Karnataka High Court
Windsor Garden Pvt Ltd vs The State Of Karnataka on 10 November, 2010
Author: Ashok B.Hinchigeri
Bench: Ashok B.Hinchigeri
IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 10*" DAY OF NOVEMBER, BEFORE THE HON'BLE MR. JUSTICE ASH_0AK._B. HI'NC'HIGERI.'_'_j;. I WRIT PETITION N0s.35005--i'6/2:'O1"0 (TARAESOI BETWEEN: ' A I A A WINDSOR GARDEN PvT LTD NO. 81, 36"' CROSS, 0 ST" BLOCK, JAYANAGAR, BANGALORE - 560 041. _ I . REPRESENTED BY ITSTMANAGINGD, DIRECTOR, MR. MSRINIVASA AGED 40 YEARS_._ ~ _ , PETITIONER (BySRI'vIPI<,RAH__A..: HuIL.:G,O.i§, ADVOCATE) AND: A A 1. THE STATEOF vKA'RNAT'A|:'<A44 A REP. BY ITSIPINANCE SECRETARY vID,H;ANA.SOuDTH_A, , * '~ ,BAl%I_GAL._Q RE 560 00:" _THE_ COMMISSIONER OF CO'r«:I§IERCI~A_L'TAXES, (AUDIT) :34',-V.DVO~III, _ BAN'GALDRE"560 009 RESPONDENTS
(BY SRI K.M.SHIVAYOGISWAMY, HCGP) WRIT PETITIONS ARE FILED UNDER ARTICLES 226 I 'T'i,'AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE 'ORDER DATED 25.10.2010 VIDE ANNEXURE F PASSED BY 2ND RESPONDENT UNDER SECTIONS 39 (1) OF THE '~._VKARNATAKA VALUE ADDED TAX ACT, 2003 FOR THE ASSESSMENT YEAR 2005-06 AND ETC.
THESE WRIT PETITIONS %OMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:
QRDER Sri K.M.Shivayogiswamy, the iearned High ___Court Government Pleader is directed to take notice .."~fo'i=..E_I'~the respondents.
2. The petitioner has caiieei-_into"""quejstion'.'_:r,,the reassessment order, dated 25.10.20i-Q 1if_Ai'iIVne'$<~:ire:IE), under Section 39(1) of the Karnata.l§Va~i.\/aiue"'2OO3'*I ('VAT Act' for short) for the.asses,sm:en.t"year.I2'GO.S,--Q.5 and the consequent demand notice, dated'2_6Vi}1'D.42(i.i(I:A('Annexure--G).
3. SVri.,\Iii.i<ramV: the learned counsel for the petitioner,_subn'ii't»s"thai: theflimpugned order is without the a'u'ti1orit';?_:':of;_Iawi._and Mtinout jurisdiction. The respondent No.2 hasy_'ri*oT_authorisatio'n whatsoever to pass the reassessment 'E*»__..order..'* has'Ir_ei:;ied on this Court's decision in the case of ..I_I,i'_j.M,(_5D,EL suci<ET AND ATTACHMENTS PRIVATE LIMITED, v. THE DEPUTY COMMISSIONER OF E" V--'i,"iciojMivisERcIAL TAXES (DM) HUBLI reported in 2010 (69) KLJ A299, wherein it is heid that only an officer, who is authorised by I ~~the Commissioner, is competent to make the reassessment. In fififi.
3 the said case, this Court quashed the reassessment order, as the officer had no express authorisation to do the reassessment.
