Indira Devi A.V. v. The Commercial Tax Officer, Attingal, Thiruvananthapuram; The Assistant Commissioner (Assessment), Commercial Taxes, Special Circle, Tax Towers, Karamana, Thiruvananthapuram; The Inspecting Assistant Commissioner, Commercial Taxes, Tax Towers, Karamana, Thiruvananthapuram

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **MONDAY, THE 29TH DAY OF AUGUST 2016/7TH BHADRA, 1938** **WP(C).No. 12705 of 2016 (K) ----------------------------** ## **PETITIONER:** **-----------** **INDIRA DEVI A.V, STAR TRADERS, 28TH MILE, VETTIYARA P.O, NAVAIKULAM, THIRUVANANTHAPURAM DISTRICT, PIN 695 603.** **BY ADVS.SRI.S.SURESH BABU (CHERUNNIYOOR) SRI.AJI V.DEV** **RESPONDENT(S):** **--------------** **1.THE COMMERCIAL TAX OFFICER, COMMERCIAL TAX OFFICE, ATTINGAL, THIRUVANANTHAPURAM DIST. - 695 004.** **2.THE ASSISTANT COMMISSIONER (ASSESSMENT), COMMERCIAL TAXES, SPECIAL CIRCLE, TAX TOWERS, KARAMANA, THIRUVANANTHAPURAM -695 004.** **3.THE INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, TAX TOWERS, KARAMANA, THIRUVANANTHAPURAM -695 004.** **BY GOVERNMENT PLEADER SMT.LILLY.K.T** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29-08-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **mbr/** **WP(C).No. 12705 of 2016 (K)** **----------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS: -----------------------** **P1 : A TRUE COPY OF THE FIRST PRE-ASSESSMENT NOTICE DATED 18.10.2013 UNDER SECTION 25 OF THE KVAT ACT, 2003 FOR THE YEAR 2011-12 ISSUED BY THE ASSESSING AUTHORITY. P2 : A TRUE COPY OF THE REPLY DATED 29.10.2013 FILED BY THE PETITIONER TO EXHIBIT P1 NOTICE DATED 18.10.2013.** **P3 : A TRUE COPY OF THE SECOND PRE-ASSESSMENT NOTICE DATED 03.02.2014 UNDER SECTION 25(1) OF THE KVAT ACT, 2003 FOR THE YEAR 2011-12 ISSUED BY THE ASSESSING AUTHORITY.** **P4 : A TRUE COPY OF THE REPLY DATED 13.02.2014 FILED BY THE PETITIONER TO EXHIBIT P3 NOTICE DATED 18.10.2013.** **P5 : A TRUE COPY OF THE ASSESSMENT ORDER WITH DEMAND NOTICE DATED 22.04.2014 ISSUED BY THE ASSESSING AUTHORITY FOR THE YEAR 2011-12.** **P6 : A TRUE COPY OF THE APPEAL DATED 08.05.2014 FILED BY THE PETITIONER AGAINST EXHIBIT P5 ASSESSMENT ORDER FOR THE YEAR 2011-12. P7 : A TRUE COPY OF THE APPELLATE ORDER DATED 01.07.2015 OF THE DEPUTY COMMISSIONER (APPEALS), THIRUVANANTHAPURAM FOR THE YEAR 2011-12 AGAINST P.5 ASSESSMENT ORDER. P8 : A TRUE COPY OF THE THIRD PRE-ASSESSMENT NOTICE DATED 10.12.2015 UNDER SECTION 25(1) OF THE KVT ACT, 2003 FOR THE YEAR 2011-12 ISSUED BY THE ASSESSING AUTHORITY, IN CONNECTION WITH MODIFICATION OF ASSESSMENT AS PER P7 APPELLATE ORDER.** **P9 : A TRUE COPY OF THE REPLY DATED 08.01.2016 FILED BY THE PETITIONER TO EXHIBIT P8 NOTICE DATED 10.12.2015. P10 : A TRUE COPY OF THE MODIFIED ASSESSMENT ORDER WITH DEMAND NOTICE DATED 13.01.2016 ISSUED BY THE ASSESSING AUTHORITY FOR THE YEAR 2011-12.** **RESPONDENT(S)' EXHIBITS: NIL ----------------------//TRUE COPY// P.S. TO JUDGE mbr/** ## **A.M.SHAFFIQUE, J * * * * * * * * * * * *** W.P.C.No.12705 of 2016 ---------------------------------------Dated this the 29[th] day of August 2016 ## **J U D G M E N T** This writ petition has been filed challenging Ext.P10, an order passed by the Commercial Tax Officer in respect of the assessment year 2011-2012. 2. The short facts involved in the writ petition would disclose that the petitioner was served with notice dated 18/10/2013 under Section 25 of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as 'the Act') proposing to assess the petitioner to a total taxable turnover of Rs.10,86,23,456/- by adding the discount of Rs.88,49,785/- which the petitioner received from the suppliers. An apprehension was expressed that the cement was sold at a price lesser than its purchase price and therefore the discount will form part of sales turnover. Petitioner replied and objected to the same. Thereafter, another preassessment notice was issued under Section 25(1) of the Act on 29/10/2013. Petitioner again filed a reply and the assessment was completed as per assessment order dated 22/04/2014, which is produced as Ext.P5. While completing the assessment, the 2[nd] W.P.C.No.12705/2016 2 respondent found that the discount received will not form part of sales turnover and hence omitted the proposal to treat it as forming part of the sales turnover. It was further found that there was no purchase and sales suppression except