Cause title — parties, addresses and appearances
HIGH COURT OF ORISSA: CUTTACK
W.P.(C) Nos.11126, 11127 and 11128 OF 2008
In the matter of an application under Articles 226 and 227 of
Constitution of India.
SMC Power Generation Limited,
Represented through its Director,
Shri Subash Chand Agrawal
…… Petitioner
(In all the Writ Petitions)
-Versus-
State of Odisha & others
…… Opp. Parties
For Petitioner : Mr. N. Venkataraman,
Senior Advocate
M/s. Satyajit Mohanty, R.R. Swain,
A. Mohaptra & S`. Pattnaik
For Opp. Parties : Standing Counsel for Revenue.
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Date of hearing & Judgment: 06.03.2019
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P R E S E N T:
THE HONOURABLE THE CHIEF JUSTICE SHRI K.S. JHAVERI
A N D
THE HONOURABLE SHRI JUSTICE K.R. MOHAPATRA
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K.S. JHAVERI, C.J.
Since in all these writ petitions, the questions of law involved
are similar, learned counsel for the petitioner requested to take up
W.P.(C) No.11126 of 2008 as leading case. Learned counsel for the
opposite parties have no objection to the same. As such, W.P.(C)
No.11126 of 2008 is taken up as leading case and the order to be
passed herein, will govern the fate of other two writ petitions, i.e.,
11127 and 11128 of 2008.
2
In W.P.(C) No.11126 of 2008, the petitioner has prayed for
the following relief:
“In the facts and circumstances stated above, it is
humbly prayed that this Hon’ble Court may graciously
be pleased to issue Rule NISI in the nature of Writ of
Certiorari and/or any other appropriate Writ/Writs, call
for the records and calling upon the Opp. Parties to
show cause;
As to why the order of Assessment dtd.2.7.2008
passed by the Asst Commissioner of Sales Tax,
Sambalpur Range, Sambalpur (vide Annexure-6) under
Section 42(4) of the Orissa Value Added Tax Act, 2004
for the period 1.4.2005 to 30.11.2006 imposing tax
amounting to Rs.3,53,36,607.00 including penalty of
Rs.2,35,57,738.00, shall not be quashed;
And if the Opp. Parties fail to show cause or
show insufficient cause, make the said Rule NISI
absolute.
And pass such other order/orders as this
Hon’ble Court may deem fit and proper;
And allow the Writ Petition.
And for this act of kindness the Petitioner shall
as in duty bound ever pray.”
2.
Learned counsel for the petitioner at the outset fairly
submitted that he is not canvassing any other points raised, but he is
restricting his argument only on the point of extension of time, which
ought to have been sought for within six months from the date of
receipt of the Audit Visit Report. That having not been done, the
impugned order of assessment is barred by limitation. In order to
appreciate the submission of learned counsel for the petitioner, some
facts as well as relevant dates need be considered.
3.
Pursuant to an audit under the provisions of the OVAT
Act, the Audit Visit Report (AVR) was submitted on 01.06.2007 under
Section 41(4) of the OVAT Act. The Assistant Commissioner of Sales
Tax, Sambalpur Range, Sambalpur (Opposite Party No.3) received the
Audit Visit Report on 05.07.2007. Accordingly, notice under Section 42
of the OVAT Act was issued by the Assessing Authority (Opposite Party
No.3) on 04.10.2007 which was received by the petitioner on
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10.10.2007 requiring him to appear on 13.11.2007. Thus, according to
him, the period of limitation has expired on 04.01.2008 or 09.04.2008,
i.e., six months from the date of issuance of notice to the petitioner, but
extension of further six months time was sought for as it is reflected in
the order dated 07.06.2008, which reads as under:
“7.6.2008. Call for the record. The cross verification of
statement and other documents are completed today.
As such, the audit visit report is related to the period(s)
1.4.05 to 30.11.2006. Thus, issue letter to the
Commissioner of Commercial Taxes, Orissa, Cuttack
accordingly seeking extension of further six months
time for completion of assessment U/s. 42(4) of the
OVAT Act of the instant dealer-Company. Put up the
record along with the permission order of the
C.C.T.(O), Cuttack for completion of assessment and
issue of assessment order and demand notice to the
dealer-Company.”
However, extension of time was granted on 26.06.2008
as is revealed from the order dated 30.06.2008 passed by the Asst.
