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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF APRIL, 2018 BEFORE: THE HON’BLE MRS. JUSTICE S.SUJATHA W.P.Nos.11916-11920 & 12854-12857/2018 (T – RES)
BETWEEN:
M/s B.L.KASHYAP & SONS LTD., 4TH FLOOR, WEST WING, SOUL SPACE PARADIGM, OUTER RING ROAD, MARATHALLI, BENGALURU-560037 TIN:29210018181 REP. BY SHRI DHEERENDRA DIXIT, ASSISTANT MANAGER TAXATION, AGED ABOUT 41 YEARS S/O LATE RAJAN LAL DIXIT
... PETITIONER
[BY SRI V.RAGHURAMAN, ADV.]
AND:
JOINT COMMISSIONER OF COMMERCIAL TAXES, (ADMN) DGSTO-5, VTK-2, KORAMANGALA, BENGALURU-560047
DEPUTY COMMISSIONER OF COMMERCIAL TAXES (A&R)-5.7, 6TH FLOOR, A-BLOCK, VTK-2, RAJENDRANAGARA KORAMANGALA, BENGALURU-560047
…RESPONDENTS
[BY SRI T.K.VEDAMURTHY, AGA.)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO R
- 2 - QUASH THE IMPUGNED ORDERS DATED 08.09.2017 PASSED BY THE R-1 ENCLOSED AT ANNEX-A1, A2 AND A3 BY A WRIT OF CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER AS VIOLATIVE OF ARTICLES 14, 19, 246 AND 265 BEING WITHOUT JURISDICTION, UNREASONABLE, ARBITRARY, OPPRESSIVE, EXCESSIVE AND WITHOUT THE AUTHORITY OF LAW AND ETC.
THESE PETITIONS COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R
Petitioner has called in question the legality and correctness of the orders dated 8.9.2017 passed by the Respondent No.1 enclosed as Annexures-A1, A2 and A3 to the writ petitions as well as endorsement dated 8.2.2018 issued by the Respondent No.1 enclosed as Annexure-B to the writ petitions and the consequential endorsement dated 14.02.2018 issued by the Respondent No.2 enclosed as Annexures-C1, C2, C3 and C4 to the writ petitions.
Petitioner is engaged in execution of civil works contract of construction of buildings and other works contract for private parties and Government. The
- 3 - petitioner-company was registered both under the Karnataka Value Added Tax Act, 2003 [‘Act’, for short] and Central Sales Tax Act, 1956. The business premises of the petitioner was visited by the Respondent No.2 on 14.11.2011 for the purpose of audit for the period April 2010 to March 2011. Pursuant to audit conducted, the reassessment order dated 22.11.2011 was passed by the Respondent No.2 under Section 39[1] of the Act wherein returns filed by the petitioner during the audit period were accepted and proceedings initiated under Section 39 of the Act were dropped. Further, based on intelligence report dated 16.04.2013, reassessment order under section 39[2] of the Act for the period April 2010 to March 2011 was passed by the Respondent No.2 on 26.06.2013 wherein certain ineligible input credits were identified and an amount of Rs.8,991/- was demanded which was remitted by the petitioner along with interest.
Subsequently, reassessment order under section 39[1] of the Act was
- 4 - passed by the Respondent No.2 for the period April 2011 to March 2012 on 26.06.2013 and reassessment order under Section 39[1] of the Act was passed by the Respondent No.2 for the period April 2012 to March 2013 on 29.07.2013. The amount demanded pursuant to these reassessment orders was remitted by the petitioner with interest. The Respondent No.2 again resorted to assessment and issued three separate notices under section 39[2] of the Act for the tax periods April 2010 to March 2013 alleging that the claim of labour and like charges at 30% on the total contract receipts which includes taxes collected and again allowing deduction towards taxes collected to arrive at taxable works contract receipts resulted in excess allowance of labour charges on the taxes collected which resulted in short payment of tax.