4. The second contention urged on behalf of the petitioner is that the tax on iron and steel is ieviabie oniy at 4% a_'rici_"n_o't,_at 12.5%, as is done by the respondent No.2. In Submissions, Sri Vikram reiies on thiS~iiC.ourt's decisiion' .i_n,t'h_e a case of NAGARJUNA CONSTRUCTION tioiiéiriii~..isii~(:'i+Lt'i~iIfiét), BANGALORE v. STATE OF 'i{An.isiAT"AxAi_Aiiisipg*o.Ti4ERsii° reported in 2010 (69) KLJ'_..97. "ifhea:r"e--|.ev»a'nt porti.on_of the said judgment is extracted hereinbeiov-i~:__Vftp} The'refore,.VV.:'steel':and steel products used as raiiv, materia'i"!jy..%:thiev'éfsietitioriers are incorporated into their ciikii._ikvorks'=.or"i.other.piévorks contracts in the same form. except' that .the sarrie may be fashioned to suit the reqairenient, before___the same merge into the works which is"thereafter«.._identifl'ed as immovabie property. At the 'Vtimue steel and steel products do not lose their naturej_ or form and therefore cannot be subjected to tax; as.':th'e"';said goods are already subjected to tax as AAdeciare._d:goods under the csr Act. "
°:The third contention urged by Sri Vikram is that the T v'_4a'ri'orjs components used in the execution of the works contract not been considered separateiy. In some projects the 913%.4
petitioner has oniy constructed the compound and soid the immovabie properties. When the saie of the immovabie property is pure and simple not invoiving the works contract and not reiatable to the safe of goods, the question of imposingjswa:ies"t,ax wouid not arise at afi, so contends Sri Vikram.
6. Sri K.M.Shivayogiswamy, the»--.£earned','"iii'gh' Government Pieader appearing on beihgaiitoi submits that the respondent isA.'ex_pre,sls'$y"<.,givenj the"?
assignment of reassessment in respec.t',_'of"th_e petitioner. He has produced the printout, whichis_,_e'xtraEted.':hhereinheiow:
" -- .. _ lfiisstisiiir-1Ei\i_'T"No TE Assignrnent Nzimtier 366976 Assignment Date" _ " 21/08/2009 TIN V' 29910077257 N .~ 'Pro;/Cé)i21p'any Name' and Windsor Gardens Private Limited, Adciress No.81, 36TH Cross, 5"' Block, ' ' it " Jayanagar, Bangalore.
_ LVQ: _ Li/O 090 - M.M. Trust Bangalore V Assignment Type Re.-~assessment Intelligence Officer C.L. Krishne Gowda T5"osr"Name ACCT AUDIT-34 '19.'. .. Directions to officer 0 V 0 A Remarks
11. Assignment Category Inspected Case fiifiié
7. Sri K.M.ShivayogEswamy, the learned HEgh___Court Government Pleader has also relied on the letter,..:'j'«da'tved 27.07.2009 issued by the Additional Comn'tl--ssi'o'r.se':§A Commercial Taxes. Its contents are extracted h'ereinbe!ov»':'_'sr»V GOVERNMENT or KARMA (Commercial Taxes Departrne.nt) No.Adcom(HQ--II)/CR--1(Auto AUC*£t);'09--10 . c _ .- , "t'9fl'ice of? the '.C'(jl'l'3'1Tl'.'". Bf Commit Taxes, " (Karnataka), A _ ._ " -Bangalore, ., oavtedf.-; ;3?.07.2o09.
To All JCS (Adfnn) _ "' "
VAT Divifsions.1,"2;;?,V4,5' Bangalore And VAT Divisions Mysore, _MaInad,"'Mangalore, Dharwad, lE~'elgat;rrnyGulbargaand Da vanagere. Sir, 4 ' ~ g Sub: K1/ATAct, 2003 ~ assigning of cases for "audit ~? _____ :Ré'f.-A 1) Letter No./ildcom (HQ-II)/CR--10/07--O8 A .0 _ dt: 06.02.2008 V = '~..._2)_j..Letter lV0.AdC0m l-lQ--II)CR-01/Aut0-- Audit/09-10 C C dt.'20.04.2009 >l<>l=>lfi . " Cases that have been identified using the auto A' selection process for the purpose of audit and assigned to _ _ your audit officers, may please be viewed in your system. VHVCDCS, AC5 and C705 (Audit), apart from cases earlier allotted, have now been recently assigned inspection cases that are finalized and in respect of which data entries are made in VAT Soft CEN. Please ensure that assignment notes are duly signed and issued to the audit". . officers concerned so that the important revenue.mladeri44..'V. inspection reports are utilized and re~assessmen.ts---- made." if"
at the earliest in the interest or revenue. However; considered necessary to change the.-' assigi7ment_Vto"'V"h another audit officer the same ma y:piea.se" be hbr_o'"ught_ :0 A the notice of this office for further_nece's3a'ry actiong Further, when issuing assignmgentbb notes": to; the audit officer please inst.~"ut,ft them"'toV...taiter~.up audit"fo'r the tax periods from April 0S"'i5fovye»ver, in cases where audits have been 'take_ii--..upv--.earlieraudit officers may be instructed to:__ e2_cclu'de«. ..Vp_ejriod/s already audited. 0 V ' A " 0' Furthei<._moi*.e,_ _w.'2_en._:recomineriding a case to this office for audi't'._-assignn*--.-ent..please ensure that the case has notaiready.Va'uditeCl,or assigned. The TIN and the periods-fol' yvhic,h'4Vauo'it:su_.'r~are to be taken up and officer to vaghonj the V-assignment must be given may also be " _ menti'on--ed. A """ "
Yours faithfully, Sd/~ (KA VERY MONNAPPA) Adcom. Commr. Of Comml.