Commissioner of Sales Tax, which reads as under:
“Record is put up to me today along with the order of
extension of time for further six months for completion
of assessment vide Head Office letter No. VII (REV)
06/08/10698/CT dated 26.6.2008. In this letter of
the Head Office it is revealed that the C.C.T.(O),
Cuttack has been pleased to extend a period of further
six months time for completion of assessment
U/s.42(6) of the OVAT Act and fixed the date of
completion of assessment on dated 04.7.2008. Hence,
put up the record on 2.7.2008 for issue of assessment
order and demand notice to the dealer-Company.”
4.
Learned counsel for the petitioner took us to the
provisions of Sections 41 and 42 of the OVAT Act, which read as under:
“41. Identification of tax payers for tax audit.-
(1) The Commissioner may select such individual
dealers or class of dealers for tax audit on random
basis or on the basis of risk analysis or on the basis of
any other objective criteria, at such intervals or in
such audit cycle, as may be prescribed.
(2) After identification of individual dealers or class of
dealers for tax audit under sub-section (1), the
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Commissioner shall direct that tax audit in respect of
such individual dealers or class of dealers be
conducted in accordance with the audit programme
approved by him:
Provided that the Commissioner may direct tax audit
in respect of any individual dealer or class of dealers
on out of turn basis or for more than once in an audit
cycle to prevent evasion of tax and ensure proper tax
compliance.
(3) Tax audit shall ordinarily be conducted in the
prescribed manner in the business premises or office
or godown or warehouse or any other place, where the
business is normally carried on by the dealer or stock
in trade or books of account of the business are kept
or lodged temporarily or otherwise.
(4) After completion of tax audit of any dealer under
sub-section (3), the officer authorized to conduct such
audit shall, within seven days from the date of
completion of the audit, submit the audit report, to be
called “Audit Visit Report”, to the assessing authority
in the prescribed form along with the statements
recorded
and
documents
obtained
evidencing
suppression of purchases or sales, or both, erroneous
claims of deductions including input tax credit and
evasion of tax, if any, relevant for the purpose of
investigation, assessment or such other purposes.
42. Audit assessment
(1) Where the tax audit conducted under sub-section
(3) of section 41 results in the detection of suppression
of purchases or sales, or both, erroneous claims of
deductions including input tax credit, evasion of tax or
contravention of any provision of this Act affecting the
tax liability of the dealer, the assessing authority may,
notwithstanding the fact that the dealer may have
been assessed under section 39 or section 40, serve on
such dealer a notice in the form and manner
prescribed along with a copy of the Audit Visit Report,
requiring him to appear in person or through his
authorized representative on a date and place specified
therein and produce or cause to be produced such
books of account and documents relying on which he
intends to rebut the findings and estimated loss of
revenue in respect of any tax period or periods as
determined on such audit and incorporated in the
Audit Visit Report.
(2) Where a notice is issued to a dealer under sub-
section (1), he shall be allowed time for a period of not
5
less than thirty days for production of relevant books
of account and documents.
(3) If the dealer fails to appear or cause appearance, or
fails to produce or cause production of the books of
account and documents as required under sub-section
(1), the assessing authority may proceed to complete
the assessment to the best of his judgment basing on
the materials available in the Audit Visit Report and
such other materials as may be available, and after
causing such enquiry as he deems necessary.
(4) Where the dealer to whom a notice is issued under
sub-section (1), produces the books of account and
other documents, the assessing authority may, after
examining all the materials as available with him in
the record and those produced by the dealer and after
causing such other enquiry as he deems necessary,
assess the tax due from that dealer accordingly.
(5) Without prejudice to any penalty or interest that
may have been levied under any provision of this Act,
an amount equal to twice the amount of tax assessed
under sub-section (3) or sub-section (4) shall be
imposed by way of penalty in respect of any
assessment completed under the said sub-sections.
(6) Notwithstanding anything contained to the contrary
in any provision under this Act, an assessment under
this section shall be completed within a period of six
months from the date of receipt of the Audit Visit
Report :
Provided that if, for any reason, the assessment is not
completed within the time specified in this sub-
section, the Commissioner may, on the merit of each
such case, allow such further time not exceeding six
months for completion of the assessment proceeding.
