K.P.CHANDRASEKHARAN vs. THE SALES TAX OFFICER

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 27TH DAY OF AUGUST 2014/5TH BHADRA, 1936 WP(C).No. 15567 of 2012 (U) ---------------------------- PETITIONER: -------------------------- K.P CHANDRADASAN AGED 58 YEARS S/O. APPUTTY, VISWA HINDU BHAVAN LODGE, CHALAPPURAM KOZHIKODE DISTRICT. BY ADV. SRI.SUNNY MATHEW RESPONDENTS: ---------------------------- 1. THE SALES TAX OFFICER, WC & LT OFFICE OF THE SALES TAX OFFICER, KOZHIKODE. 2. THE DEPUTY COMMISSIONER (APPEALS)-I OFFICE OF THE DEPUTY COMMISSIONER, COMMERCIAL TAXES KOZHIKODE. 3. THE COMMERCIAL TAX OFFICER WORKS CONTRACT AND LUXURY TAX, SALES TAX COMPLEX JAWAHAR NAGAR, KOZHIKODE. R BY ADV. GOVERNMENT PLEADER SRU BOBBY JOHN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 27-08-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C).No. 15567 of 2012 (U) APPENDIX

PETITIONER(S) EXHIBITS EXHIBIT P1: TRUE COPY OF THE ASSESSMENT ORDER DATED 3.3.2004 PASSED BY THE 1ST RESPONDENT. EXHIBIT P2: TRUE COPY OF THE FINAL ANNUAL ASSESSMENT AND THE DEMAND ISSUED BY THE 1ST RESPONDENT. EXHIBIT P3: TRUE COPY OF THE APPELLATE ORDER AND THE GROUNDS OF DECISION DATED 25.3.2008 PASSED BY THE 2ND RESPONDENT. EXHIBIT P4: TRUE COPY OF THE LETTER DATED 22.1.09 SENT BY THE PETITIONER TO THE 3RD RESPONDENT. EXHIBIT P5: TRUE COPY OF THE ACKNOWLEDGMENT ISSUED BY THE DEPARTMENT OF POSTS, INDIA FOR HAVING DELIVERED EXHIBIT P4 TO THE 3RD RESPONDENT. EXHIBIT P6: TRUE COPY OF THE NOTICE DATED 7.5.2012 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. EXHIBIT P7: TRUE COPY OF THE ORDER DATED 15.5.2012 PASSED BY THE 3RD RESPONDENT. EXHIBIT P8: TRUE COPY OF THE EXPLANATION OFFERED BY THE PETITIONER DATED 19.5.2012. EXHIBIT P9: TRUE COPY OF THE ORDER DATED 21.5.2012 PASSD BY THE 3RD RESPONDENT.

RESPONDENTS' EXHIBITS: NIL TRUE COPY P A TO JUDGE

K. VINOD CHANDRAN, J - - - - - - - - - - - - -- - - - - - - - - - - - - - - - W.P(C) No. 15567 of 2012 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 27th day of August, 2014 J U D G M E N T The petitioner is aggrieved with the refund declined for the assessment year 1998-1999. Petitioner, admittedly, was a works contractor and had carried on construction as per the work awarded by various parties. The petitioner had filed a return, claiming exemption on the entire turnover declared, for reason of the goods employed in the contract having already suffered tax. In any event, without going into the claim, what assumes significance herein, is that an assessment initiated and completed by the Assessing Officer, was set aside in first appeal as is indicated in Ext.P3. Ext.P3 was not challenged by the State and the said order dated 25.03.2008 has acquired finality. 2. After Ext.P3 order in appeal was passed, the petitioner is said to have filed Ext.P4 application for

: 2 : refund dated 22.01.2009. It is to be specifically noticed that by the time Ext.P4 was filed the limitation period for a second appeal had long expired. The petitioner was before this Court in an earlier writ petition numbered as W.P(C) No.3102/2012, wherein Ext.P3 was produced as Ext.P4. This Court directed consideration of the application. In fact, even at that point, the State did not dispute that such an application was filed. The Department also had consciously not filed an appeal from Ext.P3 order. The petitioner claims that he has to be refunded the amounts, which he had claimed exemption, by way of the return filed. 3. The learned counsel appearing for the petitioner would contend that Section17 is the procedure to be followed by the Assessing Authority and by sub- section (2) if the Assessing Authority is satisfied of the correctness of a return filed, then, the assessment would be concluded, as per the return. However, in the context of no return having been filed within the prescribed period, or if the return submitted is incorrect and

