2015 (4) TMI 573 - HC - VAT and Sales Tax

Compounding of offence - Clubbing of proceedings for same assessment period - Sales made through credit card - Held that - From a plain reading of the Section 82, it would be clear that finality is to be given only to such proceedings which relate to compounding of offences. The reassessment proceedings, which may be for the same assessment periods, would be independent proceedings and could not be clubbed with the proceedings for compounding of offences. In the present case, the proceedings for compounding were concluded on the basis of the inspection carried out on 31.01.2008. The same had become final and could not be subjected to any appeal. Once the Department had thereafter initiated reassessment proceedings, the same being independent of the proceedings for compounding of offences, the appellant-assessee would always have a right to challenge such reassessment order on merits. - conclusion of the revisional proceedings by holding that the appeal against reassessment order was not maintainable by virtue of Section 82(3)(c) of the KVAT Act, cannot be justified in law. We are of the clear opinion that the respondent-revisional authority ought to have decided the matter on merits and in accordance with law, after considering the reply of the appellant and giving opportunity of hearing to the appellant. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Reassessment post compounding of offences under KVAT Act - Maintainability of appeal against reassessment order under Section 82(3)(c) of the KVAT Act.

Analysis:
The case involved appeals related to the assessment period of March 2005, March 2006, and March 2007. An inspection revealed sales through credit cards not reflected in the books of accounts, leading to compounding of tax liability under Section 79 of the KVAT Act. Subsequently, the assessing authority reassessed and enhanced the turnover reported by the appellant. The appellant challenged this reassessment, which was set aside by the Joint Commissioner of Commercial Taxes. However, the Additional Commissioner of Commercial Taxes initiated revisional proceedings and restored the assessing authority's order. The main contention was whether reassessment post compounding was valid under the KVAT Act.

The appellant argued that reassessment after compounding was not justified, and the revisional proceedings wrongly concluded that the appellant had no right to appeal against the reassessment order. The respondent contended that reassessment was permissible based on intelligence reports of turnover suppression. The High Court opined that the assessing authority had the power to reassess due to the suppressed turnover. However, it emphasized that the proceedings for compounding and reassessment were separate, and the appellant had the right to challenge the reassessment order on merits.

The Court analyzed Section 82 of the KVAT Act, which governs compounding of offences. It noted that finality was granted only to compounding proceedings, while reassessment was an independent process. The Court held that the revisional authority erred in concluding that the appeal against reassessment was not maintainable under Section 82(3)(c) of the KVAT Act. It directed the matter to be reconsidered on merits, emphasizing the need for a fair hearing and compliance with the law. Consequently, the appeals were allowed, setting aside the revisional authority's order and remanding the case for a fresh decision in accordance with the law, ensuring the appellant's right to be heard.