TMI Blog2019 (12) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... ewly introduced provision would cause the assessees substantial prejudice or deprive the assessees of any vested right that accrued to them prior to the introduction of the new provision. It is trite that if a retrospective operation of a statutory provision has the effect of depriving an assessee of an accrued right, in a manner that will substantially prejudice him, then such retrospective operation of the amended provisions would not be legally justified. These writ petitions are disposed by upholding the retrospective operation of Section 42(3) of the KVAT Act, but declaring that the power to re-open assessments under the said provision cannot be exercised in relation to such assessments where the period for which the assessee concerned is obliged to retain the Books of account under Rule 58(20) of the KVAT Rules has expired - The retrospective operation of Section 42(3) of the KVAT Act will thus stand controlled by the period of limitation aforementioned, and the legality of the notices/orders impugned in these writ petitions shall stand determined by the said declaration. Petition disposed off. - W.P(C).No.13673 OF 2017(H) - - - Dated:- 18-12-2019 - W.P.(C).Nos.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with his returns. The assessments completed under Sections 21, 22 and 24 can still be re-opened in terms of 25 of the KVAT Act to assess such turnover as has escaped assessment to tax in an earlier assessment. The power to assess escaped turnover under Section 25 has, however, to be exercised within the period stipulated under the Act for the exercise of such power. The said period was five years from the end of the assessment year concerned till 31.3.2017, and was extended to six years from the end of the assessment year concerned thereafter. 3. Section 42 of the KVAT Act, as it stood till 12.11.2016, read as follows: 42. Audit of accounts and certification of returns :- (1) Every dealer whose total turnover in a year exceeds rupees forty lakhs shall get his accounts audited annually by a Chartered Accountant or Cost Accountant and shall submit copy of the audited statement of accounts and certificate, in the manner prescribed. Provided that a co-operative society registered or deemed to be registered under the Kerala Co-operative Societies Act, 1969 (21 of 1969), may in lieu of the statement and certificate mentioned above, submit a copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the time limit mentioned thereunder shall not be applicable in such cases. Soon after the aforesaid amendment, the Revenue initiated proceedings for re-opening the assessments of those assessees whose turnover was above the limits specified under Section 42(1), notwithstanding that the period under Section 25 of the Act for re-opening the assessments of such assessees had expired. In many cases, the assessments were thereafter completed by including the alleged escaped turnover and subjecting the same to tax. As already noticed, the pre-assessment notices and assessment orders are impugned in these writ petitions. 4. The contention raised on behalf of the writ petitioner assessees, as discernible from the pleadings, can be summarised as under: ➢ As per the Scheme of the KVAT Act, there is a finality attached to assessment proceedings and there are indicators under Sections 21, 22 24 and 25 of the KVAT Act as to when an assessment can be deemed final. Section 42(3), if interpreted as conferring a power on the Revenue to disregard the finality attaching to assessments, would militate against the Scheme of the KVAT Act. Such an interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there is no limitation period prescribed under a taxing statute for taking action against an assessee, a reasonable period of limitation has to be read into the statutory provision by the Court. In the instant cases, the reasonable period would be the period prescribed under Section 25 of the KVAT Act. [Ref. [Director of Income-Tax (International Taxation) v. Mahindra and Mahindra Ltd. - [(2014) 365 ITR 560 (Bombay)]; Regional Provident Fund Commissioner v. K.T. Rolling Mills Pvt. Ltd. [(1995) 1 SCC 181]; Union of India and Others v. Uttam Steel Limited - [(2015) 13 SCC 209]; Chhedi Lal Yadav and Others v. Hari Kishore Yadav (Dead) Through Legal representatives and Others - [(2018) 12 SCC 527]. ➢ Since Section 25 and Section 42 operate in the same field and govern re-opening of assessments so as to assess escaped turnover, prescribing a limitation period for exercise of power under Section 25 to the exclusion of such prescription under Section 42(3) would pave the way for Assessing authorities to choose between remedies. Such discretion cannot be left open to the Revenue in a taxing statute without offending Article 14 of the Constitution and the concept of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of a power, other than mentioned under Section 25 of the KVAT Act, the Revenue could not re-open an assessment after the expiry of the limitation period under Section 25 of the KVAT Act. The amendment removes the basis of the judgment by introducing a separate provision for assessing escaped turnover in respect of the particular class of assessees mentioned in Section 42 (1) of the KVAT Act. Reliance is placed on M.P. Sundararamier Company v. State of Andra Pradesh [1958 SCR 1422]; J.K. Jute Mills Company v. State of Uttar Pradesh [AIR 1961 SC 1534]; Bahuji v. Municipal Committee, Khandwa [AIR 1961 SC 1486]; M/s.Reghubar Dayal Jai Prakash v. Union of India [AIR 1962 SC 263]; Cheviti Venkanna Yadav v. State of Telungana and Others [(2017) 1 SCC 283]; State of Karnataka and others v. Karnataka Pawn Brokers Association and Others [(2018) 6 SCC 363]. 6. I have heard the learned counsel for the petitioners in all these writ petitions as also the learned Government Pleader for the respondents. 7. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that Section 42 of the KVAT Act wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of adopting a different procedure for those with a higher turnover, appears to me to be guided by an intelligible differentia having a rational nexus with the object sought to be achieved by the legislature. The said classification would therefore withstand the tests under Article 14 and the statutory provision cannot be said to be discriminatory in the sense of treating unequals as equals. 9. While the prospective operation of Section 42(3) satisfies the test of constitutionality, the question arises as to whether the retrospective operation of the newly introduced provision would cause the assessees substantial prejudice or deprive the assessees of any vested right that accrued to them prior to the introduction of the new provision. It is trite that if a retrospective operation of a statutory provision has the effect of depriving an assessee of an accrued right, in a manner that will substantially prejudice him, then such retrospective operation of the amended provisions would not be legally justified. [See Rai Ramkrishna v. State of Bihar - [AIR 1963 SC 1667]; R.C. Tobacco Pvt. Ltd. and Another v. Union of India and Another - [AIR 2005 SC 4203]; Jayam an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in Section 25 of the KVAT Act but the time limit under the said provision is expressly stated to be inapplicable to Section 42(3). This Court has therefore to look at the overall Scheme of the KVAT Act, the interests of ensuring certainty in taxation matters as also the necessity to interpret the provision in a manner that would avoid unconstitutional results such as unreasonableness, unfairness and arbitrariness of the statutory provision, for determining the limits of exercise of the power under Section 42(3). In my view, the time limit specified in Rule 58(20) of the KVAT Rules offers a safe guide to define the limits of the power under Section 42(3) of the Act. It would ensure that the power to reopen assessments, so as to bring to tax escaped turnover, is not exercised in a manner that prejudicially affects an assessee who is not in a position to meet the charge against him for want of his Books of account and other relevant material. Such a limitation on the power to re-open assessments would also accord with the requirement of ensuring fairness and certainty in maters of taxation, a feature that has been insisted upon in the tax jurisprudence of our country. [See Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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