: 3 : incomplete, the Assessing Officer has the power to carry on the assessment on the best of his judgment, with notice to the assessee and after rejecting the returns filed. The only restriction being, the limitation provided under sub-section (6) of Section 17. As per that provision any assessment proceedings, initiated within four years would be perfectly permissible under the statute. The assessment concluded by the Assessing Officer having been set aside by the first appellate authority, on the ground of it having been passed after the period of limitation, it is the contention of the learned counsel that the assessment should be deemed to have been completed on the return filed and in such circumstances, the refund would definitely have to be ordered. 4. The learned Government Pleader, has produced the records and point out that the assessment filed is incomplete, insofar as the petitioner has not filled up many of the columns. What assumes significance, on perusal of the return filed is that, the petitioner had claimed the entire turnover as being exempted and had

: 4 : indicated the tax paid; being the tax deducted at source. In the circumstance of the petitioner having specifically indicated the turnover as being exempted from tax, the dealer would be entitled to seek for refund since return filed would then have to be considered as one correct and complete in all respects. This would be so only in the circumstance of the Assessing Officer having not thought it fit to reject the returns and proceed for best judgment assessment within the limitation period. 5. The learned Government Pleader would contend that the assessment order would also, indicate that the exemption claim was not substantiated by sufficient documents. In this context, it is to be noticed that the Assessing Officer, has been granted ample powers under the statute to complete the assessment, declining the exemption claim if not substantiated. However, that will have to be done within the limitation period. 6. The contention that sub-section (3) of Section 17 is an enabling provision would not enure to

: 5 : the benefit of the State, since the same is regulated by the rigour of limitation provided under subsection (6). Sub-section (3) enables the Assessing Officer to proceed for best judgment assessment after rejecting the returns filed; but the said power has to be exercised within the period of limitation provided as per subsection (6). 7. The further contention raised by the learned Government Pleader is with respect to the delay in approaching this Court. An application for refund was made subsequent to Ext.P4. In the context of the statute not providing for separate application for refund and the claim being raised in the return itself, the issue of delay would not at all be conclusive in the present case. There can also be no delay attributed to the petitioner herein. The petitioner filed an application on 22.01.2009 by Ext.P4 and pursued the same before the authority and before this Court, earlier with a writ petition. No contention of delay or the absence of request of refund was raised at that point of time. This Court directed consideration of the application Ext.P5, which was

: 6 : produced as Ext.P4 in the earlier writ petition as is revealed from the records. It was in pursuance of that judgment that Ext.P6 notice was issued and Ext.P7 order was passed. 8. Ext.P7 finds that refund can be made only after completion of final assessment and the tax paid is on the admitted turnover, which tax is deducted in the bill and paid as tax deduction at source. The fallacy of the contention is insofar as the final assessment, which was permitted by statute, not being completed within time. It was only due to the latches of the Department, that the assessment could not be made. The assessment made out of time was set aside by the first appellate authority. The contention in Ext.P7 that the tax paid at source was admitted tax also cannot be accepted, since the returns, disclosed from the records, would clearly reveal that the assessee had claimed exemption. 9. Apposite would be a reference to the decision of the Hon'ble Supreme Court in Commissioner of Income tax v. Shelly Products and

: 7 : Another ( 2003 ITR 261 367). In the said case, the Hon'ble Supreme Court was concerned with the assessment under the Income Tax Act, 1961 made after the period of limitation. The assessee's claim which was urged before the Hon'ble Supreme Court was for refund of the amounts returned as payable tax, in the self assessment made by the assessee. While declining such refund of returned tax, the Hon'ble Supreme Court held so as to the effect of the failure to pass an order of assessment . “If the assessing authority cannot make a fresh assessment in accordance with the provision of the Act it amounts to deemed acceptance of the return of income furnished by the assessee. In such a case, the assessing authority is denuded of its authority to verify the correctness and completeness of the return, which authority it has while framing a regular assessment. It must accept the return as furnished and shall not in any event raise a demand for payment of further taxes. Accepting the income as disclosed in the return of income furnished by the assessee, it must refund to the assessee any tax paid in excess of the liability incurred by him on the basis of income disclosed. Even if the tax paid is found to be less than that payable, no further demand can be

: 8 : made for recovery of the balance amount since a fresh assessment is barred. In other words, the tax paid by the assessee must be accepted as it is, and in the event of the tax paid being in excess of the tax liability duly computed on the basis of the return furnished and the rates applicable, the excess shall be refunded to the assessee, since its retention may offend article 265of the Constitution.” Ext.P7 hence would stand set aside. The petitioner would be entitled to refund of the tax paid or the amounts adjusted towards any pending dues. The petitioner shall be granted the same within three months from the date of receipt of copy of this judgment. Sd/- (K. VINOD CHANDRAN, JUDGE) jma //true copy// P.A to Judge