(7) No order of assessment shall be made under sub-
section (3) or sub-section (4) after the expiry of one
year from the date of receipt of the Audit Visit Report.”
5.
Learned counsel for the petitioner further contended
that the issue is squarely covered by the ratio in the case of State of
Punjab and Ors.-v- Shreyans Indus Ltd. and Ors; reported in (2016)
4 SCC 769, wherein the Hon’ble Supreme Court at paragraphs-8, 9
and 24 has observed as follows:
“8. As the submissions of the parties on either side
would be better understood once the relevant statutory
provision is noted, it would be apposite to reproduce the
provisions of Section 11 of the Act, which are as follows:
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“11. Assessment of tax.—(1) If the assessing authority
is satisfied without requiring the presence of dealer or
the production by him of any evidence that the returns
furnished in respect of any period are correct and
complete, he shall pass an order of assessment on the
basis of such returns within a period of three years
from the last date prescribed for furnishing the last
return in respect of such period.
(2) If the assessing authority is not satisfied
without requiring the presence of dealer who furnished
the returns or production of evidence that the returns
furnished in respect of any period are correct and
complete, he shall serve on such dealer a notice in the
prescribed manner requiring him, on a date and at place
specified therein, either to attend in person or to
produce or to cause to be produced any evidence on
which such dealer may rely in support of such returns.
(3) On the day specified in the notice or as soon
afterwards as may be, the assessing authority shall,
after hearing such evidence as the dealer may produce,
and such other evidence as the assessing authority may
require
on
specified
points, [pass
an
order of assessment within a period of three years from the last date prescribed for furnishing the last return in respect of any period.] (4) If a dealer having furnished returns in respect of a period, fails to comply with the terms of notice issued under sub-section (2), the assessing authority shall, within a period of three years from the 1st date prescribed for furnishing the last return in respect of such period, pass an order of assessment to the best of his judgment. (5) If a dealer does not furnish returns in respect of any period by the last date prescribed the assessing authority shall within a period of five years from the last date prescribed for furnishing the return in respect of such period and after giving the dealer a reasonable opportunity of being heard, pass an order of assessment to the best of his judgment. (6) If upon information which has come into his possession, the assessing authority is satisfied that any dealer has been liable to pay tax under this Act in respect of any period but has failed to apply for registration, the assessing authority shall, within five years after the expiry of such period, after giving the
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dealer a reasonable opportunity of being heard, proceed to assess, to the best of his judgment the amount of tax, if any, due from the dealer in respect of such period and all subsequent periods and in case where such dealer has wilfully failed to apply for registration, the assessing authority may direct that the dealer shall pay by way of penalty, in addition to the amount so assessed, a sum not exceeding one-and-a-half times that amount. (7) The amount of any tax, penalty or interest payable under this Act shall be paid by the dealer in the manner prescribed, by such date as may be specified in the notice issued by the assessing authority for the purpose and the date so specified shall not be less than fifteen days and not more than thirty days from the date of service of such notice: Provided that the assessing authority may, with the prior approval of the Assistant Excise and Taxation Commissioner, in charge of the district extend the date of such payment or allow payment by instalments against an adequate security or bank guarantee. (8) If the tax assessed under this Act or any instalment thereof is not paid by any dealer within the time specified thereof in the notice of assessment or in the order permitting payment in instalments, the Commissioner or any other person appointed to assist him under sub-section (1) of Section 3 may, after giving such dealer an opportunity of being heard, impose on him a penalty not exceeding in amount the sum due from him. (9) Any assessment made under this section shall be without prejudice to any penalty imposed under this Act. (10) The Commissioner, may for reasons to be recorded in writing, extend the period of three years, for passing the order of assessment for such further period as he may deem fit. (11) Where the proceedings of the assessment are stayed by an order of any court, the period for which such stay remains in force, shall not count towards computing the period of three years specified under this section for passing the order of assessment. (12) The assessing authority may, on his own motion, review any assessment order passed by him and such review shall be completed within a period of one year from the date of order under review.”
