Assessment Based On Best Judgement Basis , Non-Filing Of Returns After Receipt Of Order, Fatal For Assessee: Kerala High Court

The Kerala High Court has held that the non-filing of returns even after receipt of the assessment order is fatal for the assessee.

The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that it may be true that the respondents did not issue a formal notice as required under Section 62(1) of the Income Tax Act before completing the assessment on a best judgment basis under the said provision, but the fact remains that the appellant could have obtained a nullification of said assessment order if he had filed the return at least within thirty days of the receipt of the assessment order.

The appellant/assessee challenged the best judgment assessment order passed by the assessing authority under Section 62 of the CGST/SGST Act. The assessee, who was obliged to file returns under the Act in its capacity as a registered dealer, failed to submit returns for more than six months. Therefore, steps were taken by the assessing authority to cancel its registration under the Act. Simultaneously, the assessment on a best judgment basis under Section 62 was also completed, taking note of the fact that the appellant had not filed any return as provided under the section.

The single judge noted that even after receipt of the assessment order under Section 62, the appellant did not avail herself of the opportunity to file a return as provided under Section 62(2), which, if filed, could have resulted in an automatic cancellation of the assessment order passed on a best judgment basis. The single judge before whom the writ petition came up for hearing proceeded to dismiss the writ petition in its challenge against the assessment order.

The assessee contended that the single judge ought to have found that the respondents had not complied with the requirement of issuing a notice prior to passing the order on a best judgment basis under Section 62(1). The assessee being a new venture, it was not aware of the requirements of the statute with regard to filing of returns and the consequences of non-filing of the returns.

The department contended that the non-filing of the return even after the receipt of the assessment order passed on a best judgment basis under Section 62(2) indicates that the attitude of the appellant-assessee was one of non-cooperation in the assessment proceedings. It is pointed out that the assessment order passed under Section 62 would have to be upheld in the absence of any positive step taken by the appellant to get the same nullified in terms of Section 62(2). As regards the cancellation of the registration, if the appellant is aggrieved by it, it is open to the appellant to approach the statutory appellate authority against the order of cancellation of registration.

The court, while upholding the judgment passed by the Single Bench, held that the assessee has only itself to blame for the predicament that it finds itself in, since the statutory provisions grant sufficient opportunities to an assessee to ensure that an assessment is completed, as far as possible, based on the returns filed by the assessee.

Counsel For Appellant: K.T. Thomas, Mathew Bob Kurian

Counsel For Respondent: R.Harishankar, R Harishankar

Case Title: Aaron Construction Co. Versus Union Of India

Citation: 2024 LiveLaw (Ker) 436

Case No.: WA No. 906 Of 2024

Click Here To Read The Order