2018 (9) TMI 296 – KARNATAKA HIGH COURT – TMI – Jurisdiction of the Respondent No. 1 – power of 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.
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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?
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Held 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 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
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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. 2. Petitioner is engaged in execution of civil works contract of construction of buildings and other works contract for private parties and Government. The 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
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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. 3. The petitioner submitted his reply to the said proposition notices issued under Section 39[2] of the 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
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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. 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. 5. 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
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he 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. 8. 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. 9. Heard the learned counsel appearing for the parties and perused the material on record. 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? 11. To collate the legal aspects on this issue, it is apt to refer to the Judgments of the Hon ble Ap
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ed 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. 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 (
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uld 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 . 14. 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 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
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