Department Can't Reopen Assessment If Limitation Period Expired Before Amendment Extending Timeline: Kerala High Court

The Kerala High Court stated that the department cannot reopen an assessment that has already been settled by issuing a fresh notice if the period of limitation had expired before the date of the amendment extending the timeline for reopening.

The Division Bench of Justices A.K. Jayasankaran Nambiar and K.V. Jayakumar observed that “…….no doubt, in those cases where the erstwhile period of limitation of five years had already expired before the date of the amendment of Section 25(1) in 2017, the Revenue would not be permitted to re-open assessments that had been settled, through a fresh notice issued thereafter invoking the six-year period of limitation.”

The assessee/respondent filed a writ petition challenging an assessment order dated 16.03.2020 under Section 25(1) of the Kerala Value Added Tax Act (KVAT Act) for the 2013-2014 assessment year. The primary contention was that the order violated the principles of natural justice, as the notice was issued on 12.02.2020, and the assessment was hastily completed on 16.03.2020 without providing sufficient opportunity for a response.

The Kerala High Court allowed the petition on the ground of limitation. The department has now challenged this decision before the Kerala High Court.

The assessee argued that the Assessing Officer's justification for expediting the process believing the assessment had to be completed by 31.03.2020 was incorrect, as only the issuance of the pre-assessment notice was mandated by that date, allowing assessment completion thereafter.

The department submitted that the Single Judge erred in assuming that the case of the assessee was one of the assessment order being barred by limitation. She pointed out that the assessment order would not be barred by limitation as was believed by the Assessing Officer while completing the assessment in haste.

The bench opined that “the assessment year in question is 2013-14 under the KVAT Act. The KVAT Act was amended in 2017, whereby the period of limitation for re-opening the assessment was enhanced from five years to six years. No doubt, in those cases where the erstwhile period of limitation of five years had already expired before the date of the amendment of Section 25(1) in 2017, the Revenue would not be permitted to re-open assessments that had been settled, through a fresh notice issued thereafter invoking the six-year period of limitation.”

The bench found that the only relief that the assessee sought in the writ petition was for a re-examination of the issue on merits before the Assessing Officer, as the assessee itself did not have a case of the assessment order being barred by limitation. It was only on account of the erroneous assumption of the Single Judge that the writ petition came to be allowed on the ground of limitation.

Finding from the assessment order that was impugned in the writ petition that the assessee was not heard prior to the passing of the assessment order, the bench set aside the order that was impugned in the writ petition, and remanded the matter to the Assessing Authority for a fresh decision on merits, after hearing the assessee.

Counsel for Appellant/ Department: GP. Resmitha Ramachandran

Counsel for Respondent/ Assessee: K.P. Abdul Azees

Case Title: The Assistant Commissioner Of State Tax v. Bhima Jewellery And Diamonds P. Ltd.

Citation: 2024 LiveLaw (Ker) 745

Case Number: WA NO. 1652 OF 2020

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