The petitioner submitted his reply to the said proposition notices issued under Section 39[2] of the
- 5 - Act. Considering the objections filed by the petitioner, Respondent No.2 passed orders under Section 39[2] of the Act to the effect that there was merit in the objections filed by the petitioner and hence proposal made in the show cause notice dated 30.04.2014 was dropped. Again notice under section 39 [2][e] of the Act dated 25.06.2016 was issued by the Respondent No.2 to initiate reassessment proceedings for the period April 2010 to March 2013 on the same ground that claim of labour and like charges at 30% on the total contract receipts which include taxes collected and again allowing deduction towards taxes collected to arrive at taxable works contract receipts resulted in excess allowance of labour charges on the taxes collected which resulted in short payment of tax. Pursuant to which the petitioner submitted his reply to the three reassessment notices dated 25.06.2016 on 29.07.2016. In the meantime, the first respondent-Joint Commissioner of Commercial Taxes issued notice dated
- 6 - 3.11.2016 invoking the power under Section 63-A of the Act, for the very same tax periods April 2010 to March 2013 on the very same ground that deduction of 30% as labour and like charges claimed by the petitioner has resulted in excess deduction and short payment of taxes. The petitioner replied to the said notice issued under Section 63-A[1] of the Act. After considering the reply, the Respondent No.1 proceeded to pass the orders revising the order of the Respondent No.2 dated 16.08.2014 passed under Section 39[2] of the Act for the tax periods April 2010 to March 2013. Pursuant to the orders passed by the Respondent No.1, petitioner has filed rectification application under Section 69 of the Act which came to be rejected. These orders of the Respondent No.1 passed under Section 63-A[1] of the Act as well as endorsements issued by the Respondent No.1 rejecting the rectification application are impugned herein.
- 7 - 4. The main ground of challenge in these writ petitions is regarding the jurisdiction of the Respondent No.1 to pass an order under Section 63-A[1] of the Act pending reassessment proceedings under Section 39[2][e] of the Act.
Learned counsel appearing for the petitioner reiterating the grounds urged in the writ petitions, would contend that subsequent to dropping of the proceedings initiated under Section 39[2] of the Act by the Respondent No.2, notices were issued on 25.06.2016 under Section 39[2][e] of the Act by the very same Authority, to initiate reassessment proceedings. Such being the position, the order passed by the Respondent No.2 on 16.08.2014 dropping the proceedings initiated under Section 39[2] of the Act ceases to exist. The Respondent No.1 initiating proceedings under Section 63-A[1] of the Act, to revise
- 8 - the order dated 16.08.2014 passed by the Respondent No.2 is nullity and without authority of law.
In support of his contentions, learned Counsel for the petitioner placed reliance on the following Judgments: [a] ‘THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES v. H.R. SRI RAMULU’ reported in 1977 [39] STC 177.
[b] ‘V. JAGANMOHAN RAO v. COMMISSIONER OF COMMERCIAL TAX AND EXCESS PROFITS TAX, ANDHRA PRADESH’ reported in 1970 [75] ITR 373.
[c] ‘M/s. KUNDAN LAL SRIKISHAN, MATHURA [U.P.] v. COMMISSIONER OF SALES TAX, U.P. AND ANOTHER’ reported in 1987 [1] SCC 684.
Learned Additional Government Advocate appearing for the respondents supporting the impugned orders, would submit that the Respondent No.1 is empowered to revise the order passed by the Assessing
- 9 - Authority dropping the proceedings under Section 39[2] of the Act. Dropping of reassessment proceedings initiated by the Respondent No.2 being erroneous and prejudicial to the interest of the revenue, it cannot be held that the Respondent No.1 had no jurisdiction to invoke Section 63-A[1] of the Act, to revise such orders.
Learned Additional Government Advocate would submit that the Respondent No.2 failed to act upon the notices issued under Section 39[2][e] of the Act, which constrained the Respondent No.1 to proceed with the revisional powers under Section 63-A of the Act. Thus, he submits that the revisional proceedings initiated by the Respondent No.1 is justifiable and the same do not call for any interference by this Court.
Heard the learned counsel appearing for the parties and perused the material on record.
- 10 - 10. The crucial issue that arises for consideration in these writ petitions is whether the Respondent No.1 acted without jurisdiction in invoking Section 63-A of the Act pending reassessment proceedings under Section 39[2][e] of the Act?
