TMI Blog2015 (8) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 40 of the Act with effect from 01.04.2011 and substituted the new provision of law namely Act No.17 of 2012 in its place. By virtue of such substitution, the period of limitation of five years for assessment made under Section 38 or reassessment made under Section 39 stood enhanced to eight years relating to any tax period upto the period ending 31st March, 2007 and for the period commencing from 01.04.2007 to the period ending 31st March, 2012, it was enhanced to seven years. Same has been impugned on the ground that it enables the prescribed authority to reopen the assessment already concluded and which had attained finality and which could not have been reopened or reassessed in view of the bar of limitation contained in the unamended provision and as such, there cannot be retrospective operation of the said provision. Law of limitation is intended to give certainty and finality to legal proceedings. It is well settled that no statute shall be construed to have a retrospective operation until its language is such that would require such a conclusion. The exception to this Rule is enactments dealing with procedure. The law of limitation being a procedural law, is retros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst and second provisos to sub-section (1) of Section 40 of the Karnataka Value Added Tax Act, 2003 substituted by Act No.54/2013 with effect from 01.04.2005 as being beyond legislative competence and thus, illegal, invalid and ultra vires of the Constitution of India and consequently, to quash the respective re-assessment orders. 2. I have heard the arguments of Sriyuths Aravind Kamath, Keshava Bhat A, Thirumallesh M, Suryakanth C.S., T.N.Keshava Murthy and K.J. Kamath appearing for petitioners and Sri A.S. Ponnanna, learned Addl. Advocate General appearing along with Sri T.K. Vedamurthy HCGP for respondent State. 3. It is the contention of learned Advocates appearing for the petitioners that right accrued to the assessee by virtue of limitation under Section 32 of the Karnataka Value Added Tax Act, 2003 (for short Act ), the assessee is not required to maintain books of account beyond five years i.e., after the end of five years of the accounting year prescribed under Section 40 and by virtue of the amended provision, the time barred assessments cannot be re-opened. It is also contended that on expiry of the limitation prescribed under Section 40, the assessee would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 82 STC 388 1991 MAHAVEER DRUG HOUSE vs. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, ASSESSMENTS-II, BANGALORE (4) 260 ITR 548 2003 NATIONAL AGRICULTURAL CO- OPERATIVE MARKETING FEDERATION OF INDIA LTD. AND ANOTHER vs. UNION OF INDIA AND OTHERS (5) (1977) 1 SCC 643 STATE OF MAHARASHTRA vs. THE CENTRAL PROVINCES MANGANESE ORE CO. LTD., (6) 72 ITR 594 1969 J.P. JANI, INCOME TAX OFFICER, CIRCLE IV, WARD G, AHMEDABAD, AND ANOTHER vs. INDUPRASAD DEVSHANKER BHATT 6. Per contra, Sri A.S.Ponnanna, learned Additional Advocate General would contend that the legislature has power to legislate prospectively as well as retrospectively and unless there is embargo in the Act not to re-open the assessment, then retrospectivity cannot be given effect to as otherwise, the legislature has such power. 7. It is contended that when a subsequent Act amends an earlier one in such a way as to incorporate itself or to be a part of itself into the earlier Act, then the earlier Act must be thereafter be read and construed as if altered words had been written into the earlier Act. He would submit that the State Legislature while amending Section 40 of the Act repealed earlier amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RADESH AND ANOTHER ETC., (4) (2008) 9 SCC 306 T. KALIAMURTHY AND ANOTHER vs. FIVE GORI THAIKKAL WAKF AND OTHERS (5) (2002) 4 SCC 339 K.M. SHARMA vs. INCOME TAX OFFICER, WARD 13(7), NEW DELHI. 9. Having heard the learned Advocate appearing for the parties, this Court is of the considered view that it will have to be examined as to: Whether Section 40 of the Act suffers from the vice of constitutional validity on any ground whatsoever and as such, the consequential re- assessment orders passed by the jurisdictional assessing Officers are liable to be set aside or quashed? ANALYSIS OF STATUTORY PROVISIONS: 10. Karnataka Sales Tax Act, 1957 came to be replaced by the Karnataka Value Added Tax Act, 2003 with effect from 01.04.2005. Section 38 of the Act provides deemed assessment namely, every dealer is deemed to have been assessed to tax based on the return filed by him under Section 35 except in any case where the Commissioner may notify the dealer of any requirement of production of accounts in support of a return filed for any period. Section 39(1) of the Act provides for re-assessment of the deemed assessment and Section 39(2) provides for furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the end of the prescribed tax period. Provided that an assessment or reassessment relating to any tax period upto the period ending 31st day of March, 2007, shall be made within a period of eight years after the end of the prescribed tax period. Provided further that an assessment or reassessment relating to any tax period commencing from 1st day of April, 2007 upto the period ending 31st day of March, 2012 shall be made within a period of seven years after the end of the prescribed tax period. (2) Notwithstanding anything contained in sub-section (1), if any tax is, not paid by a dealer who has failed to get registered though liable to do so or fraudulently evaded attracting punishment under Section 79, an assessment or reassessment may be made within eight years from the end of the prescribed tax period; Provided that an assessment or reassessment relating to any tax period upto to the period ending 31st day of March, 2007 shall be made under this sub-section within a period of ten years after the end of the prescribed tax period. The above amendment came to be further amended by Act No.54 of 2013 whereunder sub-section (1) and (2) of Section 40 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p.565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn., Vs State of U.P., State of Rajasthan Vs Mangilal Pindwal, Koteswar Vittal Kamath Vs K. Rangappa Baliga and Co., and A.L.V.R.S.T Veerappa Chettiar Vs S. Michael. In