assessee, prior to the filing of the return, had been made aware of the tax liability and virtually admitted the same and had paid some provisional amount. Therefore, there is absolutely no bona fides on the part of the assessee in continuing to file nil returns even for this period and claiming no tax liability. The revised returns were filed only after inspection, etc., and therefore, cannot be accepted as a voluntary return or bona fide return as the assessee has done it after a good deal of persuasion. Even when a revised return or a return subsequently has been made subsequent to passing of the best judgement order, while the original assessment can be withdrawn, best judgement assessment cannot be withdrawn, which, nevertheless does not absolve the assessee from being levied with penalties and interest. Insofar as the argument that the revised return having been filed within six months and taking cue from the provisions of section 38(3) of the Act, the revised return should be accepted and acted upon is concerned, we find this provision is not applicable to the present situation as it arises only in a situation where best judgment assessment is passed because of non-filing of the return as for the periods in question which we are discussing, the assessee had filed nil returns. In so far as the submission that in a best judgment assessment, where a return is not accepted and is based on the information as disclosed in the books of accounts, etc., the claim in the returns or nonclaiming in the returns cannot be of much significance, we find that claim for input-tax credit can only be in specified form and not in a generalised form and therefore, the arguments cannot succeed. We have discussed this aspect elaborately as above. Therefore, on comparison of provisions of section 38(3) of the Act, the benefit cannot be extended by overlooking the statutory requirements under section 10(4) of the Act read with sub-sections (1) and (4) of section 35 of the Act. An assessee pays penalty if it violates the statutory provision and likewise the Revenue also loses revenue unless it adheres to the requirements of the statutory provision. It is for this reason we are not impressed by the submission on behalf of the assessee that there was no need for taking a technical approach or hyper-technical approach and if the appellate authority had taken a pragmatic and plausible view, the revisional authority should not have disturbed the same or interfered with the same, is not accepted. Input credit disallowed - levy of interest and penalty confirmed.

Issues Involved:
1. Tax Liability and Filing of Nil Returns
2. Input-Tax Credit Entitlement
3. Penalty and Interest Levied
4. Jurisdiction and Authority of Appellate and Revisional Authorities

Issue-wise Detailed Analysis:

1. Tax Liability and Filing of Nil Returns:
The assessee, a registered dealer under the Karnataka Value Added Tax Act, 2003, engaged in land development and building construction, filed nil returns for the tax periods of 2005-06 and 2006-07 despite having taxable turnover. The assessee claimed ignorance of the Supreme Court's reversal of a High Court decision, leading to the incorrect filing of nil returns. Inspections by the Commercial Taxes Department revealed the non-payment of taxes, prompting reassessment and the issuance of reassessment notices. The assessing officer determined the tax liability for each month during the periods in question and rejected the claim for input-tax rebate due to the filing of incorrect and false returns.

2. Input-Tax Credit Entitlement:
The assessee contended that input-tax credit is a substantive right and should not be denied due to non-compliance with Section 35 of the Act. The Appellate Commissioner accepted the assessee's claim for input-tax credit based on the list of registered dealers and invoices, despite the assessee not producing these documents before the assessing officer. The revisional authority, however, set aside the Appellate Commissioner's order for the period from April 2005 to November 2006, restoring the original assessment orders. The court held that the first appellate authority acted beyond its jurisdiction by granting input-tax credit without the assessee fulfilling the statutory requirements.

3. Penalty and Interest Levied:
The assessing officer levied penalties under Section 72(2) and interest under Section 36 of the Act for filing false returns and not meeting tax liabilities on time. The court upheld the penalty and interest, noting the assessee's lack of bona fides in filing nil returns despite being aware of the tax liability. The court emphasized that the assessee's conduct warranted the imposition of penalties and interest due to the deliberate suppression of taxable turnover.

4. Jurisdiction and Authority of Appellate and Revisional Authorities:
The Appellate Commissioner granted relief to the assessee by allowing input-tax credit and reducing penalties and interest. The revisional authority found the Appellate Commissioner's order erroneous and prejudicial to the revenue, thus restoring the original assessment orders. The court supported the revisional authority's decision, stating that the Appellate Commissioner acted contrary to statutory provisions and beyond its jurisdiction. The court dismissed the appeals, affirming the need for strict compliance with statutory requirements in tax matters.

Conclusion:
The court dismissed the appeals, upholding the reassessment orders, penalties, and interest levied by the assessing officer. The court emphasized the importance of strict adherence to statutory provisions and found no merit in the assessee's arguments regarding input-tax credit entitlement and the actions of the appellate authority. The decision reinforced the principle that compliance with tax laws must be precise and that deviations, even if claimed to be in good faith, do not absolve the taxpayer from penalties and interest.

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