2019 (7) TMI 478 - HC - VAT and Sales Tax

Principles of natural justice - validity of reassessment order - reassessment order was passed without providing reasonable opportunity to the petitioner - proceedings were pending under the provisions of Insolvency and Bankruptcy Code, 2016 - HELD THAT - The proceedings were pending before the NCLT as well as the National Company Law Appellate Tribunal under the provisions of Insolvency and Bankruptcy Code, 2016. The assessment order passed and the books of accounts said to have been furnished by the Accounts Officer representing the IRP in the Insolvency proceedings though may not be unjustifiable but the principles of natural justice warrants an opportunity to the petitioner to put-forth its claim inasmuch as the tax amount paid under the KVAT Act disputed by the prescribed authority. The matter is restored to the file of the prescribed authority to redo the assessment.

Summary

Issues:
Challenge to assessment order under KVAT Act for the period April 2012 to March 2013 during company moratorium.

Analysis:
The petitioner, a Private Limited Company involved in land purchase and development projects, challenged an assessment order passed by respondent No.2 under the Karnataka Value Added Tax Act, 2003 (KVAT Act) for the period 2012-13. The petitioner contended that the assessment was initiated during a moratorium period when the company's Board was suspended, and they were not provided a reasonable opportunity to present their case. The petitioner argued that due to the moratorium, they were unable to present accounts or object to the proceedings. However, the officer representing the company in the reassessment order was involved in insolvency proceedings. The petitioner sought the order to be set aside to allow them to file objections and present their claim.

The Additional Government Advocate argued that the pendency of insolvency proceedings should not prevent tax assessment procedures. They stated that the reassessment was conducted lawfully, including issuing a proposition notice, and thus, the writ petition should be dismissed. After considering the arguments, the court noted that insolvency proceedings were ongoing during the assessment period. While the assessment and accounts provided by the IRP's officer were not necessarily unjust, the principles of natural justice required the petitioner to have an opportunity to present their claim, especially regarding disputed tax amounts under the KVAT Act.

Consequently, the court set aside the impugned order and directed the matter to be returned to the prescribed authority for reassessment. The petitioner was instructed to file objections to the proposition notice within two weeks and appear before the authority without further notice. The prescribed authority was tasked with expeditiously considering any objections and completing the assessment within two weeks thereafter. The writ petition was disposed of based on these directions.