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TMI Blog2016 (10) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the Deputy Commissioner under section 25B of the Act to extend the time for completing the assessment beyond the period specified under Section 25(1) and whether penalty proceedings could be taken against an assessee beyond the period specified under section 67(1) read with section 25(1) of the Act, or under section 45A read with section 19(1) of the Kerala General Sales Tax Act, 1963 (hereinafter referred as the KGST Act). 2. The cases on hand can be categorised under different groups for an easy analysis of the facts and disputed questions. GROUP-A. These are cases wherein the contention urged is that the notice for assessment or assessment orders passed under section 25(1) are barred by limitation. (1) In W.P.(C) No.10979/2014, Ext.P6 is the assessment order dated 28.3.2014, which is rectified as per Ext.P6A order. The notice under section 25(1) is issued on 28/3/2014 in respect of assessment year 2005-2006. (2) In W.P.(C) No.27736/2014, Ext.P2 is the assessment order dated 31/7/2014. The notice under section 25(1) is issued on 14/7/2014 in respect of assessment year 2006-2007. (3) In W.P.(C) No.1489/2015, Ext.P5 is the assessment order dated 19/8/2014. The notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner challenges Ext.P4 order of assessment dated 15/3/2016 in respect of assessment year 2009-2010. The pre-assessment notice was issued on 5/2/2016. (14) In WP(C) No. 14426/2016, Ext.P3 is the assessment order dated 19/3/2016 in respect of assessment year 2009-10. Pre-assessment notice was issued only on 14/01/2016. (15) In WP(C) No.14600/2016, Ext.P5 is the assessment order dated 25/2/2016 in respect of assessment year 2007-08. The facts of the case would disclose that best judgment assessment was completed for the year 2007-08 on 31/12/2013. The petitioner preferred an appeal as KVAT Appeal No.1060/2014. In the meantime, on 18/10/2014, another pre-assessment notice for best judgment for the same assessment year was issued. Petitioner challenged the same by filing WP(C) No. 28422/2014. However, the respondent finalised the second best judgment assessment on 30/10/2014. The assessment order was challenged by amending WP(C) No. 28422/14 in which further proceedings were stayed. Petitioner was served with another notice dated 13/2/2015 under Section 25(1) of the Act proposing to reopen the assessment for the year 2007-08. While matters stood thus, on 5/2/2016, notice was is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, time is required for completing the assessment and if hasty steps are taken, it would be harmful to the revenue as well as to the assessee. It is further observed that the enquiry based on the offence detected is still pending and it is not possible to be done before 31/3/2014. The assessment is with reference to the assessment year 2007-08. (2) In W.P.(C) No.17769/2015, Ext.P3 is the assessment order dated 21/3/2015. The notice under section 25(1) is issued on 2/3/2015 in respect of assessment year 2006-2007. It is stated that the Deputy Commisssioner has extended the time upto 31/3/2015 as per Ext.P4 dated 28.3.2014. (3) In WP(C) No. 21230/2015, Ext.P2 is the order of assessment dated 20/5/2015. The date of issuance of the order is not clear. However, it is stated that notice was served on the dealer on 25/4/2015 in relation to assessment year 2007-08. Petitioner is served with Ext.P3 order dated 23/9/2014 by which it is stated that the Deputy Commissioner had extended the time invoking Section 25B of the Act. In Ext.P3, it is observed that the period for completing assessments had been extended upto 31st March, 2014 as per the proviso to Section 25(1) and on the reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner extending the time for completing the assessment under Section 25B for the year 2006-07 for six months till 31/3/2015 and by Ext.P14, the period was extended upto 31/3/2016. (10) In W.P.(C) No. 26723/2016, petitioner challenges Ext.P1 order dated 31/3/2016 issued by the Deputy Commissioner extending the period of completion of assessment for the years 2005-2006 and 2006-2007 upto 31/3/2017 and Ext.P2 assessment order dated 15/7/2016. It is contended that the preassessment notice under section 25(1) was served on the assessee only on 6/6/2016. GROUP-C: [W.P.(C) Nos. 12708, 12716, 12717, 12723, 12725, 17390, 17392, 17393, 17394, 17398, 17399, 17400, 17428, 18403, 18405, 19472, 19492, 19493, 23170 & 23185/2016]. These are cases in which orders are passed by the Deputy Commissioner under Section 25B of the KVAT Act. Petitioners challenge those orders inter alia contending that the power under section 25B cannot be exercised beyond the period of limitation. In some of the cases, the impugned orders are challenged in part only. GROUP-D: In this case, penalty orders are under challenge. In WP(C) No. 12066/2015, petitioner challenges Ext.P4 series of penalty orders issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of limitation specified under section 25(1). The Deputy Commissioner has extended the time for completion of assessment upto 31/3/2016 as per order dated 19/3/2015 in terms of section 25B, which acccording to the petitioner is beyond the period of limitation. (2) In W.P.