Protective assessment may proceed despite compounding notice where tax liability and risk of non-payment are established.

A notice under Section 82 of the Karnataka Value Added Tax Act, 2003 does not bar a protective assessment under Section 38(5). Compounding proceedings under Section 82 are distinct and, where they have not reached finality, assessment action may still proceed. Section 38(5) applies when there is evidence of tax liability and the prescribed authority has reason to believe the dealer may not pay assessed tax, penalty, or interest. Delayed registration, non-filing of returns, partial payments, and absence of a valid explanation were treated as sufficient factual basis for that statutory belief.

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Issues: Whether initiation of protective assessment under Section 38(5) of the Karnataka Value Added Tax Act, 2003 was justified when notice under Section 82 of the same Act had already been issued.

Analysis: Section 82 deals with compounding of offences and does not create any bar against proceeding under Section 38(5). The mere issuance of a notice under Section 82 does not preclude assessment action, particularly when the compounding proceedings had not reached finality. Under Section 38(5), a protective assessment can be issued where there is evidence showing tax liability and the prescribed authority has reason to believe that the dealer will fail to pay the tax, penalty, or interest assessed or payable. The authority found that the dealer had delayed registration, had not filed returns for the relevant years, had made only partial payments, and had no valid justification for non-payment. These circumstances supported the statutory belief required for issuing a protective assessment.

Conclusion: The invocation of Section 38(5) was held to be valid and the challenge failed.

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