2020 (11) TMI 281 - HC - VAT and Sales Tax

Reopening of assessment - Assessment for escaped turnover - time limitation - Section 25(1) read with Section 42(3) of the KVAT Act - assessment year 2013-2014 - HELD THAT - Under the provisions of Section 25(1), as amended by Kerala Finance Act, 2017, and before repeal of KVAT Act on 22.06.2017, six year period of limitation for reopening assessments cannot be relied upon to issue preassessment notices in cases, where by 31.03.2017, five year period for re-opening assessments under the unamended provisions of Section 25(1) had already expired - In the case of BAIJU A.A. AND OTHERS VERSUS STATE TAX OFFICER, STATE OF KERALA AND OTHERS 2019 (12) TMI 469 - KERALA HIGH COURT , this Court declared that the amendments to Section 25 of the KVAT Act, through the Kerala Finance Act, 2018 are illegal and unconstitutional inasmuch as they were beyond the legislative competence of the State Legislature. In the instant case, the period of limitation with respect to the assessment year 2013-14 had expired on 31.03.2019 - therefore, Ext.P1 notice dated 18.01.2020 issued under Section 25(1) read with Section 42(3) of the KVAT Act, for the assessment year 2013-14, proposing to carryout assessment for escaped turnover, is clearly barred by limitation. It is declared that the assessment in respect of which the period of limitation for re-opening under Section 25 of the KVAT Act was to expire by 31.03.2019 cannot be re-opened on 18.01.2020 by issuing Ext.P1 notice - petition disposed off.

Summary

Issues:
1. Interpretation of limitation period for assessment under the Kerala Value Added Tax Act, 2003.
2. Validity of notice issued for assessment of escaped turnover beyond the limitation period.

Analysis:
The petitioner, a Public Sector Undertaking, filed returns under the Kerala Value Added Tax Act, 2003, for the assessment year 2013-2014. Subsequently, the 1st respondent issued a notice proposing to carry out an assessment for escaped turnover beyond the prescribed time limit. The petitioner contended that the limitation period for assessment had expired on 31.03.2019, and therefore, the notice issued on 18.01.2020 was time-barred. The petitioner sought to quash the order based on this ground.

Upon hearing both parties, the court referred to a previous judgment where it was held that amendments to Section 25 of the KVAT Act, extending the limitation period, were illegal and unconstitutional. In the present case, the court found that the limitation period for the assessment year 2013-2014 had indeed expired on 31.03.2019. Consequently, the notice issued on 18.01.2020 for the assessment of escaped turnover was deemed to be clearly barred by limitation.

In conclusion, the court disposed of the writ petition by setting aside the assessment order and declaring that any attempt to reopen the assessment, where the limitation period had expired by 31.03.2019, was impermissible. The judgment reaffirmed the importance of adhering to statutory limitation periods in tax assessments, thereby upholding the petitioner's claim based on the prescribed timeline under the KVAT Act.