(C) No.13183/2016, Exts.P1 and P1(a) are under challenge. Ext.P1 is an order passed on 31/10/2015 in respect of assessment year 2008-2009. Proceedings were taken under section 8 read with 25A of the Act. Ext.P1(a) is the penalty order issued in respect of assessment year 2008-2009 by issuing notice on 14/10/2015. The contention is that both the orders have been initiated beyond the period prescribed under section 25(1) of the Act. 3. Section 25(1) reads as under: "25. Assessment of escaped turnover.-(1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been underassessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made there from, or where any input tax credit has been wrongly availed of, the assessing authority may, at any time within five years from the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the years up to 2007-08 under this section shall be extended upto 31st March, 2013." Kerala Finance Act, 2013 In section 25(1), for the third proviso, the following proviso was substituted: "Provided also that the assessments pending as on 31st March, 2013 under this section shall be completed on or before 31st March, 2014." Kerala Finance Act, 2015 In section 25(1), for the third proviso, the following proviso was substituted : "Provided also that the period for the completion of assessments including those subjected to extension under section 25B which expires on 31st March, 2015, shall be extended up to 31st March, 2016." Provisos virtually extends the period for completing assessments under section 25(1), upto 31/3/2011 in respect of assessment year 2005-06, upto 31/3/2012, in respect of assessment years 2005-06 and 2006-07, upto 31/3/2013 in respect of assessment year 2007-08, which was extended to 31/3/2014 and upto 31/3/2016 for the completion of assessments including those subjected to extension under section 25B which expires on 31//2015. Section 25(5) indicates that in computing the period of limitation, for the purpose of the section, the time during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention urged by the State is that, by way of successive amendments made to the Finance Act, provisos had been incorporated from time to time extending the period of limitation by one year which permits extension of period for completing the assessment. The contention is that when time is extended to complete the assessment, virtually it includes a right to issue notice under Section 25(1) as well. Further section 25B of the Act gives power to the Deputy Commissioner to extend the period of limitation on certain eventualities and once such a power is exercised, it is not open for judicial review. 8. Heard the learned counsel appearing for the petitioners and the learned Government Pleader appearing on behalf of the State and its authorities. 9. The main contention urged by the petitioners is with reference to judgment of the Apex Court in State of Punjab v. Shreyans Industries Ltd.[(2016) 4 SCC 769] wherein the Apex Court while considering the provisions under the Punjab General Sales Tax Act, 1948, (hereinafter referred as the Punjab Act) held that in the context of the Punjab Act, it can be said that the extension of time for assessment has the effect of enlarging the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings have to be initiated by the issuance of notice within the period prescribed in section 19 of the KGST Act. Further, the Division Bench proceeded to consider the scope of the 3rd proviso to sub section (1) of section 25 incorporated as per Kerala Finance Act, 2010 and later by Kerala Finance Act, 2011. It was held that the net effect of the introduction of the 3rd proviso to Sub section (1) of section 25 and the inclusion of section 25 within the canopy of section 25B is indicative of the fact that for all intents and purposes, the legislature fixed an outer time limit for completion of assessment proceedings under sub section (1) of section 25 at least in cases to which the provision in Section 25 (1) as amended by the Kerala Finance Act, 2010 and the later amendments sustaining that provision or conferring power of enlargement of time applies. (ii) State of Kerala v. Abhilash T.Mathew (2013 (1) KLT S.N.119). It was held that the prescription of period of limitation result in rights accrued to the assessee, by passage of the prescribed period, which cannot be disturbed without hearing the assessee. One of the questions considered was whether the Deputy Commissioner could exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny time within three years next succeeding that to which the tax or licence fee relates determine to the best of his judgment the turnover which has escaped assessment and assess the tax payable or levy the licence fee in such turnover after issuing a notice to the dealer or licensee and after making such enquiry as he considers necessary." Now in view of the previous decisions the principle is firmly established that assessment proceedings under the Sales Tax Act must be held to be pending from the time the proceedings are initiated until they are terminated by a final order of assessment. The distinguishing feature on which emphasis has been laid by the counsel for the respondent is that the language employed in Rule 33 is such as to lead to only one conclusion that the final determination of the turnover which has escaped assessment and the assessment of the tax have to be done within three