2025 (5) TMI 851 - HC - VAT / Sales Tax

Challnege to revisional order passed by the Commissioner of Taxes under the TVAT Act 2004 for the assessment years 2014-15 2015-16 2016-17 and 2017-18 (up to June 2017) - reopening of assessment for the year 2014-15 beyond five years without issuance of notice under Section 31(1) of the TVAT Act 2004 - HELD THAT - The petitioner has been able to make out sufficient grounds to interfere in the matter. The Revisional Authority has also failed to decide the question of law which was raised in the revision petition i.e. determination of a fresh turnover beyond the returns without rejection of the returns of the petitioner for the above periods April to June 2017 or reflecting any exercise as to whether the turnover was increased relying on the same materials produced by the Assessee along with his returns. The assessment order dated 29th July 2019 does not reflect any exercise undertaken or any material relied upon to undertake the best judgment assessment for the financial year 2017-18. The matter therefore requires to be remanded for a fresh assessment for the relevant year 2017-18 including on the question of penalty. Petitioner has not been able to dispute that notices for assessment proceedings for the relevant year 2017-18 were issued on 13.02.2019 which was well within the period of five years prescribed for assessment under Section 33 of the TVAT Act. Conclusion - The common impugned revisional order dated 15th October 2022 is set aside so far as it relates to tax periods 2014-15 2015-16 and 2016-17 whereas the same stands interfered to the extent that the matter is remanded to the Assessing Authority for carrying out a fresh assessment proceeding for the year 2017-18 tax periods April to June 2017 in accordance with law. Petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the revisional order dated 15th October, 2022 passed by the Commissioner of Taxes under the TVAT Act, 2004 is sustainable in law for the assessment years 2014-15, 2015-16, 2016-17 and 2017-18 (up to June 2017).

- Whether the assessment for the year 2014-15 can be reopened beyond five years without issuance of notice under Section 31(1) of the TVAT Act, 2004.

- Whether the remand of the matters relating to imposition of penalty for assessment years 2015-16 and 2016-17 after due notice is necessary or a futile exercise, given that the tax liability including penalty has already been deposited.

- Whether the determination of turnover by the Assessing Authority for the period April to June 2017 (assessment year 2017-18) without rejecting the returns filed by the petitioner and without conducting a best judgment assessment is legally sustainable.

- Whether penalty imposition under Sections 25(4)(d) and 75A of the TVAT Act, 2004 for delay in filing returns and tax evasion without issuance of proper notice is valid.

- Whether the revisional authority failed to consider the legal pleas raised by the petitioner regarding turnover determination and penalty imposition for the assessment year 2017-18.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Reopening of assessment for 2014-15 beyond five years without notice under Section 31(1)

Legal Framework and Precedents: Section 33 of the TVAT Act, 2004 prohibits assessment after five years from the end of the tax period unless prosecution proceedings have been initiated. Section 31(1) requires issuance of notice before assessment. The Apex Court decision in Superintending Engineer/Dehar Power House Circle Bhakra Beas Management Board v. Excise and Taxation Officer was relied upon for condonation of delay in filing revision petition but also underscored procedural compliance.

Court's Reasoning: It was established on record and admitted by the revenue that no notice under Section 31(1) was issued for the 2014-15 tax period. The common assessment order dated 29th July, 2019, which covered 2014-15 to 2017-18, erroneously assessed the 2014-15 period without issuing the requisite notice. Since more than five years had elapsed, reopening the assessment for 2014-15 was barred by Section 33.

Application of Law to Facts: The petitioner's return for 2014-15 was accepted with nil tax liability. The revisional order remanding the matter for fresh assessment for 2014-15 was thus unsustainable in law and set aside.

Conclusion: The assessment for 2014-15 cannot be reopened beyond five years without notice. The revisional order for this year is quashed.

Issue 2: Remand for penalty imposition for 2015-16 and 2016-17 after due notice where tax liability including penalty is paid

Legal Framework: Section 25(4)(d) of the TVAT Act empowers imposition of penalty for delay in furnishing proof of payment along with returns. The revisional authority remanded the penalty imposition for these years for fresh consideration after due notice.

Court's Reasoning: Both parties agreed that the total tax liability, including interest and penalty, has been deposited by the petitioner for these years. The Court held that remanding the matter for penalty imposition after notice would be a meaningless exercise.

