2019 (2) TMI 1089 - HC - VAT and Sales Tax

Assessment and re-assessment made under the Kerala Tax on Luxuries Act 1979 - invocation of sub-section (5) of Section 6; which sub-section was brought in after the subject assessment years in August 2006 - constitutional invalidity - re-assessment carried out for the years 2000-01 to 2004-05. Held that - Under the Income Tax Act on the facts of the present case the re-assessment would not be possible since the Assessing Officer had looked at the total turnover in the Ayurvedic Centre and Boat Hiring centre etc., and had consciously excluded a portion of the same as being not covered under the Act. However we find that the provision under Section 6(5) is in pari materia with the Agricultural Income Tax Act. The Assessing Officer hence is clothed with the power to even interfere with the earlier finding in regular assessment provided it is done within a period of five years as provided under the provisions for re-assessment. There is no reason to so keep in abeyance the demand raised or direct rectification of the assessments carried out on the said ground raised. The accounts of the assessee which were confirmed at the AGM s earlier constituted; when recast can only have implications to the share-holders. The assessment made under the Act of 1976 is only on the receipts of the Hotel which would not at all be altered and the same is based on the books of account as maintained by the Hotel and verified by the Assessing Officer. There can be no alteration of the receipts at this stage when the last of the assessment years we are concerned with is about 14 years prior. Appeal is partly allowed setting aside the re-assessment made for the year 2000-01 but upholding the re-assessment for the other years.

Summary

Issues:
Challenge against assessment and re-assessment under the Kerala Tax on Luxuries Act, 1979 based on constitutional validity, inclusion of charges for services provided by third parties in a hotel, retrospective effect of re-assessment provision, change of opinion by Assessing Officer, rectification of error, and keeping recovery in abeyance pending finalization of accounts.

Analysis:

1. Constitutional Validity Challenge: The challenge against assessment and re-assessment under the Kerala Tax on Luxuries Act, 1979, primarily based on constitutional invalidity, was raised in two writ petitions. However, the court found the provisions to be constitutionally valid, as acknowledged by the learned Senior Counsel.

2. Inclusion of Charges for Services Provided by Third Parties: The challenge was focused on the inclusion of charges for services provided within a hotel by third parties to individuals not residing in the hotel. The court referred to previous judgments holding that such charges could be considered luxury and taxed under the Act.

3. Retrospective Effect of Re-assessment Provision: The issue of retrospective effect of the re-assessment provision was raised concerning the years 2000-01 to 2004-05. The court noted that the re-assessment was challenged on the grounds of a provision being brought in after the assessment year and the Assessing Officer excluding certain charges during the original assessment.

4. Change of Opinion and Rectification of Error: The court deliberated on the Assessing Officer's change of opinion regarding the exclusion of charges levied on individuals not residing in the hotel. The court referenced a Full Bench decision and emphasized that a mere change of opinion is not sufficient for re-assessment under the Income Tax Act.

5. Keeping Recovery in Abeyance: The final contention involved keeping the recovery in abeyance until the accounts were finalized due to disputes among shareholders and management changes. The court rejected this contention, stating that the assessment was based on verified accounts and should not be altered based on subsequent developments.

In conclusion, the court partly allowed one writ appeal, setting aside the re-assessment for the year 2000-01 but upholding it for other years, while rejecting the second writ appeal. No costs were awarded in the judgment.