years. It is pointed out that in the other sales tax provisions which came up for consideration in the cases mentioned above the words employed were "proceed to assess" e.g., sub-sections (4) and (5) of Section 11 of the Punjab General Sales Tax Act. Our attention has been invited to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (ii) Commissioner of Income Tax. V. T.O.Abraham & Co. (2011(2) KLT SN 117). The question considered was regarding the limitation for completing block assessment under section 158BE of the Income Tax Act, 1961. (iii) R.K.Upadhyaya v. Shanabhai P.Patel [(1987) 3 SCC 96]. In this case, Apex Court considered the question whether service of notice under Section 148(1) of the Income Tax Act, 1961 is a condition precedent to confer jurisdiction on the Income Tax Officer. It was held that once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income Tax Officer to proceed to reassess. It was held that issuance of notice within the period of limitation under Section 149(1) by itself was enough and the fact that the assessee had received the notice after the expiry of that period is not relevant. (iv) Grindlays Bank Limited v. Income Tax Officer, Calcutta and Others [(1980) 2 SCC 191]. That was a case arising under the Income Tax Act, 1961 wherein the Apex Court held that when the assessment proceedings remained stayed for over two years by successive court orders, the said period could be excluded while computing the period of limitation and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax authorises the assessing authority to make assessment or reassessment before the expiration of 8 years from the end of such year notwithstanding that such assessment or reassessment may involve a change of opinion. The proviso came into force w.e.f. 19-2-1991. We do not think that sub-section (2) and the proviso added to it leave anyone in doubt that as on the date when the proviso came into force, the Commissioner of Sales Tax could authorise making of assessment or reassessment before the expiration of 8 years from the end of that particular assessment year. It is immaterial if a period for assessment or reassessment under sub-section (2) of Section 21 before the addition of the said proviso had expired. Here, it is the completion of assessment or reassessment under Section 21 which is to be done before the expiration of 8 years of that particular assessment year. Read as it is, these provisions would mean that the assessment for the year 1985-86 could be reopened up to 31-3- 1994. Authorisation by the Commissioner of Sales Tax and completion of assessment or reassessment under sub-section (1) of Section 21 have to be completed within 8 years of the particular assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een exercised, the department was not entitled for the exclusion. (viii) VLS Finance Ltd. v. Commissioner of Income Tax [(2016) 384 ITR 1 (SC)]. This case arises under the Income Tax Act in relation to the limitation provided under 158BE. (ix) Paul Varghese v. State of Kerala [(2005) 13 KTR 29(Ker)]. This is also a case arising under Section 17(6) of the KGST Act. It was held at paras 6, 7 and 8 as under:- "6. The assessment in this case was legally made well before the period of limitation provided under the second proviso to Sec. 17(6) of the Act. The second proviso clearly provided the period of limitation for completion of the assessment for the year 1994-95 as 'on or before 31st March, 2000.' Unlike in the case of enlargement of the period of limitation generally made, in the present case, the legislature has specifically stated that the assessment relating to the year 1994-95 shall be completed on or before 31.3.2000. In view of this special provision regarding the completion of assessment for the year 1994-95 it is not the decision of the Supreme Court in Gadgil's case that is applicable to the present case, but the decisions of the Supreme Court in Commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for completion of the assessment for the year 1994-95 till 31.3.2000. Admittedly, the assessment for the year 1994-95 was completed well before 31.3.2000. Thus by virtue of the second proviso the assessment is well within time. The contention of the assessee, as already noted is that the second proviso added for extending the period of limitation for completion of the assessment for the year 1994-95 did not serve the purpose for the reason that the said proviso was inserted only with effect from 1.4.1999 when the time limit provided under Section 17(6) (unamended) had expired before the said date on 31.3.1999. It s the contention of the assessee that in a case where the assessment is already barred by limitation it cannot be saved by subsequent amendment enlarging the period of limitation thereafter. On the other hand the contention of the State, as already noted, is that the second proviso is inserted solely for the purpose of providing limitation for the completion of assessment for the year 1994-95 and therefore in the absence of a challenge to the said provision as ultravires or unconstitutional the said provision has to be given its full effect, which will clearly save the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the rules provided the assessment has not been made or the order passed more than six years previously. This being the plain meaning, the said