TMI Blog2015 (8) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... as also prejudicial to interest of Revenue, as that was not requirement of section 37 If there was error resulting in revenue losing tax, it would be prejudicial to interests of Revenue Law does not require that order was erroneous for invocation of power under section 37 There was no period of limitation prescribed for exercising power under section 37 In such circumstances, impugned order upheld Appeal dismissed Decided in favour of Revenue. - S. T. Appl. No. 1 of 2012 - - - Dated:- 10-7-2014 - JOSEPH K. M. AND HARILAL K. JJ. M. Gopikrishnan Nambiar, P. Gopinath Menon, P. Benny Thomas, K. John Mathai and Kuryan Thomas for the petitioner. Bobby John Pulikaparambil, Government Pleader, for the respondent. JUDGEMENT The appellant is a registered assessee under the Kerala General Sales Tax Act, Central Sales Tax Act and the Kerala Value Added Tax Act. This case relates to the assessment year 2003-04. The assessment under the Central Sales Tax Act in the year in question was completed on January 24, 2009 fixing the total and taxable turnover of ₹ 19,90,425. Notice dated August 10, 2010 was issued proposing to disallow the claim of stock transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remitting it to the assessing authority for reassessment based on the subsequent materials? (IV) While the reassessment proceeding by the assessing authority are pending vide annexures 2 and 3 notices, has the Commissioner of Commercial Taxes not erred in invoking suo motu proceedings regarding the very same issue and based on the very same material relied on in the reassessment proceedings? Is this not bad for initiation of two parallel proceedings by the Department on the same issue? (V) Can the exemption claimed by the appellant based on valid form F declarations and allowed in annexure 1 assessment order be disallowed based on the subsequent disqualification of the dealer who issued the statutory forms? 3. We have heard the learned counsel for the appellant and learned 3 Government Pleader for the respondent. 4. The learned counsel for the appellant submits that the order of assessment was not erroneous and prejudicial to the interest of Revenue. Based on subsequent material which were not within the knowledge of the assessing authority at the time of completion of the assessment, it is impermissible for the Commissioner to pass annexure VII order. The learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, for the purpose of satisfying himself as to the legality or propriety of such order and may pass such order with respect thereto as he thinks fit. 8. Section 21 of the said Act of course provided powers for reassessment of escaped turnover. In a decision reported in Bismillah Trading Co. v. Intelligence Officer, Squad No. II, Agricultural Income-tax and Sales Tax[2000] 119 STC 558 (Ker);[2001] 248 ITR 292 (Ker), a Division Bench of this court was considering a case under section 45A of the Act which dealt with imposition of penalty. The court took the view that order, which was sought to be interfered with could not be considered to be prejudicial to the interest of the Revenue. The court referred to section 263 of the Income-tax Act and held that the expression erroneous in the provision enabling revision suo motu by the Commissioner refers to an order which has an error or is contrary to law. It is further held that it was necessary that the Commissioner must come to a definite finding that the order is both erroneous as well as prejudicial to the interests of the Revenue. In paragraph 22 of the said decision this court held as follows (page 573 in 119 STC):- 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Commissioner of Sales Tax, U. P., Lucknow[2006] 143 STC 325 (All), a learned single Judge of the Allahabad High Court while dealing with a case under section 10B of the U. P. Trade Tax Act, 1948 took the view that it was not permissible for revising authority to revise the assessment on the basis of the fact that in the income-tax search and seizure the dealer admitted suppression of sale. It was held that subsequent information could not be the basis for the revising authority to revise the assessment order. It was further held that the revisional power could be exercised only to satisfy the revising authority about the legality or correctness of the order passed under the Act on the basis of existing materials and not on the subsequent information or materials. 12. In the decision reported in Malabar Industrial Co. Ltd. v. Commissioner of Income-tax[2000] 243 ITR 83 (SC), the Supreme Court dealt with the meaning of words prejudicial to revenue and held as follows (pages 87 and 88 in 243 ITR):- The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is so offering, the order passed by the assessing officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. Commissioner of Income-tax[1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. Commissioner of Income-tax[1973] 88 HR 323 (SC). 13. The learned Government Pleader draw our attention to the following case law:- In Devidas Kesava Menon v. State of Kerala[1998] 6 KTR 318 (Ker) a Division Bench of this court while dealing with a case where the Commissioner exercised suo motu power of revision under section 35 of the Act held as follows:- 7. Now we will consider the third contention taken by the asses-see that the revisional authority has travelled outside the record of assessment and therefore the revisional order is without jurisdiction. Section 35 as it stood during the relevant period provides that 'the Deputy Commissioner may, of his own motion, call for and examine any order passed or proceedings recorded under this Act by (any officer or authority subordinate to him other than an Appellate Assistant Commissioner) and may make such enquiry or cause such enquiry to be made and, subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eto as he thinks fit. For exercising this power, he may suo motu or on application call for and