2019 (8) TMI 667 - HC - VAT and Sales Tax

Deemed assessment - Section 27(2)(b) of the U.P. VAT Act, 2008 - absence of any prior notice having been issued to the assessee so as to allow him 15 days' time to submit his revised return in terms of Rule 45(13)(a) of the Rules - Assessing Officer had issued such notice to the assessee on 19.03.2017 served on 20.03.2017. HELD THAT - Under Section 24 of the Act, a taxable dealer is obliged to submit its tax return for different tax periods, as also its annual return. Section 25 of the Act provides for assessment of tax for a tax period i.e. a provisional assessment. Tax period has been defined under Section 2(ak) of the Act, as a period for which a dealer is liable to submit tax return under Section 24 of the Act - Section 26 of the Act provides, every taxable dealer, for each assessment year shall be assessed to tax payable by him and to amount of Input Tax Credit (I.T.C.) admissible to him - Thus, it fixes the scope and purpose of an assessment to be made. It is in the above statutory context, provisions of Sections 27, 28 and 29 of the Act appear and they provide for self-assessment; assessment of tax after examination of record and; assessment of tax of turnover escaped from assessment year appear. Section 28 of the Act provides for a full-fledged or regular assessment to be made. However, it departs from its predecessor enactment i.e. U.P. Trade Tax Act, 1948. The Act contemplates a regular assessment upon examination of records be made only in certain cases specified in sub-section (1) of Section 28 of the Act - Thus, though section 26 of the Act requires an assessment to be made in each case, as to tax payable and I.T.C. entitlement available, besides the legal fiction under section 27 of the Act the same may also arise as a consequence of an assessment after examination of records or upon reassessment order made under section 29 of the Act i.e. as a result of conscious application of mind by the assessing authority to the books of account, return of annual turnover, prescribed statements and replies etc. that may collectively form the record of the assessment case. In a case where the assessee files its revised return in response to a notice issued under Rule 45(13)(a) of the Rules, and the assessing officer feels satisfied, as to its completeness and correctness, he may accept the same in exercise of power conferred under Rule 45(13)(b) of the Rules. In that case, the annual return would constitute the self-assessment, of which intimation would be given to the assessee. Thus, Section 27 of the Act read with Rule 45(13)(a) and (b) of the Rules provide for a deemed assessment in case the original return is accepted in entirety or a self-assessment if the revised return is accepted. In either case, no order of assessment would come into existence. In both cases, a legal fiction (with twin consequences discussed above) arises. Though the provisions of Section 28(1)(b)(i) and (iv) of the Act and Rule 45(13)(a) of the Rules, do over lap and in either case regular assessment after examination of records may be passed and further in either case that resort may be had upon a detection being made by the assessing officer that the return filed is incomplete or incorrect or contains wrong particulars, the immediate consequence arising upon such detection would be different, depending upon the time when such defect is noticed and/or acted upon by the assessing authority. Thus, in the first place, there never arose an order under Section 27 of the Act. Only a legal fiction of deemed assessment arose on 31.3.2017, for the limited purpose of creating a demand of admitted tax and entitlement of Input Tax Credit (ITC). No third purpose or inference arose. Then provisions of Section 28 of the Act being independent of Section 27 of the Act, upon the satisfaction of the assessing officer being found existing in terms of Section 28(1)(b) of the Act, that power could be exercised irrespective of the fact whether any proceedings had been conducted under Section 27 of the Act and irrespective of the fate of those proceedings. The initiation of proceedings under section 28 of the Act, vide notice dated 27.2.2018 did not suffer from any infirmity - though a deemed assessment for A.Y. 2014-15 had come into existence on 31.03.2017, yet, it did not preclude the assessing officer to make an assessment upon examination of record under Section 28 of the Act, which order is found to have been passed in accordance with law, upon a valid notice dated 27.02.2018. Though it is a tough case inasmuch as the assessment order was passed ex parte and none of the appeal authorities have considered the merits of assessment order, yet, this Court in exercise of its revision jurisdiction is constrained to answer the question in the affirmative i.e. against the assessee and in favour of the revenue in view of the fact that the assessee never raised such challenge on merits, before the appellate authorities. Revision dismissed.

Summary

Issues Involved:

1. Validity of deemed assessment under Section 27(2)(b) of the U.P. Value Added Tax Act, 2008.
2. Jurisdiction of the Assessing Authority to initiate assessment proceedings under Section 28 of the Act.
3. Tribunal's decision on the appeal's merits.

Issue-Wise Detailed Analysis:

1. Validity of Deemed Assessment under Section 27(2)(b) of the U.P. Value Added Tax Act, 2008:

The assessee argued that the deemed assessment came into existence on 31.03.2017 due to the lapse of the statutory period without a valid notice being served. The notice issued on 19.03.2017, served on 20.03.2017, did not allow the mandatory 15 days for filing a revised return, thus rendering it invalid. The Tribunal, however, viewed the failure to provide the full 15 days as a technical defect, stating that the assessee had sufficient time (11 days) to file the revised return but did not utilize it. Consequently, the deemed/self-assessment proceedings under Section 27 of the Act ended, and regular assessment proceedings were validly initiated.

2. Jurisdiction of the Assessing Authority to Initiate Assessment Proceedings under Section 28 of the Act:

The court clarified that the Assessing Authority retains jurisdiction to make an assessment under Section 28 of the Act, independent of the proceedings under Section 27. The deemed assessment under Section 27 is a legal fiction that does not preclude the Assessing Authority from initiating regular assessment proceedings under Section 28. The court emphasized that the provisions of Section 28 are independent and not governed or restricted by Section 27. The Tribunal's decision was upheld, stating that the assessment proceedings initiated on 27.02.2018 were valid, despite the earlier notice being invalid.

3. Tribunal's Decision on the Appeal's Merits:

The assessee's appeal primarily focused on the jurisdiction issue, neglecting to challenge the merits of the assessment order. The court noted that the appellate authorities did not consider the merits due to the assessee's failure to raise such challenges. Consequently, the court, in its revision jurisdiction, affirmed the Tribunal's decision, concluding that the assessment order was validly passed under Section 28 of the Act.

Conclusion:

The court dismissed the revision, affirming the Tribunal's decision. The deemed assessment under Section 27 did not preclude the Assessing Authority from conducting a regular assessment under Section 28. The notice issued on 27.02.2018 was valid, and the assessment proceedings were lawfully initiated. The assessee's failure to challenge the merits of the assessment order before the appellate authorities resulted in the court's decision against the assessee.