2024 (12) TMI 1294 - HC - VAT / Sales Tax

Karnataka VAT re-assessment beyond seven-year limitation period under Section 39(1) quashed by High Court

The Karnataka HC allowed the appeal challenging a re-assessment order passed under Section 39(1) of the Karnataka VAT Act, 2003. The court held that the ... Challenge to order of re-assessment passed by Respondent No. 1 u/s 39 (1) of the Karnataka Value Added Tax Act, 2003 on the ground of being barred by time limitation - case of appellant is that Section 40 of the Act of 2003 provided for a period of limitation for passing an order of assessment or re-assessment - whether the learned Single Judge is justified to hold that the limitation for the purpose of re-assessment would start running from the date of passing of the order by the Commissioner under Section 64 (2) of the Act of 2003? HELD THAT:- There is no dispute that, we are concerned with the tax period between April 2007 to September 2007, and the Assessing Authority has passed an order of re-assessment on 16.01.2010. The Appellate Authority exercising jurisdiction under Section 62 of the Act, had allowed the first appeal filed by the appellant vide order dated 31.05.2010. Pursuant thereto, even the Revisional Authority had by initiating the suo-moto revision, has dropped the proceedings on 13.06.2012. It is only on 17.07.2014 the Commissioner of Commercial Taxes had initiated the proceedings under Section 64 (2) of the Act and set aside the order of the Appellate Authority and the Revisional Authority, and remanded the matter to the Assessing Officer for re-verifying the taxable contract receipts for the period of April and May of 2007 and to do the re-assessment. It follows that the period taken for disposal by different authorities like Appellate Authority/Revisional Authority/Commissioner of Commercial Taxes in the manner depicted by the appellant, which we have reproduced above, need to be excluded. In other words, as stated above, if 07 years of limitation for assessment or re-assessment need to be computed, the same shall expire on 31.05.2014, but, if 391 days are added to the same, then the period will come to an end just five days before 30.06.2015. So in other words, the re-assessment cannot be carried out after 26.06.2015. In the present case, the re-assessment was done only on 30.05.2018, much after 26.06.2015. Hence, in that sense, the bar under proviso to Section 40 of the Act of 2003 shall come into play. The appellant is also justified in relying upon the judgment of the Hon’ble Supreme Court in the case of Jaipuria Brothers Limited [1964 (10) TMI 57 - SUPREME COURT]. In the said case the facts were, on March 20, 1952, the Sales Tax Officer, Kanpur, issued a notice under Section 21 of the Uttar Pradesh Sales Tax Act 1948, calling upon the appellant/Company to file a return of its turnover for the Assessment Year 1948-49 on the ground that the turnover had escaped assessment. On March 31, 1952, the Sales Tax Officer has made a best judgment assessment and determined the taxable turnover of the appellant/Company at Rs. 50/- for the year 1948-49 and determined the appropriate tax liability. In the judgment reported, as the Assessing Authority, Amritsar and another [1969 (5) TMI 49 - PUNJAB AND HARYANA HIGH COURT] the Full Bench of Punjab and Haryana High Court was considering the reference made to it on the question whether the jurisdiction of the Commissioner under Section 21(1) of the Punjab General Sales Tax Act, 1948 is subject to period of limitation prescribed under Section 11(A) of the Act. In the said case also, the Commissioner while disposing of the revision under Section 21 of the Act had set aside the Order of Assessment and ordered the Assessing Authority to make a fresh assessment in accordance with law. The court held the proceedings are governed by the period of limitation prescribed in subsections (4), (5) and (6) of Section 11 or Section 11(A) of the Punjab General Sales Tax Act, 1948 - The Court held that, the view is well-founded based on the judgment of the Hon’ble Supreme Court in Jaipuria Brothers Limited. It was also held that once the Commissioner while exercising revisional powers decided to direct the Assessing Authority to make a reassessment in accordance with law, the proceedings for re-assessment were fresh proceedings which were governed by the period of limitation prescribed under Section 11(A) of the Act and accordingly, the appeal was dismissed. Conclusion - The reassessment done by the Assessing Officer leading to impugned orders dated 30.05.2018 is without jurisdiction, being beyond the statutory limitation period, and accordingly the impugned order of the learned Single Judge is set aside, and consequently, the orders of the Assessing Authority and the demand made thereof, are also set aside. Appeal allowed. Issues Involved:1. Whether the re-assessment order dated 30.05.2018 was barred by limitation.2. Interpretation of the limitation period under Section 40 of the Karnataka Value Added Tax Act, 2003.3. The applicability of the judgment in Jaipuria Brothers Limited by the Hon'ble Supreme Court to the present case.Issue-wise Detailed Analysis:1. Barred by Limitation:The primary issue in this case was whether the re-assessment order dated 30.05.2018 was barred by the limitation period as prescribed under the Karnataka Value Added Tax Act, 2003. The appellant contended that the order was issued beyond the permissible period, considering the statutory limitation period of seven years for re-assessment from the end of the tax period, as stipulated in the proviso to Section 40(1) of the Act. The tax period in question was May 2007, and the appellant argued that the re-assessment should have been completed by 30.04.2014. The respondents argued that the order was within time, as the limitation period should be calculated from the date of the Commissioner's order directing fresh assessment under Section 64(2).2. Interpretation of Limitation Period:The court examined the relevant provisions of the Act, particularly Section 40(3), which was amended with retrospective effect from 01.04.2005. This section provides that the period taken for disposal of any appeal or revisional proceedings should be excluded when computing the limitation period for assessment or re-assessment. The appellant calculated that excluding the 391 days taken for various proceedings, the re-assessment should have been completed by 26.06.2015. The court agreed with the appellant, finding that the re-assessment order dated 30.05.2018 was indeed issued beyond the permissible period, as the limitation period expired on 26.06.2015 after accounting for the excluded days.3. Applicability of Jaipuria Brothers Limited Judgment:The appellant relied on the Supreme Court's judgment in Jaipuria Brothers Limited, which held that the period of limitation applies regardless of whether the re-assessment is initiated suo-moto or pursuant to directions from a superior authority. The court found this judgment applicable to the present case, reinforcing the view that the limitation period prescribed by the Act must be adhered to, even when the re-assessment is directed by the Commissioner. The court noted that the learned Single Judge had erroneously concluded that the limitation period commenced from the date of the Commissioner's order under Section 64(2), without excluding the period during which proceedings were pending before various authorities.Conclusion:The court concluded that the re-assessment order dated 30.05.2018 was issued beyond the statutory limitation period, rendering it without jurisdiction. Consequently, the court set aside the impugned order of the learned Single Judge and the re-assessment order and demand notice dated 30.05.2018. The writ appeal was allowed, and no costs were awarded.