Retrospective tax reopening cannot revive stale assessments beyond limitation where missing records would prejudice the assessee.

Reassessment under the Kerala Value Added Tax Act could not be sustained after expiry of the five-year limit where the retrospective insertion of Section 42(3) was used to revive stale assessments. The Kerala HC treated Rule 58(20) as reflecting the practical outer limit for exercising reassessment powers and emphasised that reopening must not unfairly prejudice the assessee, especially where books and records may no longer be available to answer allegations of escaped turnover. A retrospective deeming provision does not, by itself, authorise unlimited reopening beyond a reasonable limitation period, and tax powers must be exercised consistently with statutory time constraints and fairness.

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Issues: Whether reassessment proceedings initiated beyond the five-year limitation under Section 25(1) of the Kerala Value Added Tax Act, 2003 could be sustained in view of the retrospective amendment to Section 42(3), and the relevance of the record-preservation period under Rule 58(20).

Analysis: The assessment was sought to be reopened after the expiry of the limitation period prescribed under Section 25(1). The retrospective insertion of Section 42(3) was held not to permit an unrestricted revival of stale assessments so as to prejudice the assessee, particularly where books and records may no longer be available to meet allegations of escaped turnover. Rule 58(20) was treated as a safeguard indicating the outer practical limit for exercise of the power, and the provisions were construed to avoid unfairness and arbitrariness in tax administration.

Conclusion: The reassessment orders were barred by limitation and were unsustainable; the challenge succeeded in favour of the assessee.

Ratio Decidendi: A retrospective provision deeming an assessment pending does not by itself authorise reopening beyond a reasonable limitation period where the assessee would be prejudiced by loss of records, and the power must be exercised consistently with the statutory time constraints and fairness.

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