Taxes, (H.Q.)~2, Bangalore.
8;. Nextly, he relies on Note Nos.1S and 16 of auto audit assignment 2009-10. The entire Note Nos.1S and 16 are fextracted hereinbeiow:
ti.
"15. As per instructions, the following is submitted for kind consideration
(i) There are six VAT Divisions located in BangaloreVwithV~.._.'__' A' jurisdiction based on Postal PIN Codes in Bangalore__"City,iV: "ii Jurisdiction over Tumkur District, Kolar,.Distri"ct'an'o'--. .
Bangalore District (other than City) are dusti.'ib'uted.'as4' follows :
(i) Division 2 --- Channapatna'F-Zamanagar-,_:
(ii) Division 4 - Kolar, Chintamani,_ KGF and.
Bangerpet V " ' '
(iii) Division 5 «-- Dodaba.iiapurt_ai{1d. Chi!§ahai'lapur
(iv) Division 5 e Tuml<ur,_:Tiptur_and 'Madhugiri
(ii) However}...a.udfiif::'::assign;nentsgate' given to the audit officeis.i'ni__'th_ese"6 Divisionsii'of"'i3angalore in respect of dealers"acro:;s 'E5 Dlvis-ions Without confining to their respective--.Divisions., it '
(iii) Durint,r the 'couisetneetings held on 14"' and 15"' July _al._i the'u;iC_sv ofifiangalore have expressed that this crcSs:.divisio_n assign--:1ng'of cases is causing them a lot of .adrniriistrative"problems and that they are unable to keep 1 track ' es,aec.iaily where inspection report cases are concerned."§T__Further, the authority who is to take up revision'-(VSMR) in respect of these re--assessed cases is uh ' D " -- ._ V' also not determinable.
',(iv,)_ In view of all these problems their request is for ' confining the audit cases to their respective divisions as it it "is in respect of outside Divisions.
933%
(v)Apart from the above 8they have also expressed concern over the fact that the inspection reports received from the Enforcement Wings are not being audited. There are a large number of such cases remaining unaudited.
In view of the circumstances explained above'_'4--th'eA'.."-dbW following steps may be taken: _ i 4' it i
(i) Confine the Jurisdiction of audit officers their respective Divisions; and i t V' V
(ii)Ailocate all inspections reports theii audit_-..oi°ficers».u"-~ over and above the numbers"ea'ril'er specified at and 40 for Dcs, Acs and C705 respectiveiy ' '- it t For orders, please.
16. _ '
9. Sri Shiyayog'isvva.n1v:'_"_.submits that based on the aforet extractedffiotings an-d:Vc_orr;munications, it cannot be disputed that i trze_VVi'eispon.de.n_t No.2 has the authorisation to do the reassestshmehta$;r;;»Qri§..V'xiWhen he is authorised to do the auditing work, it '.4i"nva'Vriabiv implies that he has to do the reassessment L:-:i*so_. according to Sri K.M.Shivayogiswamy, there is no it-4';:_di--ffiere--n'ceiibetween auditing and reassessing. They are one and thesame. As the respondent No.2 is expressly authorized to and verify the books of the petitioner, he also has to 3.83%.
perform the consequentiai duty of reassessing, if he finds any discrepancy between the returns filed and the inspection:'jof"'the accounts.
