Remanded

State of Kerala v. Smt. Annamma Peter

Kerala HC18 Jun 2020OT.Rev/169/2017

Case brief

AI extract

What is this about?

The High Court of Kerala allowed a revision petition filed by the State against the KERALA VAT APPELLATE TRIBUNAL. The Tribunal had set aside an assessment for purchase suppression. The Court ruled that without a revised return and substantiating material for sales, the finding of purchase suppression stood, restoring the Assessing Officer's order but reserving the correctness of gross profit addi

What did the court decide?

Revision allowed; order of the first appellate authority and Tribunal set aside; order of the Assessing Officer restored.

State of Kerala Vs Smt. Annamma Peter — GST and Indirect Tax | Kerala HC (2020)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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THE HONOURABLE MR.JUSTICE T.R.RAVI

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THURSDAY, THE 18TH DAY OF JUNE 2020 / 28TH JYAISHTA, 1942

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O.T.Rev.No.169 OF 2017

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AGAINST THE ORDER IN T.A.(VAT) No.475 OF 2013 DATED 28.04.2017 OF KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM

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[ASSESSMENT YEAR 2010-11]

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REVISION PETITIONER/APPELLANT/RESPONDENT/REVENUE:

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STATE OF KERALA, REPRESENTED BY THE DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM.

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BY SR. GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN.

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RESPONDENT/RESPONDENT/APPELLANT/ASSESSEE:

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SMT. ANNAMMA PETER, AMMINI ELECTRONICS, TRIPUNITHURA-682301.

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R1 BY ADV. SRI.P.S.SOMAN R1 BY ADV. SMT.T.RADHAMANY

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THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 18.06.2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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O.T.Rev.No.169 of 2017

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K.Vinod Chandran & T.R.Ravi, JJ.

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O.T.(Rev.) No.169 of 2017

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Dated, this the 18^th day of June, 2020

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ORDER

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Vinod Chandran, J.

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Revision by the State, against the order of the

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Tribunal which upheld the order of the first appellate authority reversing the assessment made for the year 2010-11. The assessee, the respondent herein, filed an annual return reporting purchases lesser than that shown in the Trading and Profit and Loss account. The undisclosed purchase was also discernible from the audit report. Notice was issued for re-opening the self-assessment made under Section 21 of the Kerala Value Added Tax Act, 2003 ['KVAT Act' for brevity], pointing out two defects, one purchase suppression and the other discount claimed not being supported by sufficient materials.

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2. The re-assessment was completed by Annexure-A,

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allowing the discount claimed based on the evidence produced; but, however, adding the purchase suppression to the turnover along with 25% gross profit (GP). In fact, before the Assessing Officer though the assessee had sought for time to proffer explanation regarding the difference in

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purchase, nothing was furnished.

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O.T.Rev.No.169 of 2017

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3. Before the first appellate authority, the assessee admitted that certain purchases were not included in the monthly return and produced the bill for the same. The first appellate authority found that there is no omission or suppression in purchases or subsequent sales. It was found that non-inclusion of the purchase bills only resulted in the input tax being denied to the assessee. The Tribunal, in the State's appeal, found that the best judgment assessment carried out adding 25% for probable omission and suppression and 25% towards gross profit was not proper.

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4. The questions of law raised by the State are as

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follows:

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“(1) Ought not the tribunal below have held that, additions made by the assessing authority on account of purchase suppression and consequent estimation of taxable turnover under Section 25(1) of the Kerala Value Added Tax Act, 2003 were in order in view of the well settled principles of best judgment assessment;

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(2) Ought not the tribunal below have found that mere production of some invoices at the appellate stage will not absolve the assessee from the risk of best judgment assessment in the absence of a revised return as permitted under Section 42 of the Act;

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O.T.Rev.No.169 of 2017

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(3) Ought not the Tribunal have found that the first appellate authority went wrong in allowing input tax credit in respect of the purchase turnover in question;

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(4) Is not the finding of the tribunal below to the effect that, in the facts and circumstances of the case it is not the best judgment assessment but penalty proceedings under Section 67(1) alone would lie is totally misconceived.

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(5) Is not the findings of the tribunal below that additions made by the assessing authority were unwarranted is incorrect and perverse in the facts and circumstances of the case”.

