M/S. UNIVERSAL ALUMINIUM vs. STATE OF KERALA

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OT.Rev/78/2019HC KeralaKLHC01054158201926 September 2023Bench: HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR,HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH7 pages
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What did the High Court hold?

The High Court held that the State had virtually attempted to tax the petitioner twice on the same turnover. The Court found that the notice issued under Section 25(1) of the KVAT Act referred to escaped turnover which was nothing other than the suppressed turnover already included in the assessment for the year 2005-06. The First Appellate Authority had rightly set aside the Assessing Authority's order. The Tribunal, however, appeared to have misunderstood the facts and failed to notice that the assessment on the turnover in question had already been completed. The Tribunal's order was found to be bereft of any reasons to support its conclusion. Therefore, the High Court set aside the Tribunal's order and allowed the revision petition, answering the questions of law in favour of the assessee. The operative direction was to allow the O.T.Revision.

What were the facts?

The assessee, M/s. Universal Aluminium, is a dealer in aluminum products. For assessment year 2005-06, an initial assessment was completed under Section 24 of the KVAT Act, determining taxable turnover at ₹1,56,42,854, tax payable at ₹2,28,721, and penalty at ₹1,32,788. This was despite the assessee initially declaring ₹1,07,56,734 and revising it to ₹1,20,49,204 after an audit noted discrepancies. The department treated the differential as suppressed turnover. Appeals to the Appellate Authority and Tribunal resulted in reductions to additions and penalty, but the tax amount was maintained. Subsequently, the Assessing Authority issued a notice under Section 25(1) proposing to assess escaped turnover, which appeared to be the same suppressed turnover already assessed. The First Appellate Authority allowed the assessee's appeal, cancelling the Assessing Authority's order. However, the Appellate Tribunal, in further appeal by the revenue, set aside the First Appellate Authority's order.

What were the issues?

1. Whether the Tribunal erred in law by setting aside the order of the First Appellate Authority and allowing the revenue's appeal, thereby permitting the State to tax the petitioner twice on the same turnover? The assessee contended that the second assessment proceeding under Section 25(1) of the KVAT Act was an attempt to tax the same suppressed turnover that had already been assessed in the original assessment for the year 2005-06. The assessee argued that the First Appellate Authority correctly appreciated this fact and set aside the Assessing Authority's order. The assessee relied on the principle that once a turnover has been assessed, it cannot be subjected to a fresh assessment as escaped turnover. The revenue, through its appeal to the Tribunal, argued that the subsequent assessment was valid. The judgment does not explicitly detail the revenue's specific arguments before the Tribunal beyond the fact that they preferred an appeal against the First Appellate Authority's order. The Tribunal's reasoning for allowing the revenue's appeal is described as lacking valid reasons.

Which sections of the Income-tax Act were involved?

Section 24,Section 25(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH TUESDAY, THE 26TH DAY OF SEPTEMBER 2023 / 4TH ASWINA, 1945 OT.REV NO. 78 OF 2019 AGAINST THE ORDER IN TAVAT 639/2014 OF AGRL.I.T.& SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/RESPONDENT/APPELLANT: M/S. UNIVERSAL ALUMINIUM MADHU ARCADE, MAVOOR ROAD, KOZHIKODE. BY ADVS. R.JAIKRISHNA SRI.C.S.ARUN SHANKAR SRI.T.G.MADHAVANUNNI RESPONDENT/APPELLANT/RESPONDENT STATE OF KERALA REPRESENTED BY DEPUTY COMMISSIONER (LAW) COMMERCIAL TAXES, ERNAKULAM 682 015. SR GP DR. THUSHARA JAMES THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 26.09.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

O.T.Rev.No.78/2019 -:2:- O R D E R Dr. A.K.Jayasankaran Nambiar, J.

This O.T.Revision impugns the order dated 6/8/2018 of the Kerala Value Added Tax/Agricultural Income Tax and Sales Tax Appellate Tribunal, Kozhikode in T.A.(VAT) No.639/2014. The brief facts necessary for the disposal of the O.T.Revision are as follows: 2. The petitioner is a registered dealer in aluminum products. For the assessment year 2005-06, the assessment was originally completed under Section 24 of the Kerala Value Added Tax Act (for short, 'the KVAT Act') by fixing the taxable turnover at `1,56,42,854/- and computing the net amount of tax payable at `2,28,721/- and imposing penalty of `1,32,788/-. The said order came to be passed notwithstanding the fact that the petitioner who had initially filed return declaring the turnover of `1,07,56,734/-, had revised his turnover to an amount of `1,20,49,204/- pursuant to knowledge of the fact that the audit team had visited his business premises and noted certain discrepancies. The revised return filed by the petitioner was not accepted by the department which saw the