for a turnover of Rs.5,01,169/-. However, the 2[nd] respondent disallowed the input tax credit amounting to Rs.11,06,223/- corresponding to the discount of Rs.88,49,786/- received from the supplier. According to the petitioner, as per Section 11 of the KVAT Act, input tax credit has to be allowed on actual purchase and the petitioner having admitted that total purchase has not been reported in the annual return and audited accounts, discount has been deducted from the total value of the bill and input tax credit was disallowed to that extent. Petitioner preferred an appeal and the appellate authority, by Ext.P7 order dated 01/07/2015, remitted the matter back to the Assessing Officer to consider the question whether the petitioner is entitled for input tax credit on the discount received. The complaint of the petitioner is that without considering the matter, as directed in Ext.P7, notice under Section 25(1) of the Act was issued on 10/12/2015 against which, the petitioner preferred an objection at Ext.P9 and the assessing authority, thereafter re- W.P.C.No.12705/2016 3 opened the entire assessment and passed Ext.P10 order taking a totally contrary view as stated in Ext.P5 order, which had become final by virtue of the merger on account of the appellate order, Ext.P7. 3. The contention urged by the petitioner is three fold. One is that the officer himself had arrived at a conclusion in Ext.P5 order that the purchase value is less the discount received. Hence re-opening of the said assessment on that ground was improper. Another contention urged is that when the appellate authority had remitted the matter back for the purpose of deciding only one issue as to whether the disallowance of input tax on discount received was justified or not, there is no reason for the assessing officer to have considered the entire matter afresh. It is also contended that the assessing authority was not justified in disallowing input tax credit. The learned counsel for the petitioner also placed reliance on the judgment in **Black Stone Rubber Industries Pvt. Ltd. v. State of Rajasthan & Ors.** _[(2002) 10 KTR 37 (Raj)]_ to contend for the proposition that mere change of opinion of the officer does not amount to a reason for re-opening an assessment. W.P.C.No.12705/2016 4 4. On the other hand, learned Government Pleader, while supporting the stand taken in Ext.P10 submits that, after the matter was remitted back by the appellate authority, the dealer was heard and on verification of the books of accounts of the dealer on 07/12/2015, it was noticed that there were certain discrepancies and irregularities. Hence a further notice dated 10/12/2015 was issued under Section 25(1) of the Act inviting objections. It is, pursuant to the said notice, that the proceedings had been taken again and therefore, it is contended that nothing prevented the Officer in considering the matter afresh after issuing notice under Section 25 of the Act. It is, therefore contended that if at all the petitioner has any challenge to Ext.P10, alternate remedy by way of appeal is already available and therefore there is no reason for this Court to interfere in the matter. Reliance is also placed on **Tenny Devassy v. State of Kerala** _[(2015) 23 KTR 586 (Ker)]_ wherein a Division Bench of this Court held that reimbursement of price received by a dealer is liable to be included in his turnover whereas the discount allowed to customer, and shown separately in the tax invoice, is liable to be excluded from the turnover. It is therefore contended W.P.C.No.12705/2016 5 that the officer was justified in taking such a view despite the fact that in an earlier occasion, a different view was taken in the matter. 5. The first question to be considered in the writ petition is whether there is any justification on the part of the assessing authority in having taken a different view in the matter despite the direction issued by the appellate authority. There is no dispute about the fact that the appellate authority remitted the matter back to consider whether the petitioner was entitled to input tax credit of discount. According to the learned Government Pleader, when an opportunity for hearing was given and the books were verified, the officer had to come to a conclusion that further notice has to be issued in terms of Section 25(1) of the Act and therefore a proposal has been made which ultimately resulted in Ext.P10. Section 25(1) of the Act reads as under: ## _“_ _**25. Assessment of escaped turnover.