2018 (3) TMI 88 - HC - VAT and Sales Tax

High Court affirms re-assessment validity for tax period, allows multiple re-assessments under KVAT Act

The High Court upheld the validity of the re-assessment proceedings for the tax period April-2006 to March-2007, allowing for multiple re-assessments ... Validity of Re-assessment proceedings - Section 39(2) of the KVAT Act, 2003 - time limitation - Held that: - this Court is of the opinion that the Re-assessment proceedings u/s 39(2) of the Act on further evidence and information coming to the notice of the prescribed authority is permitted by Section 39(2) of the Act, which clearly envisages of a second or multiple Re-assessments after the initial Re-assessment order is passed u/s.39(1) of the Act. The overlapping proceedings of Re-assessment envisaged u/s 39(2) of the Act, whether it can be dissected for the purpose of Section 40(3) of the Act or not is a mixed question of facts of law. What is effect of the stay order granted by the Tribunal on 23.01.2013 on such further Re-assessment proceedings is a question which is yet to be adjudicated by the concerned authorities of the Department, the Assessing Authority being at the first instance and the two Appellate Authorities being the later two levels of Appellate forums provided in the Act. Petition disposed off as pre-mature. Issues:1. Validity of re-assessment proceedings for the tax period April-2006 to March-2007.2. Application of Sections 39 and 40 of the KVAT Act, 2003.3. Effect of stay order on re-assessment proceedings.4. Permissibility of multiple re-assessments under Section 39(2) of the Act.5. Jurisdiction of the High Court in determining questions of law.Analysis:Issue 1: Validity of re-assessment proceedingsThe petitioner challenged the re-assessment proceedings initiated by the Respondent- Deputy Commissioner of Commercial Taxes for the tax period April-2006 to March-2007. The re-assessment was based on warranty replacement of spares, parts of computers/laptops, and payments made to caterers for food and drinks. The Assessing Authority sought to re-open the assessment due to alleged tax liabilities that had escaped assessment. The petitioner contended that such re-assessment was time-barred under Sections 39 and 40 of the KVAT Act, 2003.Issue 2: Application of Sections 39 and 40 of the KVAT Act, 2003The petitioner argued that the re-assessment for the period in question had become time-barred after the lapse of eight years or the end of the prescribed tax period. The Respondent-Assessing Authority, on the other hand, maintained that the re-assessment was permissible under Section 39(2) of the Act, which allows for multiple re-assessments based on new evidence or information.Issue 3: Effect of stay order on re-assessment proceedingsThe petitioner contended that the stay order granted by the Karnataka Appellate Tribunal (KAT) did not pertain to the issues for which the re-assessment notice was issued. The Respondent argued that the operation of the re-assessment order was stayed by the KAT, preventing further re-assessment proceedings until the dismissal of the appeal in July 2017.Issue 4: Permissibility of multiple re-assessmentsThe Court acknowledged that Section 39(2) of the Act permits second or multiple re-assessments after the initial re-assessment order. The Act provides for contingencies allowing fresh re-assessment in subsequent rounds. The current re-assessment was on different issues from the earlier one, justifying the need for further examination by the Departmental authorities.Issue 5: Jurisdiction of the High CourtThe Court opined that the questions regarding the effect of the stay order and the permissibility of overlapping re-assessment proceedings were best addressed by the Departmental authorities and Appellate Forums provided in the Act. The Court disposed of the petition, directing the petitioner to cooperate in the re-assessment proceedings before the Assessing Authority and utilize the appellate forums if necessary.In conclusion, the High Court emphasized the importance of allowing the Departmental authorities to decide on the issues raised by the petitioner during the re-assessment proceedings. The decision highlighted the need for a thorough examination of the legal and factual aspects before reaching a final determination on the validity of the re-assessment.