R IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE30H DAY OF MAY2017PRESENT THE HON’BLE DR. JUSTICE VINEET KOTHARI AND THE HON’BLE DR. JUSTICE H. B. PRABHAKARA SASTRY SALES TAX REVISION PETITION No.100004 OF2014BETWEEN: M/S.SRI BALAJI TRADERS BEING REPTD. BY ITS PARTNER S R AYYADURAI S/O. S RAMAKRISHNAN AGE:
62. YEARS, No.116-B, SIRISI ROAD ALADAKATTI, HAVERI-581110 (BY SRI. ABBIGERI KALLESHAPPA ADV. FOR SRI. K.A.SHANTHAVERANNA ADV.) ... PETITIONER AND: STATE OF KARNATAKA REPT. BY THE COMMISSIONER OF COMMERCIAL TAXES, VANIJYA THERIGE KARYALAYA GANDHINAGAR, BANGALORE-560009 (By Sri.M.KUMAR, AGA) … RESPONDENT2Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka THIS STRP IS FILED U/SEC.65(1) OF THE KARNATAKA VALUE ADDED TAX ACT2003 AGAINST THE ORDER
DATED:08.08.2013 PASSED IN STA NO.1643/2012 ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL, BANGALORE, DISMISSING THE PETITION FILED UNDER SECTION63OF THE KARNATAKA VALUE ADDED TAX ACT2003 THIS PETITION COMING ON FOR FINAL HEARING THIS DAY, DR. VINEET KOTHARI, J., MADE THE FOLLOWING: ORDER
Mr.Abbigeri Kalleshappa, Adv. for petitioner. Mr.M.Kumar, AGA for respondent.
1. This Revision Petition has been filed by the assessee aggrieved by the order passed by the Karnataka Appellate Tribunal, Bengaluru on 08th August 2013, whereby dismissing the assessee’s appeal, the learned Tribunal upheld the order passed by the first appellate authority namely, the Joint Commissioner of Commercial Taxes (Appeals), Dharwad Division, Hubballi, on 08th June 2012, as well as the re- assessment order under Section 39(1) of the Karnataka Value 3 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka Added Tax Act, 2003 (for short ‘the Act’), passed by the assessing authority, namely the Deputy Commissioner of Commercial Taxes (Audit), Haveri, on 30th June 2009, by which the additional tax, including penalty and interest of Rs.10,847/- were imposed by the Assessing Authority for the assessment period of September 2007.
2. The assessee is a dealer of fireworks and matches and on account of survey conducted at his business place on 19th September 2007 being 5th day of Ganesha Festival, it was found that he had not issued regular invoices for the sale of fire crackers made by him, but instead of bills, some loose slips were found during the survey conducted in September 2007.
3. The assessee immediately accepted the said fact of loose slips being found and suppression of sales in view of non- issuance of regular invoices amounting to Rs.20,324/- and not only paid the tax thereon at Rs.2,541/-, but also paid 4 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka compounding fee of Rs.5,000/- as imposed upon him under Section 79 read with Section 82 of the Act.
4. Despite the said assessment made under Section 38 of the Act imposed upon him and the said tax of Rs.2,541/- and compounding fee of Rs.5,000/- paid, the learned assessing authority initiated the impugned re-assessment proceedings under Section 39 of the Act and passed the impugned best judgment assessment order for the month of September 2007 on 30th June 2009 imposing the additional tax, interest, penalty of Rs.10,847/- as aforesaid, observing that the assessee was in the habit of not issuing the tax invoices with deliberate intention to evade the tax to the Department. The two appellate authorities upheld the said reassessment order, as aforesaid and being aggrieved by the same, the assessee has approached this Court by way of present Revision Petition. 5 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka 5. The question of law which arises for our consideration in the present Revision Petition is as follows: “Whether after passing of regular assessment order under Section 38 of the Act on the basis of the defects and deficiencies as found during the course of survey under Section 52 of the Act and that tax liability having been paid with compounding fee under Sections 79 & 82 of the Act, whether on the basis of same material, without any other further evidence against the assessee, the assessing authority can undertake the reassessment proceedings under Section 39 of the Act for the same period?.” 6. The learned counsel for the assessee, Mr.Abbigeri Kalleshappa for Sri. K.A.Shanthaveeranna, submitted before us that the assessing authority in the course of survey conducted on 19th September 2007 had found certain loose slips and the assessee could not issue regular invoices on account of heavy rush of customers on Ganesha Festival and he being a seller of 6 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka fire crackers, maintained records in the form of loose slips which were found during the course of survey. Without contesting his liability to pay taxes on the basis of sales estimated on the basis of such loose slips, the assessee not only paid tax liability of Rs.2,541/- assessed by the assessing authority, but also paid composition fee of Rs.5,000/- as imposed upon him under Section 82 of the Act for the alleged offence under Section 79 of the Act for not issuing regular bills. He submitted that no other incriminating material was found by the assessing authority either during the course of that survey or thereafter, justifying the issuance of fresh notice for reassessment under Section 39 of the Act, for the same period on the basis of the same material.