Notification must be given full effect. Full effect can be given only if the said Notification is read as being applicable not only to assessments which were incomplete but also to assessments which had reached finality by reason of the earlier prescribed period of four years having elapsed. Where language as unambiguous as this is employed, it must be assumed that the Legislature intended the amended provision to apply even to assessments that had so become final; if the intention was otherwise, the Legislature would have so stated." (xi) Commissioner of Trade Tax v. Lohia Machines Ltd. [(1999) 7 KTR 145 (SC)]. This was also a case where amendment was made to the UP Trade Tax Act enlarging the period of limitation. It was held at para 18 as under:- "18. The two decisions in the cases of Ahmedabad Manufacturing and Calico Printing Co. Ltd. Vs. S.G.Mehta, Income-tax Officer [1963] 48 ITR 154 (SC) and Commercial Tax Officer Vs. Biswanath Jhunjhunwala (1966) 5 SCC 626 are more closer to the issue involved in the present case before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment or reassessment under sub-section (1) of section 21 have to be completed within 8 years of the particular assessment year. Notice to the assessee follows the authorisation by the Commissioner of Sales Tax, its service on the assessee is not a condition precedent to reopen the assessment. It is not disputed that a fiscal statute can have retrospective operation. If we accept the interpretation given by the respondents, the proviso added to sub-section (2) of section 21 of the Act becomes redundant. Commencement of Act can be different that the operation of the Act though sometimes both may be the same. Proviso now added to sub-section (2) of section 21 of the Act does not put any embargo on the Commissioner of Sales Tax not to reopen the assessment if period, as prescribed earlier, had expired before the proviso came into operation. One has to see the language of the provision. If it is clear, it has to be given its full effect. To reasssure oneself, one may go into the intention of the Legislature in enacting such provision. The date of commencement of the proviso to section 21(2) of the Act does not control its retrospective operation. Earlier the assessment/reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, the law provides for self assessment. There is a time limit for rejecting the return and conveying the reasons. The petitioner has shown the rate of tax incorrectly, which amounts to an incorrect return and therefore becomes liable for penalty. (xiii) Commissioner of Income Tax, Patiala v. Shahzada Nand and Sons and Others [1966 (LX) ITR 392]. This case had arisen under the Income Tax Act, 1922. It was held that in a taxing statute, one has to look merely at what is stated and in a case of reasonable doubt, the construction most beneficial to the subject is to be adopted. However, the fundamental rule of construction is the same for all statutes, whether fiscal or otherwise. The underlined principle is that the meaning and intention of the statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the court as to what is just or expedient. The expressed intention must guide the court. That was a case in which the Apex Court considered the amendments made by way of provisos to extend the period of limitation. The Apex Court considered whether legislature by making an amendment to the statute to over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the period of limitation under sub-s. (1)(a), as sub-s. (1A) had become practically defunct. The wide phraseology of sub-s. (1)(a) takes in all the escaped concealed incomes during all the years commencing from 1941 and confers a power of the Income-tax Officer to give notice thereunder in respect of the said incomes without any bar of limitation. There is, therefore, no conflict after April 1, 1956, between sub-s.(1)(a) and sub-s. (1A), as the latter ceased to be operative. There is another way of looking at the problem. Sub-section (1A) does not really prescribe any period of limitation. It enables the Income-tax Officer to take proceedings within a particular time, though period of limitation had expired. In this view, no question of carving out a species out of a genus arises. It conferred a special power on the Income-tax Officer and the said power expired on April 1, 1956. There is yet another way of looking at the problem. The non-obstante clause in sub-s. (1A) indicates that it was enacted to operate notwithstanding that the period of 8 years had expired. The said sub-section served its purpose only when the period of 8 years governed a notice under sub-s. (1)(a). B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a). We have carefully gone through the judgments of the various High Courts, namely Bombay, Madhya Pradesh, Gujarat and Calcutta, cited at the Bar. We received considerable help from the reasonings contained in the said judgments. As we have in the course of the judgment dealt with the conflicting reasons given by the High Courts, we do not think it necessary to consider each of the four judgments in detail. For the reasons mentioned above, we agree with the conclusions arrived at by the Bombay and Calcutta High Courts in preference to those reached by the Madhya Pradesh and Gujarat High Courts. In the result, the order of the High Court is set