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Sowparnika Projects & Infrastructures v/s State Of Kerala

    W.P. (C) No. 32757 of 2018

    Decided On, 24 November 2021

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE S.V. BHATTI & THE HONOURABLE MR. JUSTICE BASANT BALAJI

    For the Appearing Parties: S. Anil Kumar, M. Rajagopal, V.K. Shamsudheen, Advocates.



Judgment Text

Basant Balaji, J.

1. The revision petitioner is a works contractor engaged in the businesses of villas and flats challenges the order of the respondent dtd. 24/7/2017, whereby his revision was dismissed confirming the order of the Deputy Commissioner.

2. The petitioner is a dealer registered under the provisions of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as the 'Act' for short). The petitioner was paying tax at compounded rate under Sec. 8 of the Act based on Annexure-I and Annexure-I(a) permissions granted by the assessing authority.

3. According to the petitioner, he has been filing returns based on the permissions granted to him, but for the returns filed for the year 2013-14, it was conceded by the petitioner that in the returns filed the contract amount shown had been lower than the actual contract amount received by the petitioner, which was an omission occurred on the part of their accountant and though the chartered accountant detected the same while returning the audited statement, the petitioner requested for revision of return by the assessing authority, but the assessing authority turned-out the same and since compounding was allowed under sec. 8(a) of the act and he is liable to pay tax at the compounded rate for the whole year.

4. The Intelligence Officer, Squad-I, Thiruvananthapuram, conducted an inspection at the place of business of the petitioner and during the course of inspection, certain receipts were recovered for further verification and the petitioner was directed to produce the books of accounts for verification. Though several opportunities were given to the petitioner for production of books, the petitioner did not avail of the same and therefore the Intelligence Officer was constrained to process the crime file relying on the data gathered at the time of inspection with reference to the self assessment returns filed by the petitioner and found that there has been huge volume of suppression of contract receipts. The Intelligence Officer found that there was no nexus between the turnover declared before the assessing authority and that was found from the records recovered from the place of business during inspection. The suppressed turnover detected by the Intelligence Officer for the year 2013-2014 was to the tune of Rs.16, 07, 01, 482.00. Thereafter, proceedings were initialed under Sec. 67(1) of the Act and the petitioner was given opportunity to file objections and also an opportunity for hearing. Thereafter Annexure-V penalty order was passed imposing penalty of Rs.3, 49, 52, 580.00 as per order dtd. 29/9/2014. On 26/2/2016, the petitioner filed Form No. 49. In the said form, the petitioner declared the ongoing projects. Challenging Annexure-V penalty order, the petitioner filed revision before the Deputy Commissioner, Commercial Taxes, Thiruvananthapuram. The First Revisional Authority modified the penalty order to the extent of not granting exemption with regard to the land value and the assessing authority was directed to complete the proceedings after giving opportunity to the petitioner within two months from the date of the order.

5. Aggrieved by the order of the Deputy Commissioner, the petitioner filed 2 revision before the respondent herein. The Commissioner after going through the averments in the revision petition as well as hearing the petitioner, dismissed the same. Challenging the order of the Commissioner dtd. 24/7/2017 this O.T. Revision is filed by the petitioner.

6. Heard Sri. S. Anil Kumar, learned counsel for the revision petitioner and Sri. V.K. Shamsudheen, learned Senior Government Pleader for the respondent.

7. The counsel for the revision petitioner submitted that, since the petitioner has been granted compounding permission for the whole year, he should be allowed to pay tax at the compounded rate under Sec. 8 of the Act, even for the difference in the contract amount which was found out by the Intelligence Officer and proceedings under Sec. 6 is perverse and illegal. His second contention is, as per the Finance Act-2019 (Act 5 of 19), a new sec. has been introduced as Sec. 25AA.

8. Sec. 25AA reads as follows:

"General disciplines related to assessment under this Act - (1) In cases where tax evasion has been detected and the offence has been compounded or penalty has been imposed under this Act, the assessment under the provisions of this Act shall be done only on the suppressed turnover detected:

Provided that in cases where pattern of suppression has been established, the assessment shall be completed by adding fifty percent of the suppressed turnover".

9. The submission of the counsel for the petitioner regarding Sec. 25AA is that, Sec. 25AA was inserted by Act 5 of 2019 with effect from 1/4/2019 and it has retrospective effect since the 'KVAT Act' has ceased its operation by the introduction of 'GST Act' and thus he is entitled to invoke the said provision of law.

