High Court at Ernakulam quashed the order confirming tax demand under KVAT Act which included closing stock in turnover for assessment year 2013-2014, directing fresh assessment.
Ext.P8 order quashed; direction to complete assessment afresh for assessment year 2013-2014.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR
FRIDAY, THE 4TH DAY OF AUGUST 2017/13TH SRAVANA, 1939
WP(C).No. 7412 of 2017 (B)
PETITIONER(S):
M/S RAJAN JEWELLERY AND DIAMONDS INDIA PVT. LTD.,
VIJAYAPURATHU CASTLE, KANNAMCODE, ADOOR P.O., ADOOR, REP. BY MANAGING DIRECTOR.
BY ADVS.SRI.ANIL D. NAIR
SRI.R.SREEJITH
SRI.P.JINISH PAUL KUM.MEKHALA M.BENNY SRI.JOSEPH GOPURAN
RESPONDENT(S):
THE INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, PATHANAMTHITTA-689 642.
BY GOVERNMENT PLEADER SMT. JASMINE M.M.
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04-08-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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WP(C).No. 7412 of 2017 (B)
APPENDIX
PETITIONER(S)' EXHIBITS
----------------------EXHIBIT P1 TRUE COPY OF THE NOTICE U/S-25(1) NO.32030242817/DATED 09.03.2015 ISSUED TO THE PETITIONER BY THE RESPONDENT FOR THE YEAR 2013-2014. EXHIBIT P2 TRUE COPY OF THE REPLY DATED 20-04-2015 FILED BY THE PETITIONER AGAINST P1 NOTICE. EXHIBIT P3 TRUE COPY OF THE LEDGER ACCOUNTS & AUDITED P&L ACCOUNT OF THE PETITIONER FOR THE PERIOD FROM 1ST APRIL, 2013 TO 31ST MARCH, 2014. EXHIBIT P4 TRUE COPY OF THE NOTICE U/S-25(1) NO.32030242817/DATED 21.04.2016 ISSUED TO THE PETITIONER BY THE RESPONDENT FOR THE YEAR 2013-2014. EXHIBIT P5 TRUE COPY OF THE LETTER DATED 7.5.2016 FILED BY THE PETITIONER AGAINST THE P4 REVISED NOTICE. EXHIBIT P6 TRUE COPY OF THE NOTICE U/S 95 DATED 30.01.2017 ISSUED BY THE RESPONDENT. EXHIBIT P7 TRUE COPY OF THE LETTER DATED 27-01-2017 FILED BY THE PETITIONER TO REOPEN THE ONLINE FILING FACILITY FOR FILING RETURN AND REMITTING TAX. EXHIBIT P8 TRUE COPY OF THE ORDER UNDER SECTION 25(1) OF THE KVAT ACT DATED 14.2.2017 ISSUED BY THE RESPONDENT FOR THE YEAR 2013-2014.
RESPONDENT(S)' EXHIBITS
NIL
TRUE COPY
P.S. TO JUDGE
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A.K.JAYASANKARAN NAMBIAR, J. ............................................................. W.P.(C).No.7412 Of 2017-(B ) ............................................................. Dated this the 4th day of August, 2017
J U D G M E N T
The petitioner, who is a registered dealer under the Kerala Value Added Tax Act (hereinafter referred to as the 'KVAT Act'), is aggrieved by Ext.P8 order passed under Section 25 (1) of the KVAT Act for the assessment year 2013-2014 confirming demand of tax and interest to an extent of Rs.1,36,42,740/-. The petitioner points out that, while passing Ext.P8 order, the assessing authority took note of the fact that the petitioner, who had been doing business in the assessment year 2013-2014, filed returns only up to February 2014, and although his registration was cancelled with effect from October 2014, for the period between March 2014 and October 2014, the petitioner had not filed any returns as required under the KVAT Act. In the pre-assessment notice issued to the petitioner, reliance was placed on the figures in the audited balance sheet and profit and loss account of the petitioner, to find that the total sales as per the profit and loss account was in an amount of Rs.21,62,44,467/- of which the total sales up to February 2014 was
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in an amount of Rs.16,00,52,872/- and the sales for March 2014 was in an amount of Rs.5,61,91,595/-. Thereafter, it was pointed out that a closing stock of Rs.16,15,28,705/- was also noticed and this was proposed to be assessed in the assessment year 20132014 itself, by adding a gross profit of 10% thereto, on the assumption that the goods representing the closing stock had been sold. Despite the fact that the petitioner submitted a detailed reply to the said proposal objecting to the same, the said proposal was confirmed by the Assessing Officer in Ext.P8 order.
On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I find from a perusal of Ext.P4 revised notice, and Ext.P8 order, that it is not in dispute that the registration of the petitioner was cancelled only with effect from October 2014. It is also not in dispute that the assessing authority took the total sales for the assessment year
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W.P.(C).No.7412 Of 2017-(B )
2013-2014 to be the figure of Rs.21,62,44,467/-. Thereafter, the assessing authority proposed, and later confirmed, an addition to the turnover in an amount representing the closing stock as on 31.03.2014, by reckoning 10% gross profit, on the assumption that the closing stock of goods had been sold by the petitioner during the assessment year in question. In my view, since it is not in dispute that the registration of the petitioner was cancelled only on October 2014, the figure representing closing stock should have been treated as the opening stock of the assessment year 20142015, and the trading activities of the petitioner for the period from April 2014 to October 2014 assessed, by looking into the books of accounts maintained by the petitioner for the said period. There was no warrant, whatsoever, for including the closing stock as on 31.03.2014, in the figure of turnover for the assessment year 2013-2014, more so when the assessing authority does not have any evidence to suggest that the goods representing the closing stock had been sold by the petitioner before 01.04.2014. Accordingly, I am of the view that Ext.P8 order, to the extent it includes the closing stock, as on 31.03.2014, in the turnover assessed for the assessment year 2013-2014, cannot be legally
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sustained. I therefore, quash Ext.P8 order, and direct the respondent to complete the assessment in relation to the petitioner for the assessment year 2013-2014 afresh, after hearing the petitioner, and taking note of the observations in this judgment. To enable the respondent to do so, I direct the petitioner to appear before the respondent at his office at 11 a.m on 18.08.2017. The respondent shall pass orders as directed within a month thereafter.
Sd/-
A.K.JAYASANKARAN NAMBIAR JUDGE
mns/04.08.17
1 issue framed by the court
Whether the inclusion of closing stock as on 31.03.2014 in the turnover assessed for the assessment year 2013-2014 is legally sustainable when the petitioner's registration was cancelled in October 20
1 provisions across 1 enactments
M/S RAJAN JEWELLERY AND DIAMONDS INDIA PVT. LTD.
THE INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, PATHANAMTHITTA-689 642.
A.K.JAYASANKARAN NAMBIAR
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