aside and the petition field under Article 226 of the Constitution is dismissed. The appeals are allowed with costs one hearing fee." (xiv) S.Narayanappa v. Commissioner of Income Tax [(1967) LXIII ITR 219]. This also had arisen under Income Tax Act, 1922. Question was whether there was jurisdiction to issue notice after the four year period specified under 34(1)(a). It was held that proceedings for assessment or reassessment start with the issue of notice and it is only after service of the notice that the assessee becomes a party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed for furnishing the return in respect of such period and after giving the dealer a reasonable opportunity of being heard, pass an order of assessment to the best of his judgment. (6) If upon information which has come into his possession, the assessing authority is satisfied that any dealer has been liable to pay tax under this Act in respect of any period but has failed to apply for registration, the assessing authority shall, within five years after the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed to assess, to the best of his judgment the amount of tax, if any, due from the dealer in respect of such period and all subsequent periods and in case where such dealer has wilfully failed to apply for registration, the assessing authority may direct that the dealer shall pay by way of penalty, in addition to the amount so assessed, a sum not exceeding one-and-a-half times that amount. (7) The amount of any tax, penalty or interest payable under this Act shall be paid by the dealer in the manner prescribed, by such date as may be specified in the notice issued by the assessing authority for the purpose and the date so specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of five years from the last date prescribed for furnishing return and pass an order of assessment to the best of his judgment. Section 11(6) contemplates a penalty procedure. Where the assessing authority comes to a finding that any dealer who is liable to pay tax has failed to apply for registration, he shall, within five years from the date of expiry of prescribed period, after giving the dealer a reasonable opportunity of being heard, proceed to assess to the best of his judgment the amount of tax, if any, due from the dealer. Section 11(10) further gives a power to the Commissioner for reasons to be recorded in writing to extend the period of three years from the order of assessment for such period that he may deem fit. The provisions of the Punjab Act apparently indicate that when a return is filed by the assessee, the assessment is to be made within a period of three years from the last date prescribed for furnishing the return in respect of such period. 13. Now coming to the Scheme of KVAT Act, Chapter V deals with assessment, recovery of tax and penalty. Section 20(1) imposes an obligation on the part of every registered dealer and every dealer liable to be registered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to extend the period of completion of assessment beyond the period specified in Section 24 or 25 in cases where any investigation or inquiry is pending under the Act or any other law or where any assessment cannot be completed, within the period specified under the said sections. The other provisions may not have any relevance and I do not intend to deal with it. 15. There is a marked difference between the Punjab Act and the KVAT Act in respect of assessment. As already indicated, every dealer, either registered or liable to be registered under the Act, is bound to file a return under Section 20 of the KVAT Act. The VAT regime had contemplated a self assessment which indicates that once the return had been submitted under Section 20(1) in the prescribed manner and accompanied by the prescribed documents, the assessment relating to the return period is deemed to have been completed on receipt of such return subject of course to the provisions of Sections 22, 24 and 25. Therefore, the very date of filing proper return on such date as may be prescribed is the date of assessment. However, the assessing authority has a right to reject the return, which procedure is contemplated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to do so. (2) In making an assessment under sub-section (1), the assessing authority may, if it is satisfied that the escape from assessment is due to willful nondisclosure of assessable turnover by the dealer, direct the dealer to pay, in addition to the tax assessed under sub-section (1) a penalty as provided in Section 45A: Provided that no such penalty shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition. Explanation:- Notwithstanding anything contained in the Indian Evidence Act, 1872, the burden of proving that the escape from assessment was not due to willful non-disclosure of assessable turnover by the dealer shall be on the dealer. (3) The powers under sub-section (1) may be exercised by the assessing authority even though the original order of assessment, if any, passed in the matter, has been the subject matter of an appeal or revision. (4) In computing the period of limitation for the purposes of this section, the time during which the proceedings for assessment remained stayed under the orders of a Civil court or other competent authority shall be excluded." 