2020 (11) TMI 1014 - HC - VAT and Sales Tax

Cancellation of compounding as permitted in the year 2014-15 - undisclosed purchases - failure to pay tax - after filing a revised return including the undisclosed purchases there could have been a best judgment assessment carried out by the assessing officer or not. Whether failure to pay tax under section 6(2) would entail cancellation of the permission granted under section 8(c) or not - HELD THAT - The Tribunal relied on rule 11(6) of the Kerala Value Added Tax Rules, 2005 to find that any failure to pay tax under section 6(2) would entail cancellation of the permission granted under section 8(c). The finding based on the statutory provision is unassailable and the first question has to be answered in favour of the Revenue and against the assessee. Whether after filing a revised return including the undisclosed purchases there could have been a best judgment assessment carried out by the assessing officer? - HELD THAT - It was rightly found that the filing of a revised return, after finalisation of penalty proceedings, payment of compounding fee as also the tax shortfall with interest would not absolve the assessee from a best judgment assessment if there is a pattern of suppression detected. On facts, it was found that the suppression was substantial amounting to more than ₹ 10,00,000. This alone would lead to a valid inference of a pattern of suppression. There are no reason to interfere with the order of the Tribunal. The question framed is answered against the assessee and in favour of the Revenue. Where the cancellation is carried out and the assessment is concluded on a best judgment basis there can be no remand made for applying the beneficial provisions; if the cancellation and regular assessment carried out are unassailable. In the present case, we have upheld both the cancellation and regular assessment. There is no scope for application of section 25AA. Revision rejected.

Summary

Issues:
1. Cancellation of compounding and best judgment assessment under the KVAT Act.
2. Validity of best judgment assessment after filing a revised return.
3. Application of section 25AA of the KVAT Act in cases of suppressed turnover by cooked food dealers.

Analysis:
1. The revisions addressed the cancellation of compounding in 2014-15 and the subsequent best judgment assessment. The first issue involved whether the assessing officer was justified in canceling the compounding due to undisclosed purchases. The Tribunal relied on rule 11(6) of the KVAT Rules, stating that failure to pay tax under section 6(2) warranted cancellation of compounding under section 8(c). The finding was deemed valid, favoring the Revenue.

2. The second issue pertained to the validity of the best judgment assessment post filing a revised return. The assessment was upheld based on section 22(10) of the Act. It was concluded that even after paying penalties and compounding fees, a best judgment assessment could be conducted if significant suppression was detected. The Tribunal's decision was supported, ruling against the assessee.

3. An additional argument raised concerned the application of section 25AA of the KVAT Act for cooked food dealers with suppressed turnover. The provision allowed for assessment at a compounded rate without canceling the compounding option. However, the court clarified that section 25AA applied to pending or redone assessments, not to cases where cancellation and regular assessments were deemed valid. As both the cancellation and assessment were upheld in this case, section 25AA was inapplicable.

In conclusion, the revisions were rejected, with no costs awarded. The judgment emphasized the statutory provisions governing compounding cancellation, best judgment assessments, and the limited applicability of section 25AA in specific scenarios.