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(emphasis supplied)
9.A mere reading of the aforesaid provision would reflect that wherever return is filed by the assessee, assessment is to be made within a period of three years from the last date prescribed for furnishing the return in respect of such period. On the other hand, in those cases where return is not filed or any dealer, who is liable to pay the tax under the Act, does not get himself registered therein, the period of assessment prescribed is five years. We are not concerned with the alternate situation as in the instant appeals not only the assessees are registered dealers, they had also filed their returns regularly within the prescribed period and, therefore, assessments were to be completed within a period of three years from the last date prescribed for furnishing the returns, which is the normal period prescribed. At the same time, sub-section (10) of Section 11 gives power to the Commissioner to extend a period of three years. Interestingly, there is no upper limit prescribed for which the period can be extended, meaning thereby such an extension can be given, theoretically, for any length of time. This discretion is, however, controlled by obligating the Commissioner to give his reasons for extension, and such reasons are to be recorded in writing. Obviously, the purpose of giving reasons in writing is to ensure that the power to extend the period of limitation is exercised for valid reasons based on material considerations and that power is not abused by exercising it without any application of mind, or mala fide or on irrelevant considerations or for extraneous purposes. Such an order of extension of time, naturally, is open to judicial review, albeit within the confines of law on the basis of which such judicial review is permissible. xxx
xxx
xxx
xxx
24.If one is to go by the aforesaid dicta, with which we entirely agree, the same shall apply in the instant cases as well. In the context of the Punjab Act, it can be said that extension of time for assessment has the effect of enlarging the period of limitation and, therefore, once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore, there would be no question of extending the time for assessment when the assessment has already become time-barred. A valuable right has also accrued in favour
9
of the assessee when the period of limitation expires. If the Commissioner is permitted to grant the extension even after the expiry of original period of limitation prescribed under the Act, it will give him right to exercise such a power at any time even much after the last date of assessment. In the instant appeals itself, when the last dates of assessment were 30-4-2004, 30- 4-2005, 30-4-2006 and 30-4-2007, orders extending the time under Section 11(10) of the Act were passed on 17- 8-2007, 17-8-2007, 17-8-2007 and 25-5-2007 respectively. Thus, for Assessment Year 2000-2001, order of extension is passed more than three years after the last date and for Assessment Year 2001-2002, it is more than two years after the last date. Such a situation cannot be countenanced as rightly held by the High Court. When the last date of assessment in respect of these assessment years expired, it vested a valuable right in the assessee which cannot be lightly taken away. As a consequence, sub-section (11) of Section 10 has to be interpreted in the manner which is equitable to both the parties. Therefore, the only way to interpret the same is that by holding that power to extend the time is to be exercised before the normal period of assessment expires. On the aforesaid interpretation, other arguments of Mr Ganguli lose all significance. Argument of the learned Senior Counsel for the appellants based on Section 148 CPC would be of no consequence. This section categorically states that power to enlarge the period can be exercised even when period originally fixed has expired. Likewise, reliance upon Section 139(2) of the Income Tax Act is misconceived. That provision is made for the benefit of the assessee which empowers the assessing officer to grant an extension of time for filing of the return of income and, therefore, obviously will have no bearing on the issue at hand. Moreover, this Court in Ajanta Electricals case [CIT v. Ajanta Electricals, (1995) 4 SCC 182] , which is relied upon by the learned counsel for the appellant, held that the time can be extended even after the time allowed originally has expired on the interpretation of the words “it has not been possible” occurring in Section 133(2) of the Act. The Court, thus, opined that the aforesaid expression would mean that the time can be extended even after original time prescribed in the said provision has expired. Same is our answer to the argument of Mr Ganguli predicated on
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Section 28 of the Arbitration Act, 1940 as that provision was in altogether different context.”
6.Taking into consideration the provision under sub- section (6) of Section 42 of the OVAT Act including the proviso, it can be safely said that the notice period had already expired when the extension for time to complete the assessment was sought for. The same was done much after six months of expiry of the period of limitation in January, 2008 but the extension is sought for in June, 2008. 7. In that view of the matter and in view of the observations made by the Hon’ble Supreme Court in the case of Shreyans Indus Ltd. and Ors (supra), we are of the considered opinion that the notice is without juri iction. These writ petitions deserve to be allowed and the same are allowed. No other contention is canvassed in view of the fact that the petitioner has succeeded on the first point in the present case.
……..…………………
K.S. JHAVERI
(CHIEF JUSTICE)
agree
……..……………………
K.R. MOHAPATRA
(JUDGE)
Orissa High Court, Cuttack. Dated the 6thth March, 2019/bks/jm