17. Therefore, Sections 25 of KVAT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 25B is indicative of the fact that for all intents and purposes, the legislature fixed an outer time limit for completion of assessment proceedings under section 25(1). In Abhilash T.Mathew (supra), a Division Bench of this Court held that the prescription of period of limitation result in rights accrued to the assessee, by passage of the prescribed period, which cannot be disturbed without hearing the assessee. In regard to the power exercised by the Deputy Commissioner under Section 17(7) of the KGST Act to extend the period of limitation, it was held that the assessments as evident from the substituted provisos should be pending respectively on the specified dates. In Sundaram Iyengar and Sons [(1969) 2 SCC 396], the Apex Court considered as to what is the meaning of the words "proceed to assess and determine" and held that assessment is a comprehensive word and can denote the entirety of proceedings which are taken with regard to it. It cannot and does not mean a final order of assessment alone unless there is something in the context of a particular provision which compels such a meaning being attributed to it. In Dr.George Jacob (supra), the Division Bench held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the return relates. The words "proceed to determine" under Section 25(1) is further qualified by the words "after issuing a notice on the dealer and after making such enquiry as it may consider necessary". Therefore, any step under Section 25(1) has to be taken only after issuing a notice on the dealer which apparently has to be done within five years from the last date of the year to which the return relates. The first proviso relates to a dealer being heard before making assessment under Section 25(1). The third proviso which was subsequently incorporated provides extended time for completion of assessments. It could only mean that time is extended only for completing assessment which have already been initiated after issuing notice under Section 25(1) within five years from the last date of the year to which the return relates. Therefore, the provisos which extend the period to complete the assessments, are only in respect of those assessments in which notices under the first proviso to Section 25(1) had been issued within the five year period as specified therein. As held in Shreyans Industries Ltd., a valuable right accrues in favour of the assessee when the period of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner under Section 25B. In all these cases, the power under section 25B is exercised after the five year period as specified under section 25(1). Section 25B starts with a non obstante clause, which takes into consideration a different situation for completing the assessment beyond the period specified under the Act in cases where any investigation or inquiry is pending under the Act or any other law or where any assessment cannot be completed within the period specified under sections 24 and 25. Section 25B has been incorporated in the statute to enable the Deputy Commissioner under certain circumstances to extend time for completing assessment. As held by the Apex Court in Shreyans Industries Ltd. (supra), such power has to be exercised by giving appropriate reasons and that too for extending the period for completing the assessment beyond the period specified in those sections. Being a non obstante clause, it has to be stated that the power of the Deputy Commissioner to extend the period of completion of assessment beyond the period specified under Section 25 cannot be curtailed in any manner. This power can be exercised at any time but before exercising such power, the Deputy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any assessment cannot be completed within the period specified under the said sections, the Deputy Commissioner may, for good and sufficient reasons, extend the period of completion of the assessment beyond the period specified in those sections", it has to be held that such a power can be exercised only to extend the time for completing the assessment and not for initiating a proceeding under section 25(1) by issuance of a notice. Further, while exercising power under section 25B, the Deputy Commissioner is bound to state reasons. In none of these cases, no specific reason has been stated to invoke section 25B. In the result, Group-B cases are to be allowed as in all such cases orders are passed under section 25B beyond the period specified under Section 25(1), which will not save the period of limitation. 22. Group-C concerns cases wherein challenge has been made to the orders passed by the Deputy Commissioner under Section 25B of the Act. The main contention urged by the petitioners is that time has been extended for completion of assessments, but, the orders had been passed after the period of limitation prescribed under Section 25(1). In some of the cases only part of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence was detected when the Commercial Taxes Department had come to know about the action taken by DRI. From Ext.P7, it can as well be seen that the Commercial Tax Department was aware of the proceedings. Necessary action ought to have been taken within a specified time under the concerned enactments and atleast within a reasonable period, and it cannot be more than five years from the date on which the alleged offence came to the notice of the Commercial Tax Department. 