2025 (10) TMI 548 - HC - VAT / Sales Tax

Assessment and penalty set aside against deceased; proceedings may continue against class-I heirs under Section 23, Section 21(5) undecided

Smt. Raavi Praveena, W/o. Late Sri Raavi Satish (Proprietor of M/s. Ramanjaneya Stone Crusher Versus The Commercial Tax Officer-II, Anantapuramu, The State of Andhra Pradesh,

HC set aside the assessment (26.03.2020) and penalty (18.11.2020) because proceedings could not be initiated or continued against the deceased person. The ... Recovery of tax amounts, from the late husband of the petitioner - the late husband of the petitioner had passed away in the year 2017 much prior to the initiation of the assessment or penalty proceedings - willful default or willful suppression of fact which is the basis for revoking Section 24(5) of the A.P VAT Act, present or not - HELD THAT:- Section 21(5) of A.P VAT Act extends the period of four years for passing assessment orders to a period of six years. In the event of Section 21(5) being applied, the order of assessment and penalty would be within limitation. However, Section 21(5) stipulates that the said provision would be available where there is a willful evasion of tax committed by the dealer. The question that would arise is whether such a provision can be invoked without specifically mentioning the fact that there was willful evasion of tax by a dealer. The further question is whether the aid of such a provision can be taken without any mention being made either in the assessment order or in the show cause notice that the extended period of limitation was being applied. This issue had come up before a Division Bench of the erstwhile High Court of Andhra Pradesh in the case of K.G.F. Cottons (P.) Ltd. Vs. Asst. Commissioner (CT) LTU [2015 (5) TMI 804 - ANDHRA PRADESH HIGH COURT]. A Division Bench of the erstwhile High Court of Andhra Pradesh after an extensive review of the facts and law had summarized their conclusions in paragraph-111 of the said judgment. The Division Bench had held that 'As the fact of commission of willful evasion is a jurisdictional fact, the dealer is entitled to satisfy the prescribed authority, on being given the opportunity to show cause, that such jurisdictional facts are nonexistent, and jurisdiction under Section 21(5) of the Act should not be exercised. It is necessary, therefore, for the prescribed authority to detail these jurisdictional facts in the show-cause notice proposing to assess the dealer to tax under Section 21(5) of the Act.' It is not proposed to go into the question of whether the said provision would be applicable inasmuch as these writ petitions are being disposed of on another ground and any finding by this Court, on this issue, could affect the disposal of the assessment proceedings before the assessing authority. In view of the fact that the proceedings could not have been initiated or continued against a dead person, both the order of assessment as well as the order of penalty would have to be set aside. However, by virtue of Section 23 of the A.P VAT Act, the said proceedings can be continued against the petitioner herein and such other legal representatives who would be class-I heirs of the deceased husband of the petitioner, under the provisions of the Hindu Succession Act, 1956. These Writ Petitions are allowed setting aside the order of assessment, dated 26.03.2020, and order of penalty, dated 18.11.2020, and the matters are remanded back to the assessing authority for completing the assessment and penalty proceedings, if any, in accordance with law - Petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether assessment and penalty proceedings initiated and concluded against a deceased dealer, without bringing legal representatives into the proceedings, are valid. 2. Whether assessment and penalty orders passed beyond the statutory limitation under Section 21(3) of the A.P. VAT Act can be sustained by invoking extended limitation under Section 21(5) where the assessment or notice does not expressly allege 'willful evasion' or refer to Section 21(5). ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of proceedings and orders against a deceased dealer where legal representatives were not made parties Legal framework: Section 23 of the A.P. VAT Act makes the executor, administrator, successor in title or other legal representative of a deceased dealer liable to submit returns, be assessed under Section 21, and to pay tax, interest and penalties out of the estate; appeals and revisions are to apply as if the legal representative were the dealer. Precedent Treatment: The common law principle that proceedings cannot be validly initiated against a dead person is recognized and can be extended to tax proceedings; the Court relies on this settled principle as background. Interpretation and reasoning: The Court finds that common-law principle applies to tax proceedings and that Section 23 supplies the statutory mechanism for continuing assessment, appeal and revision in relation to a deceased dealer by involving legal representatives. Where proceedings have been initiated or concluded against a deceased person without giving notice to or involving the legal representative(s), such proceedings are procedurally improper because the statutory scheme contemplates continuation only through the legal representatives. The petitioner (as spouse and class-I heir) falls squarely within persons who can represent the deceased dealer's estate under Section 23. Ratio vs. Obiter: Ratio - Proceedings and orders in assessment and penalty passed against a deceased dealer, without notice to or participation by the legal representative(s) contemplated under Section 23, are invalid and must be set aside. This is the operative legal principle applied to dispose of the writ petitions. Conclusion: The assessment order dated 26.03.2020 and the penalty order dated 18.11.2020, having been passed against a deceased dealer without involving the legal representative(s), are set aside. The matters are remanded to the assessing authority to complete assessment and penalty proceedings in accordance with law after due notice and opportunity to the legal representative(s) (including class-I heirs) is given. Issue 2: Applicability of extended limitation under Section 21(5) where show-cause notice/order do not explicitly plead 'willful evasion' or refer to Section 21(5) Legal framework: Section 21(3) prescribes a four-year limitation for assessment from the due date or date of filing of returns computed monthly; Section 21(5) extends limitation to six years where there is willful evasion of tax by the dealer. Precedent Treatment: The Court cites and summarizes a Division Bench decision of the erstwhile High Court (K.G.F. Cottons (P.) Ltd. v. Asst. Commissioner), which held: (i) jurisdiction under Section 21(5) arises only if willful evasion is committed; (ii) the show-cause notice must contain factual particulars enabling the dealer to meet the allegation of willful evasion; (iii) a notice cannot first raise willful evasion only in the assessment order; and (iv) if the show-cause notice's factual allegations, if accepted, demonstrate willful evasion then extension may be justified even where Section 21(5) is not expressly cited. Interpretation and reasoning: The Court acknowledges the principles summarized from the Division Bench decision and frames the central questions: whether Section 21(5) can be invoked without specifically mentioning willful evasion or Section 21(5) in the notice or order, and whether the extended period can be relied upon where the show-cause notice does not delineate jurisdictional facts of willful evasion. The Court, however, refrains from adjudicating this issue on the merits in the present petitions so as not to preclude fresh consideration by the assessing authority or affect ongoing proceedings; the petitions are disposed on the separate ground of proceedings against a deceased person. Thus the Court consciously avoids pronouncing a binding view on the applicability of Section 21(5) in the factual matrix before it. Ratio vs. Obiter: Obiter - The Court's discussion of Section 21(5) and the cited Division Bench guidance is persuasive but not decisive in the present disposal; the Court explicitly declines to decide the applicability of Section 21(5) so as not to prejudice the remanded proceedings. Conclusion: No adjudication is made on whether the extended limitation under Section 21(5) was properly invoked; that issue is left to the assessing authority to consider afresh in the remanded proceedings with reference to applicable legal principles (including those summarized from the Division Bench decision). The Court's decision to remand is without prejudice to the assessing authority's lawful exercise of jurisdiction after giving appropriate notice to and opportunity for the legal representative(s) to be heard. Remedy and consequential directions Because proceedings and orders were concluded against a deceased dealer without involving legal representatives, the Court sets aside the assessment and penalty orders and remands the matters for fresh completion in accordance with law, directing that the assessing authority give due notice and opportunity to the petitioner and any other class-I heirs who choose to appear. There is no order as to costs.