10. The Senior Government Pleader on the other hand submitted that, the orders of the Revisional Authorities do not warrant any interference as they are passed taking into consideration of the suppression made by the petitioner. Eventhough he was given the option of compounding under Sec. 8 and availed compounding rate of tax, he suppressed details of certain ongoing projects and evaded tax. The realisation to pay tax is only on inspection being carried out at the business premises of the petitioner. He contended that under Rule 24B of the KVAT Rules, every contractor/developer/builder shall file a declaration form along with returns containing details of ongoing projects, transfer of apartments/flats/villas and made the work contract tax paid under the Act in respect of purchaser/intending purchaser, but the petitioner has not filed the above declaration along with returns nor disclosed the project wise receipt in the quarterly returns filed. He submitted that the petitioner has intentionally not filed a declaration in Form No. 49 with a view to conceal the actual taxable receipts. His further submission was that, eventhough compounding was allowed to the petitioner since suppression was found out by inspection, tax for the suppressed receipts can only be assessed under Sec. 6 of the KVAT Act and penalty imposed under Sec. 67(1) of the Act for the offence of Evasion of Tax. Regarding the insertion of Sec. 25AA, the Senior Government Pleader submitted that it is inserted by the Kerala Finance Act, 2019, which was given effect from 1/4/2019 onwards and the petitioner cannot avail of the same since the penalty order imposed was before the insertion of the said Sec. . His submission is that, the said Sec. has only prospective effect and it cannot be given retrospective operation.

11. It is an admitted fact that the returns filed by the petitioner for the year 2013-2014 was lower then the actual contract amount received by the petitioner. But according to him, it was an omission on the part of their accountant. It is also an admitted fact that an inspection was conducted on the premises of the petitioner on 9/5/2014 and from the inspection it was found that the petitioner has suppressed certain receipts and since the petitioner could not produce the Books of Account to substantiate the same and penalty order was imposed on 29/9/2014. On imposition of the penalty order, the petitioner filed Form 49 disclosing the ongoing projects undertaken by the petitioner. The said declaration was made by the petitioner on 26/2/2006, i.e., much after the penalty order dtd. 29/9/2014, hence the petitioner cannot content that it was an omission on his part to disclose the ongoing projects and he should be allowed to pay tax under the compounded rate. A person who has been granted compounding facility and who has suppressed receipts, after the Intelligence Officer unearthed those suppressions, cannot be allowed to pay tax at the compounded rate for the amount suppressed, which he ought to have revealed during filing of the returns. The petitioner has suppressed many receipts from the department and hence he cannot take advantage of the compounding allowed to him after the suppression has been found out by the Intelligence Officer. In that regard, the order of the Intelligence Officer confirmed by the two revisional authorities are in order and requires no interference.

12. As regards the second contention regarding the availability of Sec. 25AA of the Act, the same has no application as the said Sec. is introduced in the Act after the KVAT Regime has ended and hence it can only apply to pending assessments or assessments directed to be re-opened in appeal or revision. Sec. 25AA brought in by the Amendment Act 5 of 2019, makes it clear that the amendment has only prospective effect and does not apply for assessments already completed. The intention of the legislature is only to give effect to assessments which are pending as on the date of insertion of the new Sec. otherwise all completed assessments as on 1/4/2019 can be reopened at the instance of the dealer and the legislature in its wisdom did not intends so. Every statue is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. Unless there are words in the statute sufficient to show intention of the legislature otherwise it is deemed to be prospective only. The Act 5 of 2019 does not in any way give retrospective effect. A Division Bench of this Court had in earlier occasion considered the same issue in O.T. Revision

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No. 185 of 2016, in which one of us (S.V. Bhatti, J.) was a member and held as follows: "The learned counsel for the assessee further argued that on account of the amendment introduced by the legislature as per Sec. 25AA of the Act, the addition of turnover must be limited to 50%. A reading of Sec. 25AA brought in by Amendment Act of 2019 (Act 5 of 2019), it is clear that the amendment has only prospective effect and does not apply for assessments already completed. In such circumstances, we reject the said contention." 13. The counsel for the revision petitioner fairly conceded that as far as this case is concerned, the assessments are already been completed, hence Sec. 25AA of the Act cannot come to the rescue of the petitioner. The first revisional authority has partly allowed the appeal and remitted to the assessing authority. 14. We find no illegality or impropriety in the order passed by the 2 revisional authority and there arise no questions of law for consideration by this Court. Hence, this O.T. Revision is dismissed.
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