TMI Blog2003 (4) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... ct when the assessing officer himself detects evasion of tax in the original assessment, in exercise of his power under section 19(1) of the Act or when the Deputy Commissioner in exercise of suo motu revisional power under section 35 of the Act passes orders directing revision of assessment. Besides these two situations proviso to section 17(4) of the Act itself provides for scrutiny of assessments at random completed under section 17(4) of the Act. The scheme of section 17(5A) is levy of penalty consequent on revision of every assessment originally completed under section 17(4) and such penalty is automatic and is irrespective of the provision of the Act under which original assessment is revised. Eventhough revision of assessment and consequent penalty after original assessment under section 17(4) are possible under the three provisions referred above, in the cases of the petitioners in this Court, the revised assessments are issued by the assessing officer after detection of evasion of tax on the basis of some material or other under section 19(1) of the Act. The petitioners have also filed appeals against the revised assessments under which penalty under section 17(5A) was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any limit in turnover and assess the dealer on the basis of such return: Provided that every year out of the assessments relating to the preceding year to be completed under this sub-section, the Board of Revenue may select twenty per cent by random sampling for detailed scrutiny of the accounts and other records and if the dealer is found to have not accounted any purchases or sales or otherwise attempt to evade payment of tax, the previous five years assessments' of the dealer may be reopened and escaped turnover shall be assessed or levy of tax be made after following the procedure prescribed in subsection (3) of section 17 and the limitation prescribed under any of the provisions shall not apply to such cases. Provided further that where the return filed by any dealer falling under any of the categories referred to in this sub-section is not accompanied by any statement required by this Act or the rules made thereunder in support of any claim or exemption from, or reduction in, the rate of tax, the assessing authority shall, after due notice to the dealer, complete the assessment on the basis of the turnover conceded in the return, disallowing the claim for such exemption o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by filing statements prescribed, that is form No. 21CC with required documents attached thereto. In fact sub-rules (1B) and (1C) of rule 18A which provided for the filing of application for permission for filing of returns for assessment under section 17(4) and the assessing officer granting approval in the year itself, were omitted. Consequently, assessees could by filing form No. 21CC in pending assessments exercise option for assessment under section 17(4) and if the officer accepts it, he has to issue assessment order in the very same form itself that is form No. 21CC as provided under sub-rule (1D) of rule 18A or if the officer does not accept it, he can reject the request under rule 18A(2). Therefore the penalty provision, namely, section 17(5A) introduced from April 1, 1998 applies to assessments of earlier years, that is for the years prior to 1998-99 also, if those assessments were pending and assessees filed declarations in form No. 21CC with documents accompanied thereto and opted for assessment under section 17(4) after April 1, 1998, and when such assessments completed under section 17(4) are revised leading to levy of higher amount of tax. Though the petitioners co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout scrutiny, but after prima facie checking the returns and documents furnished by the petitioners. The accounts are not called for, for verification and the officer accepts the claims of the assessees made in the returns at the time of completion of assessment under section 17(4) of the Act. This class of assessees cannot be treated equally with other assessees who leave it to the officers to complete the assessment by scrutiny of the accounts and detailed examination of the claims made in the returns. So far as the assessees who do not opt for assessment under section 17(4) are concerned, it is the responsibility of the assessing officer to scrutinise the returns of those assessees, compare the figures declared with reference to the bookresults by scrutiny of the books of accounts, and to complete the assessment in accordance with statutory provisions by issuing notice under section 17(3) containing proposals for assessment even by rejecting the turnover declared and claims made by the assessee, and to make a proper assessment to protect the interests of the Revenue after giving opportunity to the assessee. On the other hand in the assessment contemplated under section 17(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se such an option. It is to be noted that the assessment order under section 17(4) itself is issued in the copy of the form No. 21CC furnished by the assessee as provided under rule 18(1D) of the Kerala General Sales Tax Rules. I make it clear that penalty levied under section 17(5A) in cases where original assessments are completed under section 17(4) without the assessees opted for it by filing form No. 21CC but completed by the officers following the circulars above referred are illegal and the assessing officers shall revoke such penalty orders. In the result, I hold that the petitioners who have