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5. At the outset we have to place on record our deep anguish in the casual manner in which both the appellate authorities carried out their adjudication as evidenced from the orders. The first appellate authority merely on production of four purchase bills found no omission or suppression in purchases and sales. Admittedly these four purchases were not disclosed in the returns. If the sales were properly made in the year, then the assessee could have substantiated the same from the specific sale invoices in relation to the purchased items as per the bills produced. We do not see any such substantiation having been attempted by the assessee before the Assessing Officer or the Appellate Authority. It is also pertinent

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that the assessee had not filed even an explanation much less any materials before the Assessing Officer to substantiate their contention with respect to undisclosed purchases. Likewise, we see from the Tribunal's order that the Tribunal has found fault with the 25% addition made for probable omission and suppression, which does not at all figure in the best judgment assessment.

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6. We answer the 1^st and 2^nd questions together. There was admittedly discrepancy in the returns filed and Trading and Profit and Loss account. The assessee's Counsel before us contended that the discrepancy was noticed only from the audit report filed by the assessee and the items were not sold in that year and that the purchased goods were available with the closing stock. We notice that this is contrary to the submission made before the first appellate authority; on which the first appellate authority found that there is no sale suppression. The first appellate authority has accepted the assessee's contention that the articles were sold in the same year and tax suffered for reason of which the input tax credit was also allowed. As we noticed earlier, there was no substantiating material to prove the sales having been effected in the assessment year nor was there any material available to

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establish that the items so purchased were available with the assessee as closing stock in the close of the year. In such circumstance, it can only be deemed to be a purchase suppression and sale effected without it being reflected in the books of accounts.

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7. It is also pertinent that when an audit report is filed under Section 42 of the KVAT Act, there is a provision for the assessee to file a revised return. We do not find any reason to accept the contention of the assessee that only by reason of the voluntarily filed audit report the discrepancy was noticed by the Assessing Officer. The assessee is required to file an audit report as per the statute and if there is any discrepancy, the statute enables filing of a revised return, paying the differential tax, if any. The assessee has failed to comply with that. We answer both the questions in favour of the Revenue and against the assessee.

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8. With respect to the input tax credit, the assessee having not disclosed the same in the returns, there is no question of any such claim being made. Further, the Tribunal's laconic statement that penalty proceedings

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under Section 67(1) alone would lie is totally misconceived. When purchase suppression is found in penalty

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proceedings, only the tax evaded could be reckoned. However, in a best judgment assessment even probable omissions and suppressions could be taken care of, by making additions. An Assessing Officer could resort to best judgment assessment as also penalty proceedings; which in the present case has not been attempted. Here the assessing officer merely added G.P to the suppressed purchases and demanded tax on that. No addition was made for probable suppression or omission and no penalty was imposed. The Assessing Officer has not made any further additions and has merely assessed the sales of the suppressed purchases with reasonable addition of gross profit. The questions raised at 3, 4 and 5 are also answered in favour of the Revenue and against the assessee.

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9. The learned Counsel for the respondent-assessee

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has a contention that by a subsequent amendment to the KVAT Act the assessee is entitled to input tax credit as also the addition of gross profit at a reduced 20%. The assessee will be free to move the Assessing Officer for

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the aforesaid relief, which the Assessing Officer may consider in accordance with law. We make it clear that we

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have not looked into the provision and found the entitlement of the assessee, which the Assessing Officer

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has to do independently.

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The revision is allowed, with the above reservation, setting aside the order of the first appellate authority and the Tribunal and restoring that of the Assessing Officer. Parties are left to suffer their

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respective costs.

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Sd/K.VINOD CHANDRAN JUDGE

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Sd/T.R.RAVI JUDGE

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Vku/-

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O.T.Rev.No.169 of 2017

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APPENDIX

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PETITIONER'S/S ANNEXURES:

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ANNEXURE A TRUE COPY OF THE PROCEEDINGS OF COMMERCIAL TAX OFFICER, TRIPUNITHURA DATED 15.10.2012 ANNEXURE B TRUE COPY OF THE ORDER OF 1ST APPELLATE AUTHORITY IN KVATA NO. 3459/2012 DATED 27.05.2013 ANNEXURE C CERTIFIED COPY OF THE ORDER OF TRIBUNAL DATED 28.04.2017. ANNEXURE C1 TRUE COPY OF ANNEXURE-C.

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[TRUE COPY]

State of Kerala v. Smt. Annamma Peter

Case brief

What is this about?

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State of Kerala v. Smt. Annamma Peter

Case brief

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