-**_ _(1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or return period or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction_ W.P.C.No.12705/2016 6 _has been wrongly made therefrom, or where any input tax or special rebate credit has been wrongly availed of, the assessing authority may, at any time within five years from the last date of the year to which the return relates, proceed to determine, to the best of its judgment, the turnover which has escaped assessment to tax or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction in respect of which has been wrongly made or input tax or special rebate credit that has been wrongly availed of and assess the tax payable on such turnover or disallow the input tax or special rebate credit wrongly availed of, after issuing a notice on the dealer and after making such enquiry as it may consider necessary:_ _Provided that before making an assessment under this sub-section the dealer shall be given a reasonable opportunity of being heard:_ _Provided further that where the escapement is due to the application of incorrect rate of tax, no assessment under this sub-section shall be made where the dealer files revised return and pays the tax which has escaped assessment along with interest under sub-section (5) of Section 31 and thrice the_ W.P.C.No.12705/2016 7 ## _interest as settlement fee._ _Provided also that the assessments pending as on 31[st] March, 2013 under this Section shall be completed on or before 31[st] March, 2014.”_ 6. There is no doubt about the jurisdiction of the assessing officer in a case where it is noticed that part of the turn over of the business of a dealer has escaped assessment to tax in any year or return period or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made therefrom or where any input tax or special rebate credit has been wrongly availed of, the assessing authority may, at any time within five years from the last date of the year to which the return relates, proceed to determine, to the best of its judgment, the turnover which has escaped assessment to tax. The question is whether such a method can be adopted when the appellate authority had remitted the matter back to the assessing officer. The appeal was filed by the assessee and therefore the question considered in the appeal was only regarding the entitlement of the petitioner for input tax credit. The issue as to whether discount has to be added on to the total turnover was not an issue pending before W.P.C.No.12705/2016 8 the Tribunal. It is apparent from the materials placed on record that the assessing officer had taken a different view from what has been taken earlier by issuing a fresh notice under Section 25 (1) of the Act. As rightly pointed out by the learned counsel for the petitioner, merely for the reason that there had been a mistake committed by an earlier Officer, it is not open for the Officer considering the same again to have a different view. Revenue authorities also had a right of appeal and no such opportunity had been availed of at the relevant time. 7. In the said circumstances, I am of the view that the question whether the discount has to be added to the turn over was not a matter which ought to have been taken up afresh especially when no appeal had been filed by the revenue authorities against Ext.P5 order. In the light of the above discussion, it is therefore clear that the assessing officer was not justified in re-opening the assessment already made as far as the addition of discount to the turn over is concerned. What was to be considered by the assessing officer was only whether input tax credit is liable to be made or not. In the said circumstances, I am of the view that Ext.P10 suffers from illegality which requires to W.P.C.No.12705/2016 9 be corrected. Accordingly, I am of the view that this writ petition requires to be allowed. Ext.P10 is set aside and the assessing officer is directed to consider the matter afresh in the light of Ext.P7 order passed by the appellate authority. The above direction is however without prejudice to the right of the revenue authorities to challenge Ext.P5, if so advised. (sd/-) **==> picture [258 x 13] intentionally omitted <==** jsr