25. On facts, there is no dispute that the proposal for penalty in all these cases were issued beyond five years from the date of Ext.P7. The question is whether the assessment orders can be set aside on the ground of limitation in taking action. Learned counsel for the petitioner placed reliance upon the following judgments. (i) E.I.D.Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes and Another [(2000) 117 STC 457. (SC)]. This judgment is relied upon to emphasize the point regarding imposition of penalty, wherein it was held that if the correct position of law was in doubt and the amounts had not been included in the return of turnover on the bona fide belief that they were not includable in the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Madhya Pradesh General Sales Tax Act, 1958 and Section 2(h) of the Central Sales Tax Act, 1956, amount of freight did not fall within the definition and was not liable to be included in the taxable turnover. This was the reason why the assessee did not include the amount of freight in the taxable turnover in the returns filed by it. Now, it cannot be said that this was a frivolous contention taken up merely for the purpose of avoiding liability to pay tax. It was a highly arguable contention which required serious consideration by the Court and the belief entertained by the assessee that it was not liable to include the amount of freight in the taxable turnover could not be said to be mala fide or unreasonable. What Section 43 of the Madhya Pradesh General Sales Tax Act, 1958 requires is that the assessee should have filed a "false" return and a return cannot be said to be 'false' unless there is an element of deliberateness in it. It is possible that even where the incorrectness of the return is claimed to be due to want of care on the part of the assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the Court may, in a given case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that sub sections (4) and (4)(a) of section 14 has been provided to take care of instances where there is escapement of turnover from tax on account of the dealer to disclose the turnover or any of the particulars correctly. While answering the reference, it was held that penalty proceedings do not stand by themselves but are dependant upon a finding by the assessing authority that the whole or any of the turnover of the business of a dealer has escaped assessment. It is only the finding that turnover has escaped assessment as a deterrent for the dealer, the penalty proceedings are taken. While these proceedings were distinct from the assessment proceedings themselves, they are not wholly independent from the assessment proceedings. It is therefore argued that penalty proceedings also require to be adjudicated within a reasonable time, failing which it has to be held that it is barred by limitation. (vi) State of Andhra Pradesh v. Dhanalakshmi General Stores [(1998) 26 STL 185]. This is a Division Bench judgment of the Andhra Pradesh High Court in which it is held that penalty proceedings being ancillary to the assessment proceedings, the period of limitation prescribed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (4-A) of section 14. Tax Revision Case, accordingly, fails and is dismissed. No costs." (vii) St.Mary's Hotels (P) Ltd. v. Intelligence Officer (LAWS (KER) 2010-2-75) This case was decided by learned Single Judge of this Court. In this case, the dictum laid down is that limitation for taking action for penalty starts from the date of detection of offence and not from the date of inspection by the authorities concerned. It is only after verification of the books of accounts and in the light of the incriminating circumstances brought out in the course of inspection that the offence can be detected. (viii) State of Kerala v. Jayan Medical Store (1979 KLT 738) This was a case in which a Division Bench of this Court held that the notice for imposition of penalty issued after termination of the assessment proceedings cannot be said to be in terms with section 19(2) of the KGST Act. The said judgment reads as under:- "Aggrieved by the judgment of the learned Single Judge in W.P. (C) No.23049 of 2007, the appellants who were respondents 1 to 3 in that Writ Petition have preferred this Writ Appeal. The brief facts of the case are the following. 2. Respondents 1 and 2 here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrenchment of staff etc. concerning government schools to aided schools also. The said Rule reads as follows: "9. Notwithstanding anything contained in these rules, if it is found necessary, Government may by orders extend any ban on the creation of posts, retrenchment of staff etc. affected by them in Government schools to aided schools." 