Court bars revenue authorities from assessing while compounding option is valid. Assessments should align with compounding terms.

The court held that while revenue authorities can proceed for recovery of defaulted instalments under the compounding scheme, completing a regular assessment under Section 6 while the compounding option subsists is illegal. The assessment orders, demand notices, and recovery notices issued to the petitioner were quashed. The court declared that the assessment for the relevant years should be in accordance with the compounding option exercised by the petitioner, with any payments made by the petitioner adjusted towards liabilities under the compounding scheme.

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Issues:
- Assessment under Kerala Tax on Luxuries Act based on compounding scheme
- Authority to complete regular assessment on best judgment basis
- Jurisdiction of revenue authorities to proceed with assessment while compounding option subsists

Analysis:
1. Assessment under Kerala Tax on Luxuries Act based on compounding scheme:
The petitioner, engaged in renting out a houseboat, opted for tax payment on a compounding basis under Section 5A of the Act for the assessment years 2013-2014 and 2014-2015. The compounding fee was fixed, and monthly instalments were to be paid. However, the petitioner defaulted on the payments. The revenue authorities proceeded to issue an assessment order and demand notices for recovery. The petitioner contended that the authorities could only proceed with revenue recovery steps for defaulted amounts.

2. Authority to complete regular assessment on best judgment basis:
The Government Pleader argued that under Section 6 of the Kerala Tax on Luxuries Act, if an assessee defaults in complying with the compounding scheme, the revenue authorities have the right to complete the assessment on a regular basis. It was contended that defaulting on payments forfeits the right to continue under the compounding scheme.

3. Jurisdiction of revenue authorities to proceed with assessment while compounding option subsists:
The court analyzed the provisions of Section 5A, which outline the compounding scheme as a self-contained code. It highlighted that if an assessee defaults on payments under the compounding scheme, the revenue authorities can recover the defaulted amounts as per the Act. However, the court referred to Supreme Court decisions emphasizing that once an assessee opts for compounding and it is accepted by the revenue authorities, neither party can withdraw from the option. The court held that while revenue authorities can proceed for recovery of defaulted instalments under the compounding scheme, completing a regular assessment under Section 6 while the compounding option subsists is illegal.

In conclusion, the court quashed the assessment orders, demand notices, and recovery notices issued to the petitioner. It declared that the assessment for the relevant years should be in accordance with the compounding option exercised by the petitioner. Any amounts paid by the petitioner pursuant to the quashed orders would be adjusted towards liabilities under the compounding scheme.

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