O.T.Rev.No.78/2019 -:3:- exercise as one intended to cover up the suppressed turnover that was detected by the audit team at the time of inspection of the premises. The assessment afore-mentioned was therefore completed by treating the differential turnover detected at the time of the inspection as suppressed turnover and finalizing the assessment by adding to the declared turnover, the suppressed turnover and additional amounts towards omissions and suppressions and computing the tax liability on the total turnover so fixed. A penalty was also imposed as already noticed above. 3. In the appeal preferred by the petitioner against the said assessment order, the additions towards probable omission and suppression were reduced, but the penalty imposed by the Assessing Authority was confirmed against the petitioner. In a further appeal carried by the petitioner before the Appellate Tribunal, the Tribunal proceeded to reduce the penalty further, but maintained the tax amount determined by the authorities below. It is not in dispute that consequent to the order of the Appellate Tribunal, the petitioner paid the tax and penalty amounts and the matter stood closed since there was no further proceedings initiated by the revenue or the petitioner against the Tribunal's order.

O.T.Rev.No.78/2019 -:4:- 4. While so, the Assessing Authority issued a notice under Section 25(1) of the KVAT Act proposing to assess alleged escaped turnover. A perusal of the notice however indicates that what was referred to as escaped turnover was nothing other than the suppressed turnover that was already included in the assessment of the petitioner for the year 2005-06 on the earlier occasion. This time the notice proposed that the revised return earlier filed by the petitioner be accepted and the revised turnover declared therein be taken as the base turnover to which the suppressed turnover would once again be added for the purposes of determining the tax liability of the petitioner. Finding that this was essentially an attempt at recomputing the tax liability using the same figures that were used in the earlier assessment, the petitioner preferred objections before the Assessing Authority pointing out the said facts. The Assessing Authority however vide Annexure E order dated 28/10/2013 confirmed the demand against the petitioner. In an appeal carried by the petitioner, however, the First Appellate Authority found merit in the submissions of the petitioner and allowed the appeal by cancelling the order of the Assessing Authority. In further appeal carried by the revenue before the Appellate Tribunal, however, the Appellate

O.T.Rev.No.78/2019 -:5:- Tribunal, without giving any valid reason, set aside the order of the First Appellate Authority and allowed the appeal preferred by the revenue. 5. We have heard Sri.Jaikrishna.R., the learned counsel for the petitioner and Dr.Thushara James, the learned Senior Government Pleader for the respondent State. 6. On a consideration of the rival submissions, we find from the notice of the Assessing Authority in the second round, as also from the order passed by the Assessing Authority pursuant to the said notice, that the State has virtually attempted to tax the petitioner twice on the same turnover. This attempt was noticed by the First Appellate Authority who rightly set aside the order of the Assessing Authority and allowed the appeal preferred by the petitioner. The Tribunal, however, in a further appeal carried by the State, appears to have completely misunderstood the real facts and omitted to notice that the assessment of the petitioner on the turnover in question had already been completed on an earlier occasion and therefore there was no occasion to assess the petitioner once again under Section 25(1) of the KVAT Act. The Tribunal's order being bereft of any reasons to support its conclusion, we have no hesitation in setting

O.T.Rev.No.78/2019 -:6:- aside the same and allowing this O.T.Revision by answering the questions of law raised therein in favour of the assessee and against the revenue. The O.T.Revision is allowed as above. Sd/- DR. A.K.JAYASANKARAN NAMBIAR JUDGE Sd/- DR. KAUSER EDAPPAGATH JUDGE Rp

O.T.Rev.No.78/2019 -:7:- APPENDIX OF OT.REV 78/2019 PETITIONER ANNEXURES ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE COMMERCIAL TAX OFFICER (AA) KOZHIKODE. DATED 31.10.2006. ANNEXURE B TRUE COPY OF THE MODIFIED ASSESSMENT ORDER PASSED BY THE COMMERCIAL TAX OFFICER, KOZHIKODE 26.10.2010 ANNEXURE C TRUE COPY OF THE ORDER OF THE VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM IN TA VAT 403/2010 DATED 23.11.2010. ANNEXURE D TRUE COPY OF THE PRE- ASSESSMENT NOTICE ISSUED BY ASSESSING AUTHORITY DATED 4.10.2013 ANNEXURE E TRUE COPY OF THE ORDER ISSUED BY ASSESSING AUTHORITY DATED 28.10.2013 ANNEXURE F TRUE COPY OF THE ORDER PASSED BY THE DEPUTY COMMISSIONER (APPEALS) KOZHIKODE DATED 31.12.2013 ANNEXURE G TRUE COPY OF THE ORDER OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL IN T.A. (VAT) NO. 639/2014 DATED 6.8.2018.

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