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TMI Blog2019 (12) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... for re-opening assessments under Section 25 of the KVAT Act had expired by the time the notices for re-opening assessments, invoking Section 42(3) of the KVAT Act, were issued to them. The petitioners therefore contend that in such cases, the Revenue cannot invoke Section 42(3) of the KVAT Act to re-open assessments that have already become final under the KVAT Act. 2. To appreciate the issue raised in these writ petitions, one has to first notice the statutory provisions under the KVAT Act. As per the Scheme of the KVAT Act, the assessment procedure commences with the filing of a return by the assessee. If the return filed by the assessee conforms to the requirement under the KVAT Act and Rules, in respect of the details of turnover to be furnished and the tax to be paid thereon, and there is no query raised by the Revenue within the period prescribed for the same, the assessment to tax is deemed completed as a self-assessment to tax by the assessee under Section 21 of the KVAT Act. If an assessee does not file a return as contemplated by the KVAT Act and Rules or files a defective return, then the assessment is completed on best judgment basis by the Revenue after following th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insert a new sub section therein, with retrospective effect from 01.04.2005, the date on which the KVAT Act came into force in the State of Kerala. Sub Section (3) of Section 42, that was inserted, reads as follows: "(3) Notwithstanding anything to the contrary contained in this Act, if a dealer, (i) fails to file audited accounts referred to in sub-section (1), or (ii) fails to file revised annual return rectifying the mistake or omission, along with the audited statement of accounts and certificate or if the variance in the audited statement of accounts with the returns is not satisfactorily explained in the reconciliation statement prescribed, or (iii) fails to file the annexures, statements, certificates, declarations, including the statutory declarations to be filed under the Central Sales Tax Act, 1956 which are required to be filed along with the returns to prove the correctness of the concessional rate of tax, exemptions and exports claimed in the returns, or (iv) fails to declare any sale, purchase or interstate stock transfer as evidenced from the documents prescribed under section 46 available with the assessing authority in the sales and purchase list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped turnover. It is contended that under the KVAT Rules, an assessee is obliged to keep his Books of account only for five years and hence the retrospective operation of Section 42(3) can, at any rate, be only to such extent and not beyond that. [ Ref. - Rai Ramkrishna v. State of Bihar - [AIR 1963 SC 1667]; National Agricultural Cooperative Marketing Federation of India Ltd. and Another v. Union of India and Others - [(2003) 5 SCC 23] & Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited - [(2015) 1 SCC 1]]. ➢ Removing the limitation period for re-opening assessments of registered dealers under the KVAT Act would tantamount to treating them at par with unregistered dealers and those subjected to protective assessments, who are seen as evaders of tax. The provisions would therefore breach the mandate of Article 14 in that it treats unequals as equals for the purposes of assessment. Reference is drawn to Ghanshyam Das v. Regional Assistant Commissioner of Sales Tax, Nagpur - [(1964) 4 SCR 436]; Anandji Haridas and Co. (P) Ltd. v. S.P. Kasture and Others - [AIR 1968 SC 565]; State of Gujarat and Another v. Patel Ramjibhai Danabhai and O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Corporation (P) Ltd. v. Secretary, Board of Revenue, Thiruvananthapuram & another - [AIR 1964 SC 207]; Municipal Corporation Indore & Others v. Smt. Rethna Prabha & Others - [AIR 1977 SC 308]; State (NCT of Delhi) v. Narendar - [(2014) 13 SCC 100]; Iridium India Telecom Ltd. v. Motorolla IMS - [(2005) 2 SCC 145]; Parayankandiyal Eravath Kanapravan Kalliani Amma v. K.Devi - [(1996) 4 SCC 76]. For the proposition that in the absence of a time limit prescribed under a Statute, the assessing authority is entitled to complete proceedings properly commenced without any restrictions as to time, reliance is placed on Regional Assistant Commissioner Indore v. Malva Vanaspathi & Chemical Company Ltd. - [AIR 1968 SC 894]; Bharat Steel Tubes Ltd. and Others v. State of Haryana and Others - [(1988) 70 STC 122]. ➢ The amendment to Section 42 inserting sub section (3) therein, has been given retrospective operation with effect from 01.04.2005. The said retrospectivity conferred by the legislature has the effect of removing the basis of the judgment rendered in the case of such assessees in the context of the limitation provisions under Section 25 of the KVAT Act. The said judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit specified in Section 42(1), for a differential treatment in the matter of re-opening of assessments to assess escaped turnover. The technique that was employed was to define the circumstances under which, in the case of such assessees, the assessments would not be deemed complete under Sections 21, 22 or 24, but would be deemed pending for the purposes of Section 25, notwithstanding the limitation period prescribed under Section 25 which was expressly stated to be inapplicable to such cases. Although the petitioners would contend that the classification brought about between two categories of assessees for differential treatment in the matter of reopening of assessment would offend Article 14 of the Constitution of India, I am of the view that in enacting fiscal legislation the legislature is entitled to a great deal of latitude and this Court would interfere with such a classification only if there is a clear transgression of constitutional principles that is established. In the instant case, when viewed against the object sought to be achieved by the legislature viz. the taxation of escaped turnover, a classification effected amongst assessees, based on turnover, and for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be inferred a finality to assessment proceedings within a specified period from the end of the assessment year. The fixing of such a specified period would also be in line with the judgments that hold that in the absence of a prescribed time limit for completing assessments under the Statute, a reasonable period has to be read in, and in determining what that reasonable period should be, clues can be gathered from the other provisions under the KVAT Act and Rules. [ See State of Gujarat v. Patel Raghav Natha and Others - [AIR 1969 SC 1297]; State of Punjab and Others v. Bhatinda District Cooperative Milk Producers Union Ltd. - (2007) 11 SCC 363; Director of Income-Tax (International Taxation) v. Mahindra and Mahindra Ltd. - [(2014) 365 ITR 560 (Bombay)]. 10. What then should be the period prescribed for exercise of the power under Section 42(3) and consequently the extent of retrospectivity conceded to the statutory provision ? Ordinarily, one could have looked to the time limit prescribed for exercise of a similar power, and for a similar purpose under the Act, to apply the same time limit for the exercise of power under Section 42(3). A similar power is contained in Section 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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