2020 (3) TMI 1051 - HC - VAT and Sales Tax

Re-assessment of the proceedings u/s 17D of the Kerala General Sales Tax Act, 1963 - escaped turnover - method of fast track completion of assessment - time limitation - case of Revenue is that once Section 17(D) of the Act, 1963 do not envisage any period of limitation, the argument that the applicability of Section 19 of the Act, 1963 would not apply and impugned order noticing the escaped turn over cannot be said to be erroneous or barred by law of limitation - HELD THAT - On perusal of the aforementioned provisions, particularly Section 19 of the Act, 1963 empowers the assessing authority may, at any time within five years from the expiry of the year to which the tax relates, proceed to determine the best of its judgement in respect of the turn over alleged to have escaped assessment to tax - There was an amendment in Section 17 whereby the assessment relating to year up to and including 2004-05 running as on 31st March, 2010 or to be completed on or before 31.03.2011. However, in the instant case the Ext.P2 notice was issued on 20.11.2019 followed by an assessment order dated 14.12.2009 and Ext.P4 notice, Ext.P7 order commanding the petitioner to pay the penalty and interest under the KGST Act, 1963. There is no justification for this department or a material placed on record as per the provision of Section 17D, in the absence of any statutory period referred to Section 17D escaped assessment way of fast track assessment can be taken almost 14 years later. The reasonable period can be extended upto the period referred to other provisions regarding the escaped assessment under Section 19. Even from perusal of the assessment order and the notice there is no reference to the additional material forming an opinion to undertake the fast track assessment. Demand not sustainable - petition allowed.

Summary

Issues:
1. Validity of re-assessment proceedings under the Kerala General Sales Tax Act for the period 2004-2005.
2. Applicability of Section 17D and Section 19 of the Act, 1963 in the re-assessment proceedings.
3. Time limitation for re-opening assessment under Section 17D.
4. Justification for the re-assessment initiated after a significant period.
5. Compliance with procedural requirements for fast track assessment under Section 17D.

Analysis:
1. The petitioner challenged re-assessment proceedings initiated by the 1st respondent under the Kerala General Sales Tax Act for the period 2004-2005. The petitioner contended that the assessment was completed and tax dues were paid for the relevant period. However, a notice for re-assessment was issued based on certain observations, leading to the petitioner's grievance.

2. The crux of the issue lies in the interpretation of Section 17D and Section 19 of the Act, 1963. The petitioner argued that re-opening of assessment under Section 17D requires fresh material on tax evasion and is subject to a time limit as per Section 19. The respondent, on the other hand, contended that Section 17D does not prescribe a limitation period, thus justifying the re-assessment notice.

3. The petitioner emphasized that the re-assessment notice issued beyond the prescribed period of five years, as per Section 19, is untenable. Referring to the case law of Philips India Ltd., the petitioner argued that the outer time limit for assessment had lapsed, rendering the re-assessment invalid.

4. The court examined the timeline of events, noting that the re-assessment notice was issued almost 14 years after the relevant assessment year. Despite the absence of additional material or justification for the delayed re-assessment, the court found the proceedings lacking in statutory compliance and reasonable grounds.

5. In the absence of concrete evidence or compliance with procedural requirements for fast track assessment under Section 17D, the court concluded that the re-assessment order and demand notice were unsustainable. Consequently, the court quashed the assessment order and demand notice, ruling in favor of the petitioner and allowing the writ petition.