exercised option under section 17(4) that is assessment based on the returns and statements filed by them constitute a different class from the other assessees, whose assessments were completed after verification of accounts and after following the procedure prescribed under section 17(2) or (3) of the Act. While in the case of those who opt for section 17(4) assessments the assessees have to be careful in regard to their returns and statements filed in support thereof, because the assessing officer acts upon such declarations, while in the case of other assessee, it is for the officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial tax. Therefore the penalty under section 17(5A) is a statutory offence created without the requirement of mens rea loaded therein. However, it has to be noted that section 17(5A) operates in the reverse direction also because as and when reassessment is cancelled or modified the penalty automatically gets cancelled or reduced. Therefore it is not as if the assessee is without a remedy. If revised demand of tax contested in appeal is cancelled or reduced penalty levied under section 17(5A) also goes along with the tax and there is no need to independently contest the levy of penalty. However, so far as the penalty levied under section 45A is concerned, it is an independent proceedings and the reduction of tax assessed in appeal will not automatically lead to cancellation of penalty, but penalty has to be independently contested in revision before the revisional authorities. Though both the penalties under section 17(5A) and section 45A are for evasion of tax, they apply differently and one cannot be equated with the other in all respects. Therefore the contest against the validity of section 17(5A) as arbitrary for want of requirement of mens rea as in section 45A is devoid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is immaterial whether reassessment is completed under section 19(1) or reassessment as a scrutiny case under proviso to section 17(4) or even a reassessment pursuant to directions issued under section 35. In this view of the matter, the petitioners' contention that section 17(5A) cannot be applied to an assessment under section 19(1) is without substance and is also rejected. 9.. Eventhough section 17(5A) does not suffer from the infirmities pointed out by the petitioners, I feel there are inherent infirmities in the orders issued under section 17(5A) and challenged in these cases. In the first place, section 17(4) originally provided a bar against assessment for any assessee for the year during which there was either levy of penalty or payment of compounding fee. However, this was removed by an amendment making those assessees on whom penalty was levied or who have paid compounding fee also eligible for assessment under section 17(4). This amendment clearly presupposes that any assessee who files form No. 21CC under rule 18A(1A) with supporting documents opting for assessment under section 17(4) after being subjected to penalty or compounding fee should be deemed to have inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment based on form No. 21CC and the documents attached thereto. It is quite possible that tax returned by the assessee may not be correct on account of mistake committed by the assessee in making a wrong claim of exemption or on account of mis-classification of goods claiming exemption or remitting tax at lower rate than applicable. These are matters on which the assessing officer should request the assessee to make correction after prima facie scrutiny based on form No. 21CC and the documents attached thereto and if there is any mistake in this regard regarding exemption wrongly claimed, or the rate of tax not correctly applied which the Officer could have detected at the time of assessment under section 17(4) after scrutiny of form No. 21CC along with the supporting documents, the same will not justify a penalty under section 17(5A). The assessment under section 17(4) though means an assessment in terms of returns and statement of the assessee has to be consistent with the statute and the assessing officer has to scrutinise form No. 21CC and make up for omissions and mistakes with the consent of the assessee and the assessee cannot be penalised for the omissions of the Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evised assessments-cum-penalty orders in the light of the above observations and following the specific directions given below within a period of two months from the date of receipt of a copy of this judgment, which will be produced by the petitioners, as soon as the same is received from this Court. 1.. The penalty levied under section 17(5A) should be revoked in cases- (a) Where the assessees have not opted for assessment under section 17(4) by filing form No. 21CC but assessments were completed by the assessing officers following the circulars, 28 of 1995 and 30 of 1999 issued by the Commissioner of Commercial Taxes. (b) Where reassessments were completed under section 19(1) by making additions merely based on penalty levied or compounding fee paid, prior to filing of form No. 21CC and completion of assessment under section 17(4) based on it. (c) Where reassessments are completed merely based on checkpost entries or transport documents obtained from check-posts regarding transport of goods in the name of the assessees, which are denied by the assessees and not established by tracing transporter or consignor in terms of section 30B(4) of the Act. (d) Where tax demanded un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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