2015 (7) TMI 547 - HC - VAT and Sales Tax

Second re-assessment - KVAT - Power to review - After the audit of the books of accounts of the petitioner, re-assessment proceedings were initiated under sub-section (1) of Section 39 of the Karnataka Value Added Tax Act and on 6.6.2014, an order was made holding that petitioner was entitled to refund - When the petitioner was expecting refund of the said amount, once again re-assessment proceedings were initiated under Section 39(2) of the Act and an order was made on 21.10.2014 (Annexure-A to the writ petitions) holding that petitioner was in arrears of tax, interest and penalty. Held that - The only condition for making further reassessment in addition to earlier assessment is when the authority takes notice of further evidence. But in the instant case, there was no further evidence which came to the notice of the assessing authority. Merely because the assessment in respect of M/s.Amma construction was made subsequently those facts could not have been taken note of in the instant case. There must be further evidence which is noticed by the assessing authority so as to make further assessment or reassessment. The assessing authority thus did not have any jurisdiction to do so and therefore subsequent assessment orders at Annexures A1 and B1 and demand notices at Annexures- A2 and B2 respectively are quashed. - However, if the respondent/department is of the view that the assessment made at Annexure-C calls for any further interference, then liberty is reserved to them to take such action in accordance with law. With regard to Refund - Liberty is reserved to the petitioner to make a representation and if such a representation is made, the same shall be considered in accordance with law and expeditiously within a period of two months from the date of representation. - Decided partly in favor of assessee.

Summary

Issues:
1. Jurisdiction of assessing authority to pass reassessment orders under the Karnataka Value Added Tax Act, 2003.
2. Validity of reassessment proceedings and demand notices issued to the petitioner.
3. Interpretation of Section 39(2) of the Act before and after the 2013 amendment.

Analysis:
Issue 1: The primary issue in this case revolves around the jurisdiction of the assessing authority to pass reassessment orders under the Karnataka Value Added Tax Act, 2003. The petitioner, a Private Limited Company engaged in civil works contracts, filed returns for the tax period from April 2010 to March 2011, which were initially accepted. Subsequently, re-assessment proceedings were initiated, leading to conflicting orders regarding tax liabilities and refunds. The petitioner challenged the reassessment orders, arguing that the assessing authority lacked the jurisdiction to pass fresh orders without new evidence coming to light. The petitioner contended that the authority could only modify orders under specific circumstances outlined in the Act.

Issue 2: The validity of the reassessment proceedings and demand notices issued to the petitioner is another crucial aspect of this judgment. The petitioner, aggrieved by the reassessment orders and demand notices, approached the High Court seeking relief. The petitioner argued that the assessing authority exceeded its jurisdiction by issuing contradictory orders without any new evidence warranting such actions. The Court examined the legality of the reassessment process and the grounds on which the demand notices were based, considering the implications of the conflicting orders on the petitioner's tax liabilities.

Issue 3: A significant part of the analysis focused on the interpretation of Section 39(2) of the Act both before and after the 2013 amendment. The Court delved into the specific provisions of the Act governing reassessment of tax liabilities, emphasizing the conditions under which the assessing authority could make further reassessments. By comparing the pre-amendment and post-amendment versions of Section 39(2), the Court clarified that the authority's power to conduct reassessments hinged on the presence of new evidence justifying such actions. The judgment underscored the importance of adhering to the statutory framework while conducting reassessment proceedings under the Act.

In conclusion, the High Court ruled in favor of the petitioner, holding that the assessing authority had overstepped its jurisdiction by issuing reassessment orders without any fresh evidence coming to light. The Court quashed the subsequent assessment orders and demand notices, citing the lack of legal basis for such actions. The judgment highlighted the necessity for assessing authorities to adhere to statutory provisions and refrain from making arbitrary reassessments without valid grounds.