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TMI Blog2018 (2) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... dment to Section 40 has retrospective effect with effect from 01.04.2005 enhancing the period of limitation provided under Section 40 of the Act - the proviso to Section 40 have been amended with effect from 01.04.2012 by Act No.17/2012 and subsequently by Act No.54/2013 retrospective effect was given with effect from 01.04.2005 and the constitutional validity of the same having been upheld, the arguments of the learned counsel that the reassessment proceedings are barred by limitation is wholly untenable. Whether the reassessment proceedings initiated by the prescribed authority are barred by Section 32 of the Act? - Held that: - it is not only until the expiration of 5 years the books of accounts are required to be kept and maintained but also for such other period as may be prescribed or until the assessment reaches finality whichever is later. The phrase “until the assessment reaches finality” has to be read in conjunction with Sections 39 and 40 of the Act - it is clear that assessment also includes reassessment. The prescribed limitation for assessment/reassessment is in terms of Section 40. The limitation period being enlarged by the amendment carried out under Section 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting aside the order of the FAA and restoring the re-assessment order of the Assessing Authority. Being aggrieved, the assessees are in appeal. 5. The learned counsel Shri Narayan G. Rasalkar, appearing for the appellant would contend that the order of the FAA was neither erroneous nor prejudicial to the interest of the Revenue, since the order of re-assessment was passed beyond the period of limitation under Section 40 of the KVAT Act, as it stood prior to 31.03.2011 relating to the assessment period 2005-2006. Inviting the attention of this Court to Section 32 of the KVAT Act, the learned counsel submitted that the assessees are liable to maintain the books of accounts only for five years. Any order passed subsequent to the period mentioned in Section 32 of the Act to keep the books of accounts, is arbitrary and illegal. The revisional authority overlooking these aspects exercised the power under Section 64 of the KVAT Act to revise the order of FAA who had verified the provisions of Sections 40 and 32 of the KVAT Act, in the right perspective while allowing the appeal. The order of the FAA being justifiable, there was no occasion for the Addl. Commissioner to revise the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding the production of books of accounts whose retention period as prescribed has already expired. Section 32 of the KVAT Act is not amended in co-extensive with amendment to Section 40. 7. In support of his contentions, learned counsel placed reliance on the following judgments: i) COMMERCIAL TAXES OFFICER VS. ZORASTER CO., (1993 (89) STC 462), ii) MAHAVEER DRUG HOUSE VS. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, ASSESSMENTS-II, (1991 (82) STC 388). 8. Learned Additional Government Advocate supporting the impugned order submitted that notice under Section 9 of CST Act read with Section 38(2) of the KVAT Act was issued to reassess the assessees for the tax periods in question to which the assessee did not respond. On receipt of the original file from the office of the Assessing Authority, LVO, it was noticed that dealer had filed original C-Forms only to certain extent and rest of the turnover effected towards the interstate sales were not covered by C-Forms. Accordingly, the said transaction was subjected to tax at 10% against which the assesses preferred appeals before the FAA primarily, on the ground of limitation. The FAA holding that re-assessment mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential factors viz., erroneous and prejudicial to the interest of Revenue should co-exist in an order/proceeding to take up for revision. It is apparent that the Appellate Authority was of the view that reassessment proceedings initiated by the prescribed authority is barred by limitation. 13. Section 40 of the KVAT Act has undergone several changes by way of amendments as under: Sec.40. Period of limitation for assessment.- (1) An assessment under Section 38 or re-assessment under Section 39 of an amount of tax due for any prescribed tax period shall not be made after the following time limits.- (a) Four years after the end of the prescribed tax period; or (b) three years after evidence of facts, sufficient in the opinion of the prescribed authority to justify making of the reassessment, comes to its knowledge. whichever is later: Provided that an assessment or reassessment relating to any tax period ending 31st day of March, 2007 shall be made within a period of five years after the end of the prescribed tax period. (2) If any tax is, not paid by a dealer who has failed to get registered though liable to do so or fraudulently evaded attracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax period upto the period ending 31st day of March, 2007 shall be made under this sub-section within a period of ten years after the end of the prescribed tax period. By virtue of this amendment, an assessment or reassessment relating to any tax period upto the period ending 31.03.2007 shall be made within a period of ten years, after the end of the prescribed tax period. By Karnataka Act No.54/2013, this Section is further amended retrospectively with effect from the first day of April, 2005, and the same reads thus:. (1) An assessment under Section 38 or reassessment under Section 39 of an amount of tax due for any prescribed tax period shall not be made after five years after the end of the prescribed tax period: Provided that an assessment or reassessment relating to any tax period upto the period ending 31st day of March, 2007 shall be made within a period of eight years after the end of the prescribed tax period: Provided further than an assessment or reassessment relating to any tax period commencing from the 1st day of April, 2007 upto the period ending 31st day of March, 2012 shall be made within a period of seven years after the end of the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion. The proviso came into force with effect from 19.02.1991. In that context it was held that, it was immaterial if a period for assessment or reassessment under sub-section (2) of Section 21 before the addition of the said proviso had expired. It was the completion of assessment or reassessment under Section 21 which was to be done before the expiration of eight years of that particular assessment year. It was held that sub section (2) of Section 21 of the Act does not put any embargo on the Commissioner of Sales Tax not to reopen the assessment if period, as prescribed earlier, had expired before the proviso came into operation. Earlier the assessment/reassessment could have been completed within four years of that particular assessment year and now by the amendment adding proviso to Section 21(2) of the Act it is eight years. The only safeguard being that it is after satisfaction of the Commissioner of Sales Tax. The proviso is operative from 19-2-1991 and a bare reading of the proviso shows that the operation of this proviso relates and encompasses back to previous eight assessment years. 17. In the present set of facts, the proviso to Section 40 have been amended with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32. 21. In the present case, the period of limitation as per the Amendment Act No.54/2013 is eight years with effect from 01.04.2005 i.e., 30.04.2013, the date of finality of the assessment, which would be the date of expiry of limitation to reassess the deemed assessments made under Section 38 of the Act for the assessment year 2005-2006. Reassessment proceedings were initiated by issuing notice dated 16.02.2013 and the reassessment order was passed on 22.04.2013 well within the period of limitation even as per Section 32 of the Act. 22. The Scheme of the Act is that the assessee/dealer has to file the monthly returns as per Section 35 (1) of the Act accompanied by the payment of tax and as per Section 38 (1) of the Act, every dealer shall be deemed to have been assessed to tax based on the return filed by the assessee under Section 35 except in cases where the Commissioner may notify the dealer of any requirement of production of accounts before the prescribed authority in support of a return filed for any period and such authority shall proceed to assess such dealer. Section 39 of the Act provides for reassessment of tax where the prescribed authority has grounds to belie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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