2025 (2) TMI 253 - HC - VAT / Sales Tax

Challenge to orders of attachment of the bank account and the immoveable property - time limitation for issuing an assessment order under Section 21 (4) of AP VAT Act - HELD THAT - A perusal of the impugned order would show that the entire order goes on the basis of best judgment assessment relying upon the returns filed by the petitioner. There is nowhere any mention of suppression of facts much less willful suppression of facts resulting in willful evasion of tax which is the sine qua non for invoking Section 21 (5) of the Act. In such circumstances the provisions of Section 21 (5) of the Act would not be applicable and the period of limitation would be four years as set out under Section 21 (4) of the Act. Conclusion - As the impugned assessment order has been passed beyond the period stipulated under Section 21 (4) of the Act it must be held that the impugned order is beyond limitation and non-est. Both the writ petitions are allowed setting aside the impugned assessment order of the Commercial Tax Officer Addanki Circle dated 24.08.2021 and penalty notice dated 16.09.2021.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered by the Court was whether the assessment order and subsequent penalty notice issued by the Commercial Tax Officer were within the permissible period of limitation as prescribed by the A.P. Value Added Tax Act, 2005. Specifically, the Court examined whether the order was issued in violation of the four-year limitation period under Section 21(4) or whether the six-year period under Section 21(5) was applicable due to alleged willful suppression of facts by the petitioner.

ISSUE-WISE DETAILED ANALYSIS

1. Limitation Period for Issuing Assessment Orders

Relevant legal framework and precedents: The A.P. Value Added Tax Act, 2005, under Section 21(4), stipulates a four-year limitation period for issuing an assessment order from the end of the relevant tax period. Section 21(5) extends this period to six years in cases of willful suppression of facts leading to tax evasion.

Court's interpretation and reasoning: The Court analyzed the applicability of Sections 21(4) and 21(5) of the Act. It observed that the assessment order was issued on 24.08.2021, beyond the four-year limitation period, which ended on 30.06.2021. The Court scrutinized the claim of willful suppression of facts, which would have extended the limitation period to six years under Section 21(5).

Key evidence and findings: The Court found that the assessment order was based on a best judgment assessment, relying solely on the returns filed by the petitioner. There was no evidence or mention of willful suppression of facts in the assessment order, which is essential for invoking the extended limitation period under Section 21(5).

Application of law to facts: The absence of any reference to willful suppression of facts in the assessment order led the Court to conclude that the conditions for applying Section 21(5) were not met. Therefore, the four-year limitation period under Section 21(4) was applicable.

Treatment of competing arguments: The Assessing Officer argued that the petitioner deliberately avoided service of notices and failed to cooperate, justifying the application of Section 21(5). However, the Court found no substantive evidence of willful suppression in the assessment order itself, which was necessary to apply the extended limitation period.

Conclusions: The Court concluded that the assessment order was issued beyond the permissible four-year period under Section 21(4), rendering it non-est and void.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Court stated, "There is nowhere any mention of suppression of facts, much less, willful suppression of facts, resulting in willful evasion of tax, which is the sine qua non, for invoking Section 21 (5) of the Act."

Core principles established: The Court established that for the six-year limitation period under Section 21(5) to apply, there must be clear evidence of willful suppression of facts in the assessment order. In the absence of such evidence, the four-year period under Section 21(4) is applicable.

Final determinations on each issue: The Court allowed both writ petitions, setting aside the assessment order dated 24.08.2021 and the penalty notice dated 16.09.2021, along with all consequential proceedings, including the attachment of the petitioner's bank accounts and immovable property.