10. Sri K.M.Shivayogiswamy sut=;rnits:"thva't_eethe..petEti:eo'ne_ris repfy has been considered in its entiretyéhanfduthat tihie.:respo'nd"enVt'g No.2 has passed a detaifed order. reference' filed and accepted under Sectiori':43..5 of'th:e hevhisubmits that the petitioner has not sought' is the case of the petitioner that.'~'the.Vp:turn:e_ove'r.~*':is"nhot'C.'pro.p.erly considered, its remedv wouid the Joint Commissioner of CommerciaiV"Taxe's_VimiofkinjgrSectionW62 of the VAT Act.
11. To Aconsiderformidabie submission urged on behalf ofttfhhe petitionen certain provisions of the VAT Act and the itarnatfaka 's./aiue-Ad--ded Tax Ruies, 2005 have to be noticed. it ~. x'f'--'.'.S¢~'.'.*V¢":.: __ definitions.- ' "r'«24).§_"'Pr§'sscribed authority' means an officer of the Conjinercial Taxes Department, authorised by the A Government or the Commissioner to perform such iornctions as may be assigned to him.
"$ec.58. Appointment of Commissioner, Additional Commissioners, Joint Commissioners, £138.10
Deputy Commissioners, Assistant Commissioners, State Representatives and Commercial Officers. -
(1) The State Government may if Commissioner of Commercial Taxes' and"'V'as..'jVman4y_ Additional Commissioners, Joint cckammissioneifsy ~ A' Deputy Commissioners, Assistant ' CommiIss.ion'ers} State Representatives and Comcmercla.l.
as they think fit for the pqrnose of performing; the functions, respectivelyconfeirredion.jthem by or under this Act or by or under the time being in force; if if ' C' I and change of incun;iIJen'tel.':cV5of (1) The Additional Commission ers," 7} ,, jo " 'Commissioners, Deputy Commissionersy" Commissioners and Commercial.' 'Officers shall perform their functions V' ., in '-respect of such arrears or of such dealers or classes of 'dealers such cases or classes of cases as the H Commissioner; ma y direct. "
V "Rule 46. Notice of re-assessments.- The .t,'Ccmmis'sioner may authorize any officer to make a A' -reeassessment under Section 39. "
The printout produced by Sri Shivayogiswamy shows the reassessment work is entrusted to the respondent No.2. E33 .11 However, it is issued by the Joint Commissioner of Commercial Taxes. Under Section 39(1) of the VAT Act, only the pre{s_cbri~bVed authority is competent to reassess the dealers prescribed authority as defined in Section ,24(24;)"o'f' an officer of the Commercial Tax Departmen_'t,i~'fau'tho'ri_s'ed' Government or the Commissioner__to_perform such funct.io'ns as-' may be assigned to him.;_. Secti_onv:__58_,(_1)..'of.,,the,,i§ VAT Act empowers the State GoveVrnrn'e.nté'-- Commissioner and other officers of'th_e performing the functions under__ of the VAT Rules also, the officer to make the reassessment ur:dér"'Secti'on"3;E:i'ofthe VAT Act.
13. _ A combined..'rea'ding" of all these provisions would not l'eVa've ariyb'oti*3r in xdoubtvthait the officer of the Commercial Taxes, who,.l_had_ to :d'oLth4eii,.reassessment, has to be expressly authorised
-- ,.,,...«'either'bywthe. .Go,,\x'e;rnment or by the Commissioner. Such an
-.ffja«ut'h-.orisation_:'ihas to be express, not implied, automatic or '._:"conseq.uential. Note l\ios.15 and 16 and the communication, . Add---a,tVe»d__527.07.2009 also do not come to the rescue of the 1ii.:_"res'pondents for sustaining the impugned reassessment order. flfiii;
The perusal of Note Nos.15 and 16 does not reveal any authorisation, much less the express authorisation in.f'a..\frou'r--_of respondent No.2 to do the reassessment.
communication, dated 27.07.2609 ex,tr.a.cted again in respect of audit assigned and Zthatftoo Commissioner of Commercial TaxesV."'~..Despite, the 'b.es't._e''ndeavors'~ ' made by Sri Shivayogiswamy, he is_.no:t.i_n"a,Apositi'on_,tQ..'lay hands on any document, which is"iss--ue-d__ fby Government or the Commissioner of Corrinjlercia'i'giivipng'. azuthorisation to the respondent No.2__.- ' 1
14. :The'' on behalf of the re5Pondents:"'that_ the and 'assessment' are one and the same also udoes"n.ot[. itself to me. To drive home ..,sub'l',i_,€}"~ distinctionlll'between 'audit' and 'assessment', it is proiltat-Vie"t,o"'-refers'tovthe Law Lexicon, Second Edition (Reprint) ,,,.,__,2_O01. 'The sai_d'Vso_ii'rce defines the Audit as follows:
,4 _, "Audit. As a verb; to draw up or present an account; to make an official investigation and examination of accounts and vouchers.
