2016 (9) TMI 1162 - HC - VAT and Sales Tax

Levy of tax on discount received from the suppliers - Section 25 of the Kerala Value Added Tax Act, 2003 - total purchase not reported in the annual return and audited accounts, discount deducted from the total value of the bill and input tax credit disallowed to that extent - the appellate authority remitted the matter back for the purpose of deciding only one issue as to whether the disallowance of input tax on discount received was justified or not, and assessing officer considered the entire matter afresh - whether there is any justification on the part of the assessing authority in having taken a different view in the matter despite the direction issued by the appellate authority? Held that - There is no doubt about the jurisdiction of the assessing officer in a case where it is noticed that part of the turn over of the business of a dealer has escaped assessment to tax in any year or return period or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made therefrom or where any input tax or special rebate credit has been wrongly availed of, the assessing authority may, at any time within five years from the last date of the year to which the return relates, proceed to determine, to the best of its judgment, the turnover which has escaped assessment to tax. The question is whether such a method can be adopted when the appellate authority had remitted the matter back to the assessing officer. The appeal was filed by the assessee and therefore the question considered in the appeal was only regarding the entitlement of the petitioner for input tax credit. The issue as to whether discount has to be added on to the total turnover was not an issue pending before the Tribunal. It is apparent from the materials placed on record that the assessing officer had taken a different view from what has been taken earlier by issuing a fresh notice under Section 25 (1) of the Act. Merely for the reason that there had been a mistake committed by an earlier Officer, it is not open for the Officer considering the same again to have a different view. Revenue authorities also had a right of appeal and no such opportunity had been availed of at the relevant time. The question whether the discount has to be added to the turn over was not a matter which ought to have been taken up afresh especially when no appeal had been filed by the revenue authorities. - the assessing officer not justified in re-opening the assessment already made as far as the addition of discount to the turn over is concerned. What was to be considered by the assessing officer was only whether input tax credit is liable to be made or not - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to order passed by Commercial Tax Officer for assessment year 2011-2012.

Analysis:
1. The petitioner challenged Ext.P10, an order passed by the Commercial Tax Officer proposing to assess the petitioner to a total taxable turnover by adding a discount received from suppliers. The assessment was completed, disallowing input tax credit corresponding to the discount. The petitioner contended that input tax credit should be allowed on actual purchase as per Section 11 of the KVAT Act. The appellate authority remitted the matter back to consider the input tax credit issue. However, the assessing authority re-opened the assessment and passed Ext.P10, taking a contrary view. The petitioner argued that re-opening the assessment was improper as the officer had already concluded in Ext.P5 that the purchase value was less than the discount received.

2. The assessing authority justified re-opening the assessment, citing discrepancies and irregularities found during verification of the dealer's books. The Government Pleader supported Ext.P10, stating that the officer had to issue a further notice under Section 25(1) of the Act after verifying the books and giving the dealer an opportunity to be heard. The Government Pleader also relied on a judgment stating that reimbursement of price received by a dealer should be included in turnover, while discount allowed to customers should be excluded. The assessing authority's decision was defended despite a different view taken earlier.

3. The main question was whether the assessing authority was justified in taking a different view and re-opening the assessment despite the appellate authority's direction to consider only the input tax credit issue. The Court analyzed Section 25(1) of the Act, which allows assessing escaped turnover within five years. The Court held that the assessing officer was not justified in re-opening the assessment to add discount to the turnover, as the issue was not pending before the Tribunal. The Court emphasized that the assessing officer should have only considered the eligibility of input tax credit.

4. The Court concluded that the assessing officer's decision to re-open the assessment and add discount to the turnover was illegal. Ext.P10 was set aside, and the assessing officer was directed to reconsider the matter in light of the appellate authority's order. The Court allowed the writ petition, noting that the assessing officer's action was not justified and required correction. The direction was given without prejudice to the right of revenue authorities to challenge Ext.P5 if desired.