examine the record of any proceeding or order. There is no doubt that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinised for ascertaining the legality or propriety of an order or regularity of the proceeding. But there is nothing in the Act that for passing an order in exercise of his revisional jurisdiction, if the revising authority is satisfied that the subordinate officer has committed an illegality or impropriety in the order or irregularity in the proceedings, he cannot make or direct any further enquiry ... It is, therefore, not right baldly to propound that in passing an order in the exercise of his revisional jurisdiction, the Deputy Commissioner must in all cases be restricted to the record maintained by the officer subordinate to him, and can never make enquiry outside that record .. . Jurisdiction to revise the order or proceeding of a subordinate officer has to be exercised for the purpose of rectifying any illegality or impropriety of the order or irregularity in the proceeding. The limitations to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed or proceeding recorded under this Act by any officer or authority, subordinate to it other than an Appellate Assistant Commissioner which in his opinion is prejudicial to revenue and may make such enquiry or cause such enquiry to be made and subject to the provisions of this Act may pass such order thereon as it thinks fit. (2) The Board of Revenue shall not pass any order under subsection (1) if:- (a) the time for appeal against that order has not expired; (b) the order has been made the subject-matter of an appeal to the Appellate Assistant Commissioner or the Appellate Tribunal or of a revision in the High Court; or (c) more than four years have expired after the passing of the order referred to therein. (2A) Notwithstanding anything contained in sub-section (2), the Board of Revenue may pass an order under sub-section (1) on any point which has not been decided in an appeal or revision referred to in clause (b) of sub-section (2), before the expiry of a period of one year from the date of the order in such appeal or revision or before the expiry of a period of four years referred in clause (c) of that subsection. whichever is later. (3) No order und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest of the Revenue. Here again we must notice that the apex court made the above observation under section 263 of the Income-tax Act which requires both that the order must contain an error and that it must be prejudicial to the interests of the Revenue. The apex court also noticed that the view of the Madras High Court that there must be grievous error in the order passed by the Income-tax Officer which might set a bad trend or pattern for similar assessments which, on a broad reckoning, the Commissioner might think to be prejudicial to the revenue administration was too narrow to merit acceptance. It was the duty of the revenue to levy and collect tax in accordance with the Act. If there is an error resulting in revenue losing tax, it would be prejudicial to the interests of the Revenue, which was held. 19. As far as section 37 of the Act is concerned, it is not necessary to show that the order was erroneous. It suffices, if the order is prejudicial to the interest of the Revenue. The following decisions are relied by the State for the proposition that the court should not interfere in matters v/here related administration of factual aspect:- Commissioner of Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said F forms were issued and were acted upon by the assessing officer. According to the revenue, subsequently it is understood that F forms had been invalidated. This is on the basis of the communication dated June 7, 2004 received from the Commercial Tax Officer, Avinashi, Tamil Nadu, wherein they informed that F forms issued to M/s. Sakthi Murugan Trading Company are invalidated. It is on the said basis that the order is sought to be revised under section 37 of the Act. The assessment was completed by order dated January 24, 2009, which was subsequent to the invalidation of the F forms being intimated is the finding of the Commissioner. This is not a case where at the time of the transaction entered into the F form was valid as per intimation subsequently received and it was cancelled subsequently and the case of the revenue, on the other hand, is that the invalidation was there at the point of issue and the information was received only subsequently. Apart from the fact that sum involved is a large sum, the principle involved is also one which affects the revenue. We do not think that the words prejudicial to the interests of the Revenue should be interpreted in a pedantic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no period of limitation. 26. In answer to the same, learned counsel for the appellant would submit that even if there is no period within which the original assessment to be completed, it must be completed within a reasonable period of time. Assessment in this case relates to the year 2003-04. The provisions under rule 6(7) provide an ample indication that at any rate the assessment must be completed at least within a period provided for reopening of the assessment. 27. The learned Government Pleader would respond to the same by contending that in so far as there is no provision prescribing limitation for the original assessment, the period of limitation for re-opening the assessment can have no operation in regard to the original assessment. 28. We are of the view that, the appeal is filed against the order which is issued under section 37 of the Act. There is a period of limitation prescribed for exercising the power under section 37. That period is not transgressed. In such circumstances, we are of the opinion that we need not consider the contention of the appellant. 29. Resultantly, while upholding the impugned order, we make it clear that the appellant will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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