2019 (1) TMI 1094 - HC - VAT and Sales Tax

Best Judgement Assessment - power of estimation conferred on the Assessing Officer - sub-Sections (9) and (10) of Section 22 - when a suppression is detected and the same is permitted to be regularised by filing of a return as provided under sub-Section (10) of Section 22, could there be a best judgment assessment estimating turnover, to cover up the probable omissions and suppressions? - Held that - In the KVAT Act the completion of assessment as contemplated in Section 21 is on the filing of a return; a self assessment. The deeming fiction of regularisation of assessment and completion, under sub-section (10) only saves the assessee from an assessment under Section 22 for reason of the return originally filed being defective. Section 22 (10) is also subject to Sections 24 and 25 of the Act; ie an assessment completed under Section 21 is capable of being re-opened under Section 25 for assessment of escaped turnover wherein the Assessing Officer is conferred with the power to carry out assessment to the best of his judgment. In the present case, three diaries were recovered from the premises of the assessee. There can be no presumption that there were no other suppressions. The assessee would not keep the entire details of suppression available for detection. The three diaries also found 72 instances of suppression over nine months of the subject year. There is a definite pattern of suppression established from the recovered documents and best judgment is permissible to cover up the probable omissions and suppressions. Review petition dismissed.

Summary

Issues:
1. Interpretation of provisions under sub-Sections (9) and (10) of Section 22 of the Kerala Value Added Tax Act, 2003.
2. Whether a best judgment assessment can be made after the detection and regularization of turnover suppression.
3. Application of the proviso to sub-Section (10) of Section 22 in cases of detected suppression.

Analysis:
1. The judgment deals with the interpretation of sub-Sections (9) and (10) of Section 22 of the Kerala Value Added Tax Act, 2003. Sub-Section (9) restricts revising a return if an offense is detected until proceedings are finalized. Sub-Section (10) allows filing a revised return after finalization of proceedings, deeming the assessment complete. The proviso to sub-Section (10) states that in cases of detected suppression, best judgment assessment is required.

2. The court considered whether a best judgment assessment is permissible after detecting and regularizing turnover suppression. The respondent argued that filing a return and paying tax on detected suppression should preclude further estimation. However, the court disagreed, emphasizing that the proviso to sub-Section (10) necessitates estimation for any detected suppression, preventing redundancy in the provision.

3. The application of the proviso to sub-Section (10) in cases of detected suppression was crucial. The court held that the proviso mandates best judgment assessment for any detected suppression, even if a return is filed and tax paid on the suppressed turnover. The judgment highlighted that the proviso ensures the Assessing Officer's authority to estimate and cover up probable omissions and suppressions, safeguarding against potential misuse of the regularization provision.

In conclusion, the court rejected the Review Petition, affirming that best judgment assessment is warranted upon detecting suppression, even after regularization through filing a return and paying tax on the suppressed turnover. The judgment underscored the importance of the proviso to sub-Section (10) in preventing misuse and ensuring accurate assessment in cases of detected suppression, ultimately upholding the Assessing Officer's power to estimate turnover based on clear patterns of suppression.