2017 (10) TMI 1167 - HC - VAT and Sales Tax

Rejection of revised returns - Rule 131 of Karnataka Value Added Tax Rules, 2005 - rejection on the ground that such rejected revised returns did not indicate any additional tax liability and proof of payment thereof - Held that - The Division Bench of this Court in the case of Jones Lang Lasalle Property Consultant India (P) Ltd. 2016 (5) TMI 826 - KARNATAKA HIGH COURT , where it was held that even the reversal of input tax credit claimed by assessee resulted in an additional tax liability and the revised returns on the basis of such additional tax liability, disclosed were required to be accepted in terms of the Circular issued by the Commissioner on 7.7.2008. Though the Assessing Authority has referred to the said Division Bench s judgment, it appears that he has not fully understood the ratio of the same or has not carefully examined the facts of the case in the light of the aforesaid Division Bench judgment. The matter, therefore deserves to be remanded to the Assessing Authority for passing fresh orders for each month separately, accepting all the revised returns for the period July 2005 to March 2006 - petition allowed by way of remand.

Summary

Issues:
Challenge to Reassessment Order based on revised returns filed by petitioner-assessee for a specific period. Interpretation of additional tax liability and acceptance of revised returns. Compliance with Division Bench judgment regarding additional tax liability and input tax credit. Failure of Assessing Authority to apply the Division Bench judgment in passing the impugned order. Need for detailed discussion and application of Division Bench judgment by Authorities. Judicial discipline in following and distinguishing Constitutional Court judgments.

Analysis:
The petitioner challenged the Reassessment Order based on revised returns filed for a specific period, as directed by a previous order. The petitioner argued that the Assessing Authority accepted some revised returns but rejected others for not indicating additional tax liability and proof of payment. The petitioner relied on a Division Bench judgment stating that even reversal of input tax credit results in additional tax liability, requiring acceptance of revised returns. The petitioner provided a detailed chart showing substantial increase in 'Partial Rebate' claimed in the revised returns, necessitating acceptance of all revised returns for separate assessment orders per month, as each month is a Tax Period under VAT law.

The Assessing Authority, supported by the Revenue's counsel, justified rejecting the revised returns, citing lack of disclosed additional tax liability and payment. However, the counsel acknowledged that the Division Bench judgment was not adequately discussed in the impugned order. The High Court found the impugned order unsustainable and allowed the petitions. Referring to the Division Bench judgment, the High Court emphasized the meaning of 'additional tax liability' as including adjustments with input credit, contrary to the Revenue's interpretation. The Court criticized the Assessing Authority for not fully understanding the Division Bench judgment and remanded the matter for fresh separate orders for each month, emphasizing detailed discussion and application of the Division Bench judgment.

The High Court criticized the Assessing Authority's pedantic approach and lack of detailed discussion on the Division Bench judgment. It stressed the importance of discussing Constitutional Court judgments thoroughly and recording reasons for differing views. The Court cautioned all Government Departments to apply judgments properly with detailed reasons to maintain judicial discipline. The High Court set aside the impugned order, directing the Assessing Authority to pass fresh separate orders for each month, considering all revised returns and discussing the facts of the case in detail within six months. The Court emphasized that mere acceptance of revised returns does not imply automatic approval of claims, leaving the discretion to the Assessing Authority to allow or disallow claims based on thorough assessment and discussion.

In conclusion, the High Court upheld the petitioner's challenge to the Reassessment Order, emphasizing the importance of applying Division Bench judgments, discussing Constitutional Court rulings, and maintaining judicial discipline in decision-making by Authorities. The detailed analysis and directions provided by the Court aimed to ensure a fair and reasoned assessment process for the petitioner-assessee, highlighting the need for thorough consideration of facts and legal principles in tax assessments.