Application of Law to Facts: Since the tax and penalty were paid, further proceedings on penalty imposition would not serve any purpose. Hence, the revisional order remanding these years was set aside.

Conclusion: The revisional order for 2015-16 and 2016-17 is set aside, and no further remand on penalty imposition is warranted.

Issue 3: Determination of turnover for 2017-18 (April-June 2017) without rejection of returns or best judgment assessment

Legal Framework and Precedents: Section 31(1) requires notice for assessment. The Apex Court decision in Commissioner of Sales Tax, Madhya Pradesh v. M/S. H.M. Esufali elucidates the distinction between assessment based on accepted accounts and best judgment assessment when accounts are rejected. Best judgment assessment requires the assessing authority to discard the accounts as unreliable and then estimate turnover on a rational basis with nexus to facts.

Court's Interpretation and Reasoning: The Assessing Authority passed a common assessment order dated 29th July, 2019 accepting the returns for April to June 2017 but simultaneously determined an enhanced turnover of Rs. 11,88,90,541/- without rejecting the returns or conducting a best judgment assessment. No materials or exercise justifying this enhanced turnover were reflected in the order. The revisional authority failed to address this legal plea raised by the petitioner.

Application of Law to Facts: Since the returns were not rejected, the Assessing Authority could not have determined turnover beyond the returns without conducting a best judgment assessment supported by relevant material. The absence of such exercise rendered the enhanced turnover determination unsustainable.

Treatment of Competing Arguments: The revenue could not demonstrate rejection of returns or any best judgment exercise. The petitioner's plea on this point was ignored by the revisional authority, which the Court found erroneous.

Conclusion: The matter requires remand for fresh assessment for 2017-18 (April-June 2017) including reconsideration of turnover determination in accordance with law.

Issue 4: Imposition of penalty under Sections 25(4)(d) and 75A without issuance of notice

Legal Framework: Section 25(4)(d) penalizes delay in furnishing proof of payment with returns after tax payment. Section 75A penalizes evasion of tax with penalty up to one and a half times the tax amount or minimum 10%, but mandates reasonable opportunity of hearing before imposition.

Court's Reasoning: The Assessing Authority imposed penalties under these sections for delay in filing returns and tax evasion without issuing separate notices to the petitioner. The revisional authority remanded the matter only on the question of penalty imposition after due notice but failed to consider the petitioner's plea that penalty imposition itself was unsustainable without notice.

Application of Law to Facts: Since no notice was issued before penalty imposition, the penalty orders are liable to be reconsidered after issuance of proper notice and opportunity of hearing.

Conclusion: The penalty imposition under Sections 25(4)(d) and 75A requires fresh consideration after due notice and hearing.

3. SIGNIFICANT HOLDINGS

- "If the Assessing Authority had not issued any notice before proceeding for assessment for the relevant year 2014-15 and had erroneously assessed the tax returns for the said period by the common impugned order dated 29th July, 2019, the same cannot be reopened on the basis of revisional order dated 15th October, 2022 as it would be barred beyond five years from the relevant date of the tax period 2014-2015."

- "Since the total tax liability including penalty for the assessment years 2015-16 and 2016-17 has been deposited by the petitioner, the order of remand for imposition of penalty after fresh service of notice would be a meaningless exercise and requires interference."

- "The assessment order dated 29th July, 2019 does not reflect any exercise undertaken or any material relied upon to undertake the best judgment assessment for the financial year 2017-18. The matter therefore requires to be remanded for a fresh assessment for the relevant year 2017-18 including on the question of penalty."

- "No order under Section 75A shall be made unless the dealer has been heard or has been given a reasonable opportunity of being heard."

- The Court relied on the principle from the Apex Court decision that "when the assessing officer comes to the conclusion that no reliance can be placed on the accounts maintained by the assessee, he proceeds to assess the assessee on the basis of his 'best-judgment' ... The assessments made on the basis of assessee's accounts and those made on 'best-judgment' basis are totally different types of assessments."

- "If the returns filed by the assessee are not rejected, the assessing authority cannot determine turnover beyond the returns without conducting a best judgment assessment supported by relevant materials."

Final Determinations:

- The revisional order dated 15th October, 2022 is set aside insofar as it relates to assessment years 2014-15, 2015-16 and 2016-17.

- The revisional order is interfered with to the extent that the matter relating to assessment year 2017-18 (April to June 2017) is remanded to the Assessing Authority for fresh assessment including reconsideration of turnover and penalty imposition in accordance with law.