5. The appellants relied on the said rule and Annexures I & II to support their contentions. A close reading of Annexure II would show that it is a general order applicable to all Government departments and therefore the same would apply to Government Schools also. Since the creation of posts, retrenchment of staff etc. in aided schools are governed by statutory rules, if the Government wanted to apply Annexure II to aided schools also, there should have been a separate order. In this case, there is no such separate order. Therefore, we are of the view that, Annexure II order does not apply to aided schools. If that be so, Annexure I is ab initio void and unenforceable. Further the said order has been passed on 28.07.07 reviewing the staff strength of the year 2006-2007 long after the said academic year was over. Such an order by the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods for the declared purpose; or (g) has acted in contravention of any of the provisions of this Act or any rule made there under, for the contravention of which no express provision for payment of penalty or for punishment is made by this Act; (h) or has abetted the commission of any of the above offences. Such authority or officer may direct that such person shall pay, by way of penalty, an amount not exceeding twice the amount of Sales Tax or other amount evaded or sought to be evaded where it is practicable to quantify the evasion or an amount not exceeding ten thousand rupees in any other case. Explanation I: - The burden of proving that any person is not liable to the penalty under this section shall be on such person. Explanation II: - for the purposes of this subsection the expression "assessing authority" includes any officer not below the rank of Sales Tax Officer specified by the Government in this behalf by notification in the Gazette. (2) No order under sub-section (1) shall be passed unless the person on whom the penalty is proposed to be imposed is given an opportunity of being heard in the matter. (3) The Deputy Commissioner may, on application by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax credit or refund; or (f) has continued the business during the period of suspension of registration; or (g) has failed to return the un used statutory Forms and Declarations under this Act after the cancellation or suspension of the registration; or (h) has not stopped any vehicle or vessel when required to do so; or (i) has failed to comply with all or any of the terms of any notice or summons issued to him by or under the provisions of this Act or the rules made thereunder; or (j) has acted in contravention of any of the provisions of this Act or any rule made thereunder, for the contravention of which no express provision for payment of penalty or for punishment is made by this Act; or (k) has abetted the commission of the above offences, or (l) has abetted or induced in any manner another person to make and deliver any return or an account or a statement or declaration under this Act or rules made thereunder, which is false and which he either knows to be false or does not believe to be true, such authority may direct that such person shall pay, by way of penalty, an amount not exceeding twice the amount of tax or other amount evaded or sought to be evaded whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that penalty proceedings do not stand by themselves but are dependent upon a finding by the assessing authority that the whole or any of the turnover of the business of a dealer has escaped assessment. While these proceedings were distinct from the assessment proceedings themselves, they are not wholly independent from the assessment proceedings. Similarly, in Dhanalakshmi General Stores (supra), it is held that penalty proceedings being ancillary to the assessment proceedings, the period of limitation prescribed for assessment equally applies to the order levying penalty. I fully concur with the above view. As held in St.Mary's Hotels (P) Ltd. (supra), limitation for taking action for penalty starts from the date of detection of offence and not from the date of inspection by the authorities concerned, after verification of the books of accounts and in the light of the incriminating circumstances brought out in the course of inspection that the offence can be detected. Therefore, even in respect of penalty under section 45A, the same has to be completed within a reasonable time and at any rate within 5 years provided for completing assessment under section 19 of the KG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 25(1), failing which further proceedings will be barred by limitation. The 3rd proviso by which time has been extended for completing the assessment will not save the period of limitation unless notice under the proviso to Section 25 (1) has been issued within the period of limitation. Hence, the impugned orders in all these cases are quashed. (2) Group-B cases:- {WP(C) No.28422/14, 17769, 21230, 21285, 22481/2015, 20442, 20521, 22181, 23377 & 26723/2016}. It is declared that the Deputy Commissioner while exercising power under Section 25B can only extend time for completing the assessment and that too for good and sufficient reasons. By virtue of an order passed under Section 25B, no action can be taken by the assessing officer to initiate proceedings under Section 25(1) by issuing notice in terms of the first proviso. Hence, these cases in which assessment orders are passed based on notices issued after the period of limitation are hereby set aside. (3) Group-C cases:- {W.P.(C) Nos. 12708, 12716, 12717, 12723, 12725, 17390, 17392, 17393, 17394, 17398, 17399, 17400, 17428, 18403, 18405, 19472, 19492, 19493, 23170 & 23185/2016} As already held, in these cases, notices under S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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