M/S.Aryacon Contractors And Engineers vs. State Of Kerala
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JUDGMENT T.R.Ravi, J. The above Writ Appeal is filed challenging judgment dated 18.02.2020 of the Single Judge in W.P.(C)No.4566/2020. The Writ Petition was filed, praying to call for the records leading to Ext.P5 assessment order and Ext.P6 demand notice issued by the 2nd respondent, and to quash the same; and for a direction to the 2nd respondent to keep in abeyance any recovery proceedings that may be initiated in pursuance of Ext.P5 assessment order and Ext.P6 demand notice. The issue relates to the assessment made under the KVAT Act for the year 2013-14. As per the pre- assessment notice, Ext.P1 dated 26.10.2019, the 2nd respondent sought to assess the appellant under Rule 10(2)(b) of the KVAT Rules, 2005 by treating the appellant as a dealer who has not maintained the Books of Account. The appellant submitted reply to Ext.P1 on 25.11.2019, wherein it was stated that the appellant had submitted the requisite statutory Audit Report online and hard copy of the same is being provided. The appellant had also produced the Books of Accounts, Financial Statements and other records required for the assessment. The Profit and Loss Account, Balance Sheet and supporting schedules relating for the year 2013-14, duly certified by the Chartered Accountant were also produced. The appellant has produced copy of the reply as per Ext.P3 and also the copy of the mail from the appellant's authorised representative, along with the attachment which contain the calculation statement of taxable turnover as per Exts.P4, P4(a) and P4(b), along with the writ petition. The 2nd respondent had, issued Ext.P5 assessment order on 31.12.2019. It can be seen from Ext.P5 that the 2nd respondent decided to accept the Books of Accounts, and to treat the appellant as a dealer coming under Rule 10(2)(a) of the KVAT Rules. Having taken such a decision, the 2nd respondent proceeded to assess the appellant without considering Exts.P3, P4, P4(a) and P4(b), which had been placed before him. Contention of the appellant was that, if the Assessing Authority was not satisfied with the explanation submitted by the appellant and the reconciliation statement produced, the Assessing Authority ought to have issued notice to the appellant regarding the proposed deviation that he intends to make, while carrying out the assessment. The appellant contends that, unless such a notice is issued, the appellant will not be able to satisfy the Assessing Authority regarding correctness of the documents submitted by the appellant.
The learned Single Judge, after noticing the requirements of Rule 10(2)(a) and Rule 10(2)(b), disposed of the writ petition, by relegating the appellant to the remedy of appeal. The appellant is challenging the judgment on the ground that, since Ext.P5 order was issued in total violation of principles of natural justice and in non-compliance of the mandatory procedure, it is without juri iction and submits that the learned Single Judge ought not to have relegated the appellant to the alternate remedy of appeal and ought to have exercised juri iction under Article 226 of the Constitution of India.
We find considerable force in the contention of the appellant. It is evident from Ext.P5 that the Assessing Authority had decided to deviate from the original proposal for treating the appellant as a dealer under Rule 10(2)(b), as contained in the pre-assessment notice; and assessed the appellant treating them as a dealer under Rule 10(2)(a) of the KVAT Rules. Having decided to proceed with the assessment under Rule 10(2)(a), the 2nd respondent ought to have issued a proposal notice to the appellant regarding the assessment proposed, on the basis of the Books which have been placed before the authority. It is evident from Ext.P5 assessment order that no such notice was issued to the appellant and the Assessing Authority had proceeded to assess the appellant without considering Exts.P3, P4, P4(a) and P4(b). The order is passed in clear violation of the principles of natural justice and we find that this is a fit case for interference under Article 226 of the Constitution of India. In the result, we set aside the impugned judgment in W.P. (C)No.4566/2020 and Ext.P5 assessment order. The 2nd respondent is directed to complete fresh assessment, after issuing a proposal notice and after taking into account the contentions of the appellant contained in Exts.P3, P4, P4(a) and P4(b); and after hearing the appellant. Fresh orders of assessment shall be issued within one month from the date of receipt of a copy of this judgment. C.K.ABDUL REHIM JUDGE T.R. RAVI JUDGE dsn APPENDIX APPELLANT'S ANNEXURE: ANNEXURE A AOF THE RECOVERY NOTICE DATED 25.2.2020, ISSUED UNDER SECTION 7 OF THE KERALA REVENUE RECOVERY ACT, 1968.
Reproduced from the public record of the Kerala High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.