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of <h1>Assessee's failure to file statutory return means no pending proceedings, Section 17(6) cannot be invoked by revenue</h1> HC held that because the assessee did not file any statutory return, proceedings were not initiated or 'pending' and revenue could not invoke Section ... Time limitation for passing assessment order - assessment order passed within the period prescribed u/s 17(6) of the Act, as amended by the Kerala Finance Act, 2009, and the Finance Act, 2010 or not - HELD THAT:- In the case at hand, a perusal of Annexure-A assessment order shows that the respondent-assessee had not filed any returns during the year under assessment. Therefore, the case of the respondent-assessee cannot be stated to be falling under the variations noticed by the Apex Court in Ghanshyamdas [1963 (8) TMI 2 - SUPREME COURT] - the Apex Court in Ghanshyamdas has held that “the submission of a statutory return would initiate the proceedings and that the proceedings would be pending till a final order of assessment was made on the said return”. Applying the law laid down by the Apex Court in Ghanshyamdas in a case where no return is filed by a dealer, merely because the dealer had a duty to file the return, it cannot be said that the proceedings were initiated on account of the default. It is only when a notice is issued in accordance with the law, it can be said that the proceedings are initiated. The proceedings have not been initiated against the respondent assessee to contend that they were “pending”. When that be so, it is opined that the revenue would not be entitled to place reliance on the provisions under Section 17(6) of the Act, as amended by Finance Acts, 2009 and 2010. The conclusions arrived at by the Tribunal cannot be said to be incorrect or arbitrary, warranting interference - this Sales Tax Revision Petition stands dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the assessment order for the year 2003-04 was passed within the period prescribed under Section 17(6) of the Kerala General Sales Tax Act as amended by the Kerala Finance Acts, 2009 and 2010. 2. Whether assessments which were not initiated or finalised before the original limitation date could be brought within the extended dates provided by the Kerala Finance Acts, 2009 and 2010 - in particular, whether such assessments were 'pending' as on the cut-off dates so as to attract the provisos and explanation added by those Finance Acts. 3. Whether, in circumstances where a dealer has not filed statutory returns, the mere duty to file a return (or the existence of a return obligation) renders assessment proceedings 'pending' for the purpose of statutory extension of limitation. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 17(6) time-limits (legal framework) Legal framework: Section 17(3) empowers assessment where no return is submitted or where a return appears incorrect or incomplete; Section 17(6) (inserted 1993, amended 2002) prescribes the outer period for finalisation (originally 4 years, thereafter 5 years) and was subsequently amended by Kerala Finance Acts, 2009 and 2010 to provide specified extended cut-off dates for pending assessments up to and including 2004-05. Interpretation and reasoning: For the assessment year 2003-04 the statutory limitation, as it stood until 31.03.2009, required completion by 31.03.2009 (or by the applicable 5-year period). The assessment under challenge was neither initiated nor finalised within that period; therefore, on plain reading of Section 17(6) as it stood up to 31.03.2009, the assessment was time-barred. Ratio vs. Obiter: Ratio - where an assessment is not initiated/finalised within the prescribed limitation under Section 17(6) as it stood prior to the Finance Act extensions, it is time-barred. Conclusion: Absent operation of later statutory extensions, the assessment was barred by limitation under Section 17(6). Issue 2 - Effect and scope of extensions introduced by Kerala Finance Acts, 2009 and 2010 Legal framework: The 2009 Finance Act substituted a proviso to permit completion of assessments relating to years up to and including 2004-05 pending as on 31.03.2009 by 31.03.2010 and included an Explanation clarifying that the time extension applied in all cases where regular assessments had not been completed before the date fixed for completion in the respective years. The 2010 Finance Act further substituted provisos to permit completion by 31.03.2011 for assessments pending as on 31.03.2010 and added a proviso concerning reopened assessments with Commissioner's permission. Interpretation and reasoning: The revenue contended that the legislative extensions granted a 'lease of life' such that assessments not completed by the earlier limitation could be finalised within the newly fixed dates. This claim depends on whether the assessment proceedings were 'pending' as of the statutory cut-off dates (31.03.2009 / 31.03.2010). The Court analysed the language of the provisos and the Explanation, and concluded that the extensions apply only to assessments that were in fact pending on the relevant cut-off dates. Precedent treatment: The Court examined and applied precedents (principally the Apex Court decision discussed below) about the factual commencement or pendency of proceedings to assess whether an assessment qualifies as 'pending' for statutory extension. Ratio vs. Obiter: Ratio - legislative extensions apply to matters actually pending on the specified cut-off dates; mere statutory duty to file a return does not suffice to treat an assessment as pending. Conclusion: The Finance Act extensions do not rescue assessments where proceedings were not actually initiated/pending as of the statutory cut-off; therefore the 2009/2010 extensions were not available to validate the impugned assessment. Issue 3 - Whether failure to file return renders proceedings 'pending' (treatment of precedent) Legal framework: The relevant principle is whether statutory obligation to file a return, absent any action by the assessing authority, constitutes initiation or pendency of assessment proceedings. Precedent treatment (followed and applied): The Court relied on the reasoning in the cited Apex Court authority which distinguishes four factual situations: (1) return filed and accepted (final assessment), (2) return filed but not accepted and notice issued (proceedings pending), (3) no return filed but notice under relevant sections issued (proceedings pending), and (4) no return and no notice issued (no proceedings pending). The Apex Court held that where no return is filed and no statutory notice is served, there are no proceedings pending merely by virtue of the duty to file a return. Interpretation and reasoning: Applying that precedent, the Court held that where the dealer had not filed any return and no notice initiating proceedings had been issued before the cut-off date, there was no factual pendency of proceedings. The Explanation in the 2009 Act could not be read to convert mere non-filing into statutory pendency; to do so would invoke a fiction not sanctioned by the Act and contrary to the Apex Court's construction. Ratio vs. Obiter: Ratio - the obligation to file a return does not, by itself, initiate proceedings; actual initiation requires issuance of a valid statutory notice or equivalent action by the assessing authority. Conclusion: Since no return was filed and no notice had been issued such that proceedings could be said to be pending as on the cut-off dates, the assessment could not be validated by the Finance Act extensions. Issue 4 - Validity of the Tribunal's conclusion and final result Interpretation and reasoning: Having found the assessment time-barred on the statutory period and that the 2009/2010 extensions do not apply because proceedings were not pending, the Court held that the Appellate Tribunal's decision setting aside the assessment as barred by limitation was correct and not arbitrary. Ratio vs. Obiter: Ratio - where assessment proceedings were not pending as of the dates fixed by later Finance Acts, the Tribunal correctly set aside the assessment as barred by limitation; appellate interference is unwarranted where the Tribunal's conclusion follows statutory construction and binding precedent. Conclusion: The Tribunal's order was upheld; the challenge by revenue failed and the assessment remains barred by limitation.
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