2018 (12) TMI 1012 – KERALA HIGH COURT – TMI – Penalty – Whether the refusal to exercise discretion by the learned Single Judge as against penalty proceedings was proper or not, especially considering the fact that the penalty proceeding taken was under Section 67 of the Kerala Value Added Tax Act, 2003?
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Held that:- When a penalty proceeding is initiated there is no question of a permission to file revised return, beyond the period of limitation – In the present case, the notice issued at Ext.P2 was dated 28.03.2018. The assessee has a contention that Ext.P3 communication seeking revised reruns was issued on 27.03.2018, a day before the proceedings had commenced. However, it is to be emphasised that the audited statement was filed long back on 16.05.2017, when the assessee definitely had the knowledge of the shortfall in the returns. There was no cause for the assessee to have, not sought for a revised return immediately thereafter.
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The Intelligence Officer had in attempti
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proceed with the matter and decide on whether there was any willful non-disclosure of material. 2. On facts, it has to be noticed that the assessee filed its return for the year 2014-15. The assessee, was a dealer who was required to file audited statement of accounts under Section 42 of the KVAT Act. The audited statement was filed on 16.05.2017. Admittedly as per the audited statement there were discrepancies in the returns filed. The assessee had an option to file a revised return along with the audited statement, as provided under Section 42. For reasons best known to the assessee, the opportunity was not availed. The learned Counsel for the assessee, before us, submits that at that point there was a change in regime and the goods and services enactment was already in place and hence there was a confusion as to how the revised return has to be filed. 3. Subsequently, an Intelligence Officer took note of the discrepancies in the annual return, as revealed on the filing of the audite
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Joseph Prabakar appearing for the assessee would at the outset take us through the provisions to persuade us to find the proceedings being totally without jurisdiction. According to the learned Counsel on the return being filed, the Assessing Officer could proceed under Section 25 for the purpose of assessment of escaped turnover within a period of five years; which period as of now is not over. Sub-section (3) of Section 25 is specifically noticed to argue that therein initiation of proceedings under Section 67 would necessarily be regulated by a satisfaction entered by the Assessing Officer as to whether the escapement, is due to willful non-disclosure of assessable turnover or not. In the present case, it is pointed out that the audit report was filed by the assessee themselves and hence there could be no willful non-disclosure alleged as against the assessee. True there was no revised return filed as is permissible under Section 42 but however, it is submitted, the mere fact that t
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e escapement was by reason of willful non disclosure of the assessee. Reliance is also placed on 2014 VIL 492 Ker (M/s. Chakkiath Brothers v. The Assistant Commissioner, Commercial Taxes,) and WP(C) No.27101 of 2015 (Canmec Office Technologies v. State of Kerala). The assessee also argues on the basis of Joemon Rajan that there was an estimation made by the Intelligence Officer insofar as adopting 60% Gross Profit (GP) which in any event was not permissible. 5. The learned Senior Government Pleader submits that there was absolutely no estimation made by the Intelligence Officer, since it is stated in the impugned order that the GP was as disclosed in the returns. There was definitely suppression, insofar as the returns having not disclosed the actual purchase, sales and so on and so forth as noticed in the order itself. With respect to the contumacious conduct that is required under Section 67 it is pointed out that this Court in State of Kerala v. Joy Alukkas [2018(3) KLT 360] found s
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elligence Officer has absolutely no power to carry out an estimation. It was also in that context that it was observed that in cases where the computation of tax evaded is not possible; the Intelligence Officer who detects the offence should not attempt to quantify the tax likely to have been evaded, which is essentially an exercise of estimation on best judgment, which power is exclusively conferred on the assessing authority. Chakkiath Brothers and Canmec Office Technologies was in the context of penalty being imposed on a wrong claim of exemption made by the assessee which the Assessing officer could have interfered with at the time of assessment. The reliance placed in both the aforesaid case was on the decision of the Hon'ble Supreme Court in Sreekrishna Electricals v. State of Tamil Nadu [(2009) 11 SCC 687]. 7. We sitting in Division had distinguished the two regimes and the more onerous obligation on the assessee in the VAT regime to file a correct return, the failure of whi
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y. The learned Single Judge found the penalty proceedings to be possible only in case of reassessment. The power of the Assessing Officer to proceed under Section 19 was held to be independent of the power of the Intelligence Officer to proceed under Section 45A; by the Division Bench in the cited case. The enabling power under Section 19 of the KGST Act and Section 25 of the KVAT Act, to resort to imposition of penalty under Section 45A or Section 67, is independent of the power exercised by the departmental officers empowered to initiate a proceeding under Section 45A or Section 67 of the two enactments. 9. In this case, the Intelligence Officer had verified the KVATIS, to notice the discrepancies as revealed from the returns filed by the dealer, which came to light when the audited statement was filed. In this context, we have to notice the audited statement itself was filed on 16.05.2017 and the dealer did not avail of the opportunity to file a revised return. Whatever be the reaso
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esaid discrepancies to the notice of the department. 10. The learned Counsel then would rely on C.R. Varghese to contend that in certain instances this Court, this very Division Bench had granted the opportunity to file revised return even when the time for filing such returns had expired. We have to notice the facts in each of the cases which were considered by us in C.R Varghese. In one, the monthly returns were filed by the assessee as provided under the KVAT Act, and audited statement filed as per Section 42 on 30.12.2016. Within a month, on 30.01.2017 Ext.P1 communication was addressed to the Assessing Officer pointing out the discrepancies in the returns and seeking permission to revise the returns. After the said communication, a proceeding was initiated by the Assessing Officer under Section 25(3)threatening reopening of assessment. The next case was on facts of the assessee having not disclosed the purchase of machinery as capital equipment in March 2014. In September 2015 the
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ccept it. At the risk of repetition, it has to be stated that there is no prohibition in attempting a revision of return after the time specified, if no penal proceeding is initiated. What would be required in such circumstances, as was earlier noticed, is a practical and pragmatic approach, wherein the Assessing Authority looks into the bona fides of the claim and decides whether a permission can be granted or not. The Assessing Officer definitely would have the authority to examine such claims even beyond the period and decide the question in accordance with well established principles of law and ensure that the attempt is not to cover up or get over a penal provision or avoid the penal consequences of detection. 12. Hence when a penalty proceeding is initiated there is no question of a permission to file revised return, beyond the period of limitation. In the present case we see that the notice issued at Ext.P2 was dated 28.03.2018. The assessee has a contention that Ext.P3 communic
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dings under Article 226 . 13. We also notice that the estimation alleged in the penalty order is with respect to the GP at 60%. We see from the order that the Intelligence Officer states that it is the G.P disclosed and conceded in the return. We have not seen the return nor have we examined or affirmed the said finding of the Intelligence Officer. The assessee would be free to urge such contention before the Appellate Authority and if there is any estimation made, then necessarily U.K Monu Timbers and Joemon Rajan would apply on all fours. As far as the submission of the learned Counsel appearing for the assessee that there is a proper assessment made by the Intelligence Officer we are not convinced prima facie that any estimation has been carried out. The Intelligence Officer had in attempting to find out the correct figures as per the audited report computed the tax evaded so as to determine the penalty; which is a permissible exercise. We hence leave the assessee to a statutory app
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