As a noun; an examination of accounts in general; a
-formal or official examination and authentication of accounts; setting of accounts; the process of auditing accounts; the hearing and investigation had before an auditor."
fiflii.13
The said source gives the meaning of assessment as foilowsz "Assessment: The word assessment has been; used in the sense of 'computation of Income/~...4'_A* , A' best the word is used in the sense ftii-..'-E' determination of the amount of tax payable', ' T Assessment is the official determination oi' liability " ' M 7 ofa Person to pay a Particular tax, ' ' ' The word assessment is~'use.d in a. comprehelisive--' sense and includes all procee::fin'gs, starting with; the filing of the return or issue of _n"Ctica_V and ending _ with the determination of .the. tax:'paya.bjle E;-yé assessee.
The word 'assessmentf whole procedure for .vascerta'ining and impiosing liability upon the The vi?ord""'_g. includes not only computation of i'i.;c_orn.e"bui' alsogggthe entire machinery and proceduiyiev foiij 'imposing and enforcing the tax liability. .. T r T The expression "ass-ess.ment to tax' covered all the various stages vleadiiigwup to the calculation and statement of the amount of tax due."
"reading of the meaning of the two terms -- '7V....__y.aVudit an'd"llassesvs"rnént clearly show that audit is only a part of _l_lgi*_--«.asse_ssmen'tVllprocess. Auditing may begin and end with '._'_"investigat'i~on and examination of accounts and vouchers. It may V' not result in assessment. On the other hand, assessment includes auditing. Every auditing need not lead to {the assessment or reassessment.
£83.
16. It is also profitable to refer to the Division____Bench judgment of this Court in the case of R.C.INDIA, BANG.lX'Lt3RE V. STATE OF KARNATAKA, reported in 2010 (BC) (D8). The relevant paragraph_,o.f.the extracted hereinbelow:
"11. In the instant case,*y{e find called original authorisation placed before the Court, notwithstanding, lciaifrojtogdthis effect is only an order/internai' 'notes the Joint Commissioner of Comirnercéf (Adnéini'stration), Di/O~3, Bangialore, the'. assignment for audit of appeilant. Though this note th.e"---order"of5 the Commissioner dated:'1.,_A6»:12--.2Cit,'r?'f*.. purpose of assigning the respondent' function to audit the accounts of 'the Vappeiiant-dealer for the period 1-4- o__lnwards""ti7ve -------- original enabling order of the . (,l'on7n1»issio-ner is conspicuously absent."
1'7.."*'Consideting the afore-referred statutory provisions 1-..a_nd.,.interpi'eta«tion which they have received in Model Bucket in R.C.India (supra), I have no hesitation in holding C' 'fj-th__a't" there is no authorisation, much less any express authorisation for the respondent No.2 to make the reassessment in respect of the petitioner. I therefore allow these petitions on Hffiii 15 the short ground of the impugned reassessment order being the one without jurisdiction.
18. As the impugned reassessment orde.r_.,i_sflhel»tl:' as one without jurisdiction, there is nojilneied' ;for examine the merits or otherwise of all other concte-ntions on behalf of the petitioner.
19. The is directed to issue the express atath_orisa't'io'no$ officers of the Commercial Taxes §'uQ_' Vauthority in the instant case within ,.0.n.e_m.d'nfVh::;:,f.Fonn' to'day:..:.V.....T:hereafter the prescribed authority shall -.cornVp'le't:e:g:thge"'-reasgsessment within two months. The petitionerV"'i.__g'u.d,irected_'to::_"'..'i'co--operate with the prescribed au.t.hority,. the speedy d_i_s_posal of the reassessment matter. ._g_2'0_..petVi:tions are accordingly allowed. No order as costs.
E3dhߤm Judge f*:i4o/bvr