2017 (6) TMI 694 - HC - VAT and Sales Tax

Validity of reassessment order - Section 39 of the Act - tax liability having been paid with compounding fee under Sections 79 & 82 of the Act on the basis of assessment proceedings u/s 38 - Held that - on the basis of the information and evidence gathered in the course of survey under Section 52 of the Act, the assessing authority has option to proceed under Section 39 of the Act, but it cannot do so once the regular assessment under Section 38 of the Act on the basis of the same evidence and material collected by him during the course of such survey is already made by it. The Revenue has failed to point out any other material on record on the basis of which the assessing authority could be said to have any reason to reject the books of accounts maintained in the ordinary course of business and pass reassessment order on the basis of best judgment. Mere affirmation of the reassessment order passed by the assessing authority under Section 39 of the Act by the two higher appellate forums does not deter us from holding that the very initiation of the reassessment proceedings without any further incriminating material was illegal. Revision petition allowed - decided in favor of assessee.

Summary

Issues:
1. Validity of reassessment proceedings under Section 39 of the Karnataka Value Added Tax Act, 2003 after regular assessment under Section 38 based on the same evidence.

Analysis:
The High Court of Karnataka addressed the issue of reassessment proceedings initiated under Section 39 of the Karnataka Value Added Tax Act, 2003 after a regular assessment under Section 38 had already been conducted based on the same evidence. The case involved an assessee, a dealer of fireworks and matches, who was found to have not issued regular invoices during a survey conducted in September 2007. The assessing authority imposed additional tax, penalty, and interest for the assessment period of September 2007. The assessee accepted the non-issuance of regular invoices, paid the tax liability, and a compounding fee as imposed under the Act.

The key question before the court was whether the assessing authority could undertake reassessment proceedings under Section 39 of the Act for the same period based on the same material after a regular assessment had been completed. The assessee argued that no further incriminating material was found to justify reassessment. The Revenue contended that the reassessment was valid based on a Co-ordinate Bench decision.

The court held that once a regular assessment had been made under Section 38 of the Act using the evidence collected during the survey, reassessment under Section 39 could not be initiated without fresh incriminating material. The court found that the reassessment order lacked a basis for concluding that the assessee deliberately evaded tax payment. It emphasized the need for relevant material to support a belief of tax evasion. The court concluded that the reassessment proceedings without additional incriminating material were illegal.

The court allowed the Revision Petition filed by the assessee, setting aside the reassessment orders passed by all three authorities under Section 39 for the assessment period in question. No costs were awarded in the judgment.