To collate the legal aspects on this issue, it is apt to refer to the Judgments of the Hon’ble Apex Court in the case of SRI RAMULU supra, wherein the Hon’ble Apex Court has held thus: “xxx xxx xxx
The reason for that is that once an assessment is reopened, the initial order for assessment ceases to be operative. The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment. The initial order for reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only
- 11 - with respect to a part of the matter covered by the initial assessment order.”
Similarly, in the case of JAGANMOHAN RAO supra, the Hon’ble Apex Court has observed as under: “Section 34 in terms states that once the Income-tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22[2] and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under sub-section [2] of section 22 the previous under assessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34[1][b] the Income-tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year.”
- 12 - 13. Similarly, in the case of KUNDAN LAL SRI KISHAN supra, it is held by the Hon’ble Apex Court as under: “7. In reaching the above conclusion the Court relied upon three decisions of this Court, namely, CIT v.V. Jagan Mohan Rao & Others, [1970] 1 S.C.R. 726; CST. M/s. H.M. Esufali, [1973] 3 S.C.R. 1005 and International Cotton Corporation (P) Ltd. v. CTO [1975] 2 S.C.R. 345 was a case. The third of the above three cases, namely, International Cotton Corporation (P) Ltd. v. Commercial Tax Officer, Hubli & Ors., (supra) was a case arising out of rectification proceedings. In that case this Court held that once an assessment order had been rectified and it was sought to make a further rectification of that order the period of limitation for making such further rectification would commence not from the date of the original assessment order but from the date of the earlier rectification order. In Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu this Court has clearly laid down
- 13 - that when once a notice is issued for purposes of making reassessment the assessment proceedings become re-opened and the initial order of assessment ceases to be operative. The Court has further held that the effect of the re-opening of the assessment is to vacate or set aside the initial order of assessment and to substitute in its place the order made on reassessment and that the result of re-opening of the assessment is that a fresh order for reassessment would have to be made in respect of all matters including those matters in respect of which there is no allegation of the turnover escaping assessment. The same principle should apply even to a case like the present one where an application for rectification is filed after the completion of the reassessment proceedings”.
In the light of these Judgments, it is crystal clear that when once a notice is issued for the purpose of making reassessment, the assessment proceedings would be reopened and the order of assessment ceases
- 14 - to operate. In the present set of facts, notices for reassessment were issued under Section 39[2][e] of the Act by the Respondent No.2 on 25.06.2016 whereby the proceedings initiated under Section 39[2] of the Act were dropped. Thus, it can be held that once notice dated 25.06.2016 was issued by the Respondent No.2 to initiate reassessment proceedings, against the reassessment order dated 16.08.2014 passed under Section 39[2] of the Act, the said order dated 16.08.2014 ceases to operate, or in other words, it ceases to be in existence to revise the said order.
The Respondent No.1 initiated the revisional proceedings by issuing notice dated 3.11.2016 to revise the order dated 16.08.2014 passed under Section 39[2] of the Act which has ceased to be operative on 25.06.2016 when notice was already issued by the Respondent No.2 under Section 39[2][e] of the Act.
- 15 - 16. In the circumstances, it can be held that the proceedings initiated by the Respondent No.1 under Section 63-A[1] of the Act is without jurisdiction and nullity in the eye of law. Hence, for the aforesaid reasons, the orders impugned cannot be sustained and deserves to be quashed.
Accordingly, the impugned orders are quashed with liberty to the Respondent No.2 to proceed with the reassessment proceedings initiated under Section 39[2][e] of the Act in accordance with law.
Writ petitions stand disposed of in terms of the above. The Respondent No.2 shall conclude the reassessment proceedings in an expedite manner. Petitioner shall appear before the Respondent No.2 on 24.04.2018 without expecting any further notice. The Respondent No.2 shall hear the petitioner and pass appropriate orders in accordance with law.
- 16 - All rights and contentions of the parties are left open to be adjudicated before the Respondent No.2.
Sd/- JUDGE
AN/-