7. He has relied upon certain judgments rendered under the provisions of Income Tax Act which are not of full application in the present case, because the powers of 7 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka reassessment under the Income Tax Act essentially requires recording the reasons and assessing authority should have “reason to believe” to initiate such reassessment proceedings under Sections 147 / 148 of the Income Tax Act as against the reassessment under Section 39 of the KVAT Act, which can be initiated for any reason for which turnover has escaped assessment.
8. On the other hand, the learned counsel for the Revenue, Mr.M.Kumar, AGA, relied upon the decision of a Co- ordinate Bench of this Court in the case of Mookambika Enterprises, Davanagere Vs. State of Karnataka, 2015 (81) Kar.L.J.
1 (HC) (DB), wherein this Court held that merely because a higher official visited the place of business, there is no obligation to proceed under Section 52(1)(l) of the Act and on the information furnished by such officer, the Assessing 8 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka Authority, under Section 39(1) of the Act can proceed to pass the reassessment order.
9. Having heard the learned counsels for the parties, we are of the opinion that the judgment relied upon by the learned counsel for the Revenue is not applicable to the present case. It is true that on the basis of the information and evidence gathered in the course of survey under Section 52 of the Act, the assessing authority has option to proceed under Section 39 of the Act, but it cannot do so once the regular assessment under Section 38 of the Act on the basis of the same evidence and material collected by him during the course of such survey is already made by it.
10. In the present case, we find that such regular assessment order under Section 38 of the Act was already passed by the assessing authority on the basis of the loose slips collected during the course of survey on 19th September 2007 9 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka and the tax liability as well as compounding fee were imposed and collected from the assessee. The Revenue has failed to point out any other material on record on the basis of which the assessing authority could be said to have any reason to reject the books of accounts maintained in the ordinary course of business and pass reassessment order on the basis of best judgment. The observations of the learned assessing authority in the impugned reassessment order under Section 39 of the Act that the assessee was in the habit of not issuing tax invoices with the deliberate intention to evade payment of tax is without any basis. In the absence of any further or fresh incriminating material found by the assessee, the repetitive assessment under the two provisions of the Act one under Section 38 of the Act and another reassessment under Section 39 of the Act cannot be permitted. 10 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka 11. There should be some material relevant to the case on the basis of which, the assessing authority can be reasonably assumed to have a belief that the assessee has evaded the payment of tax on any suppression of sales or purchases made by him. We do not find any such material in the present case. Mere affirmation of the reassessment order passed by the assessing authority under Section 39 of the Act by the two higher appellate forums does not deter us from holding that the very initiation of the reassessment proceedings without any further incriminating material was illegal.
12. Therefore, the present Revision Petition filed by the assessee deserves to be allowed and the same is accordingly allowed and answering the aforesaid question of law in favour of the assessee, we set aside the impugned orders passed by all the three authorities below under Section 39 of the Act for the assessment period in question. 11 Date of Order:
30. 05.2017 STRP No.100004/2014 M/S.Sri Balaji Traders Vs. State of Karnataka No order as to costs. RK/- Sd/- JUDGE Sd/- JUDGE