2020 (2) TMI 363 - HC - VAT and Sales Tax

Validity of reassessment order - Section 39(1) of the Karnataka Value Added Tax Act, 2003 - Section 9(2) of the CST Act of 1956 read with Section 36(1) of the said Act of 2003 - disallowance of input tax credit - levy of output tax - non-production of books of accounts - HELD THAT - It is apparent from the first page of the inteliigence report that the Intelligence Report relates to the years 2011-12 and 2012-13. Secondly, the Intelligence Report is not an adjudication. The Intelligence Report is submitted by exercising the powers under Section 52 of the said Act of 2003 after directing production of the documents and after inspection of the documents. Section 52 of the said Act of 2003 does not contemplate any adjudication. Apart from the fact that the Intelligence Report relates to different periods, the Intelligence Report only records an opinion which is forwarded for taking action. Perhaps on the basis of the said report, the First Information Report may have been registered. The grievance of the learned counsel appearing for appellant is that the inspection report was not produced before the authority before passing the reassessment order. The learned Single Judge has rightly observed that there is no final adjudication made on the issue whether the allegation made against the tax consultant is correct. Admittedly, the dispute is between the appellant and the tax consultant. Hence, there are no error in the view taken by the learned Single Judge in exercise of the powers under Article 226 and 227 of the Constitution of India. Appeal dismissed - decided against appellant.

Summary

Issues:
Challenge to reassessment order under Karnataka Value Added Tax Act, 2003 and Central Sales Tax Act, 1956 based on misuse of password by Chartered Accountant, non-production of books of accounts, allegations of offenses under Indian Penal Code, relevance of Intelligence Report, and final adjudication on tax liability.

Analysis:
The appellant filed a writ petition challenging the reassessment orders under the Karnataka Value Added Tax Act, 2003, and Central Sales Tax Act, 1956. The petitioner claimed that no business was transacted during the relevant period, alleging that the Chartered Accountant misused the password to conduct business. The reassessment under Annexure-N for the period April 2013 to March 2014 proposed disallowing input tax claimed and levying output tax based on EFS data revealing business activity despite the appellant's denial. Annexure-O also noted non-production of books of accounts, leading to an ex parte proposition notice. The appellant's counsel highlighted criminal complaints against the tax consultant and the relevance of an Intelligence Report at Annexure-C, arguing its non-production before passing the reassessment order.

The court found the inspection report irrelevant as no adjudication had occurred on the misuse of the password by the Chartered Accountant, which was under prosecution. The reassessment orders noted the appellant's failure to produce books of accounts, leading to the dismissal of the writ petition by the Single Judge. The court concurred with the Single Judge's decision, emphasizing that the EFS data showing the appellant's turnover couldn't be ignored, despite the ongoing dispute with the tax consultant. The court upheld the assessments, stating that the Revenue should not suffer due to inter se disputes between the appellant and the tax consultant, as there was no final adjudication on the consultant's alleged misconduct. Consequently, the appeal was dismissed, affirming the Single Judge's decision under Article 226 and 227 of the Constitution of India.