West U.P. Sugar Mills Assn., case a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case this court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case a three-Judge Bench of this Court emphasised the distinction between supersession of a rule and substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, when the impugned provisions are examined, it would be clear that the State Legislature while amending Section 40 of the Act repealed the earlier amendment made to Section 40 of the Act with effect from 01.04.2011 and substituted the new provision of law namely Act No.17 of 2012 in its place. By virtue of such substitution, the period of limitation of five years for assessment made under Section 38 or reassessment made under Section 39 stood enhanced to eight years relating to any tax period upto the period ending 31st March, 2007 and for the period commencing from 01.04.2007 to the period ending 31st March, 2012, it was enhanced to seven years. Same has been impugned on the ground that it enables the prescribed authority to reopen the assessment already concluded and which had attained finality and which could not have been reopened or reassessed in view of the bar of limitation contained in the unamended provision and as such, there cannot be retrospective operation of the said provision. 15. Statutes of limitation are regarded as procedural. The object of a statute of limitation is not to create any right but to prescribe periods with which legal proceedings may be institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have only prospective operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under Section 149 of the Act. 18. Under some what similar circumstances, the issue relating to re-opening the assessment under the provisions of the amended Rule namely, Bengal Sales Tax Rules, 1941 came up for consideration before the Hon ble Apex Court in the case of COMMERCIAL TAX OFFICER AND OTHERS vs BISWANATH JHUNJHUNWALLA AND ANOTHER reported in (1996) 5 SCC 626 whereunder the assessments concluded on 17.02.1969 and 26.03.1969 was sought to be re-opened on 07.11.1974 under the provisions of the amended sub-rule (5) of Rule 80. The said Rule prior to amendment and subsequent to amendment was as under: Prior to amendment: 80.(5) The Commissioner or any other authority to whom power in this behalf has been delegated by the Commissioner, shall not, of his own motion, revise any assessment made or order passed under the Act or the rules thereunder if --- x x x (ii) the assessment has been made or the order has been passed more than four years previously. After amendment: 80.(5) The Commissioner or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 971. Put conversely, with effect from 1-11-1971, Rule 80(5)(ii) permits the Commissioner (or other authority) to revise of his own motion any assessment made or order passed under the Act 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. 19. A plain reading of the above dicta would clearly indicate that with effect from 1st November, 1971, amendment to clause (ii) of sub-rule (5) of Rule 80 of Bengal Sales Tax Rules, 1941 was brought about by notification issued on 30.03.1974 and by reason of said notification, the Commissioner or other authority was ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been questioned as one barred by limitation prescribed under Section 40 of the Act and without jurisdiction. For the tax period ended on March, 2007, the limitation for assessment under Section 38 or re-assessment under Section 39 was five years which was to end on 31.03.2012. By Act No.12/2011 the words four years found in clause (a) of sub-section (1) was substituted with the words five years . Thus, the period of four years has got enlarged to five years and as per sub-section (1) of Section 40, the limitation existed upto 31.03.2012. sub-section (1) of Section 40 was substituted by Act No.17/2012 whereunder two provisos to sub-section (1) was added, whereby the period of limitation was extended to eight years and seven years respectively as provided under the said provisos. This amendment was further substituted by Act No.54/2013 which indicates that sub-section (1) of Section 40 is deemed to have been substituted with effect from 1st April, 2005 itself. The said amendment would authorise making of assessment or re-assessment before the expiration of eight years from the end of the particular assessment year. Thus, it would be immaterial if the period of assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings where income had escaped assessment. That is not so in the present case. Under sub-section (1) of Section 21 of the Act before its amendment, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary, assess or reassess the dealer according to law. Sub-section (2) provided that except as otherwise provided in this Section, no order for any assessment year shall be made after the expiry of 4 years from the end of such year. However, after the amendment, a proviso was added to sub- section (2) under which Commissioner of Sales Tax authorizes 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Sales Tax and notices issued by the Assessing Authority in pursuance thereof. 24. Thus, viewed from the angle of retrospective operation also, it requires to be held that in the instant case, the provisos to sub-section (1) of Section 40 having been amended with effect from 01.04.2012 by Act No.17/2012 and subsequently, by Act No.54/2013 sub-sections (1) and (2) of Section 40 having been held as deemed to have come into effect from 01.04.2005 itself, it has to be necessarily held that assessment/re-assessment proceedings initiated cannot be held as initiated within time prescribed under Section 40. By way of illustration, this Court has already explained in W.P.No.51802/2014 as to how the re-assessment order is well within time and same explanation holds good for other writ petitions also. 25. For the reasons aforestated, the contentions raised by the learned Advocates appearing for the petitioners cannot be accepted and it stands rejected. Hence, I proceed to pass the following: ORDER (1) Writ petitions are hereby dismissed. (2) This order of dismissal would not come in the way of petitioners challenging the assessment / re-assessment orders before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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