PR. COMMISSIONER OF INCOME TAX, RAJKOT - 3 vs. M/S ITALICA FLOOR TILES P. LTD

PDF · subscribers
TAXAP/1140/2018HC GujaratGJHC24050489201817 September 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeals filed by the Revenue. The Court acknowledged that the AO had not proceeded solely on the basis of the Excise Department's show-cause notice but had elicited the assessee's response to the contents of that notice. The Court rejected the assessee's argument (as seen in the prior case) that the AO could not pass a final assessment order until the excise proceedings were finalized, stating that the AO cannot defer assessment indefinitely due to potential time-barring provisions under the Income Tax Act. The Court also noted that the material in excise proceedings might differ from that in assessment proceedings. The operative direction was the dismissal of the appeals.

What were the facts?

The Revenue has filed these appeals challenging the order of the Income Tax Appellate Tribunal (Tribunal) dated January 16, 2018. The assessee, M/s Italica Floor Tiles P. Ltd, had its return for Assessment Year 2005-2006 subjected to reassessment. The Assessing Officer (AO) made additions based on materials collected by the Excise Duty department, which prima facie suggested evasion of excise duty. The Tribunal subsequently deleted these additions, leading to the present appeals by the Revenue. The High Court notes that a similar issue was previously considered in Tax Appeal No. 82 of 2016 and connected appeals, which were dismissed by the Court.

What were the issues?

1. Whether the Assessing Officer could frame an assessment based on a show-cause notice issued by the Excise Department, even if it had not culminated into a final order, after eliciting the assessee's response. Assessee's Contention: The judgment does not record any specific contentions made by the assessee in these appeals. However, in the context of the previous similar case (Tax Appeal No. 82 of 2016), the assessee had contended that since the excise proceedings had not been finalized, the AO could not have passed a final order of assessment. The Court, however, rejected this contention. Revenue's Contention: The Revenue contended that the AO had not proceeded merely on the basis of the show-cause notice but had put the assessee to notice regarding its contents and elicited a response. The Revenue also argued that the AO cannot be expected to defer completion of assessment awaiting final orders in excise proceedings, as the assessment might become time-barred.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Rajkot Bench

the assessee for AY 2005-2006 was subjected to re-assessment. On the basis of certain materials collected by the Excise Duty prima facie suggesting evasion of excise duty, the Assessing Officer carried out such re-assessment and made additions. Eventually, Tribunal deleted the additions, upon which the appeal has been filed. We have noticed that previously such an issue had come up for consideration before this Court in Tax Appeal No. 82 of 2016 and connected appeals. The Court had dismissed the appeals preferred by the Department, in the following manner :- “8. Having heard learned advocates for the parties at considerable length at the outset, we may straightaway agree with the suggestion of the counsel for the Revenue that the present group of cases do not fall in the same category as the judgment of this Court in case of Futura Ceramics (petitioner) Ltd v. State of Gujarat reported in [2013] 40 taxmann.com 404 (Gujarat). It was the case in which, the petitioner before the High Court was a registered dealer under the Gujarat Value Added Tax Act and was liable to pay tax on the basis of its turnover. The petitioner's return for the financial year 2006-07 was scrutinized by the Assistant Commissioner of Commercial Tax. The assessee was served with the show-cause notice by the said authority indicating that he has reason to believe that taxable turnover was suppressed. This was on the basis of a show-cause notice issued by the Excise department pursuant to the raid indicating that the petitioner had suppressed sales to the tune of Rs. 5.25 crores and thereby evaded tax duty to the extent of 73.55 lacs. The C/TAXAP/1135/2018 ORDER Assistant Commissioner of Commercial Tax therefore, prima facie held a belief that the assessee's sale of Rs. 5.97 crores (i.e. the suppressed sale of 5.25 crores coupled with excise duty element of 73.55 lacs) had escaped assessment. He accordingly, framed the assessment after rejecting the petitioner's objections. Such assessment order was challenged by the petitioner before the High Court on the ground that the Assistant Commissioner of Commercial Tax had proceeded merely on the show-cause notice issued by the Excise Department without any further verification. The Court noticed that the entire order of reassessment proceeded on the show-cause notice issued by the Excise department without any further material being brought on record. The Court held that merely because the Excise department issued such a notice, it cannot be a ground to presume that there was evasion of excise duty further implying evasion of value added tax. It was noticed that the show-cause notice issued by the Excise department had not yet culminated into final order against the petitioner and a piquant situation would arise if ultimately, such show-cause notice were to be dropped in favour of the petitioner. On this ground, the Court quashed the order of reassessment.

7.

In the present case, the Assessing Officer has not proceeded on the basis of show-cause notice taking the proposals contained in such show-cause notice as having achieved finality. He has put the assessees to notice with respect to the contents of such show-cause notice issued by the Excise department and also elicited assessee's response to the same. Whether this was sufficient to enable him to frame assessment is a question, which we will answer a while later.

8.

Before proceeding further, we may discard the contention of the counsel for the assessees that since the excise proceedings had not yet been finalized, the Assessing Officer could not have passed the final order of assessment. This contention would have multiple objections from us. Firstly, as is well known, the adjudication proceedings under the Central Excise Act do not come with time barring provisions unlike as in the Income Tax Act. In fact, the Adjudicating C/TAXAP/1135/2018 ORDER authorities, under the Central Excise Act, enjoy much wider time period even for issuance of show-cause notice in case of the alleged non payment or short payment of duty is for any reason of fraud or collusion or willful misstatement or suppression of facts or contravention of the provisions of the Act with intent to evade payment of duty.

9.

Under the circumstances, the Assessing Officer cannot be expected to defer completion of assessment awaiting final order of adjudication in excise proceedings at the risk of his assessment getting time barred. Even otherwise, in a given case, the material that may be brought on record in excise proceedings may be different from that which may form part of the assessment proceedings though the both may, to some extent, be common.” In the result, these Tax Appeals are also dismissed. [Akil Kureshi, J.] [B.N Karia, J.] Prakash

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →