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2022 DIGILAW 1090 (AP)

Sai Infra v. Commercial Tax Officer

2022-10-20

A.V.RAVINDRA BABU, C.PRAVEEN KUMAR

body2022
ORDER : (C. Praveen Kumar, J.) 1. Heard both sides and perused the record. 2. The present Writ Petition came to be filed questioning the Assessment Order, dated 27.03.2021, passed by the first Respondent, mainly on ground that the said Assessment is barred by limitation and is without jurisdiction. 3. The facts, in issue, are as under: a) The Petitioner herein is a registered dealer on the rolls of the first Respondent with effect from 01.06.2016 under the Andhra Pradesh Value Added Tax Act, 2005 [‘VAT Act’]. b) The Petitioner herein is said to be a Works Contractor, engaged in construction of buildings, with the Office situated at Gandhipuram, Rajamahendravaram, East Godavari District. c) On an authorization given by second Respondent to the first Respondent, verified the income tax returns of the Petitioner for the financial year 2014-2015 and having regard to non-explanation of certain entries, took up assessment under the VAT Act. A show-cause notice was issued on 22.03.2021 stating that the Petitioner is liable to pay tax @ Rs.51,94,903/- on the ground that the income tax returns filed by the Petitioner would show that he received gross income of Rs.3,58,26,915/-, but failed to file VAT returns. d) Having regard to the above, the first Respondent proposed to assess the Petitioner under Section 21 (5) of VAT Act, on the basis of turnover reported in the income tax returns. The entire turnover was proposed to be taxed @ 14.5%. The Petitioner was directed to submit reply with an opportunity of personal hearing on 25.03.2021. But, however, the Petitioner was called upon to attend personal hearing on 27.03.2021. Objections came to be filed on 27.03.2021, as he was not able to attend personal hearing. The specific plea taken was that, the works contract receipts shown in the income tax returns for the years 2014-15 are in respect of sub-contract works done in the State of Orissa for Gayatri Projects Limited and GCN Infratech Private Limited. He enclosed work orders to show that, it is only the State of Orissa, which has to levy tax and not the State of Andhra Pradesh and, accordingly, requested the first Respondent to drop the proposal to levy tax. He enclosed work orders to show that, it is only the State of Orissa, which has to levy tax and not the State of Andhra Pradesh and, accordingly, requested the first Respondent to drop the proposal to levy tax. e) It is further stated in the affidavit that, the main contractor M/s. Gayathri Projects Limited, has issued a letter, dated 30.03.2021, stating that the work was executed by the Petitioner in the State of Orissa and M/s. Gayathri Projects Limited, has discharged VAT on behalf of the Petitioner in the State of Orissa. However, all the contentions raised are overruled, confirming the liability by the Order impugned in the present Writ Petition. 4. The main ground taken by the learned Counsel for the Petitioner, as stated earlier, is that the proceedings are barred by limitation and that the Authority has no jurisdiction to deal with the same. He further submits that, though the address of Rajamahendravaram was given for the purpose of business convenience, but the entire work was done in the State of Orissa and, as such, the Authority erred in passing the impugned Order. In any event, he would submit that, since the Assessment Order came to be passed in the month of March, 2021, for the assessment years 2014-15, the same is barred by limitation, as the period prescribed under Section 21 (4) for passing an Assessment Order is four [04] years. 5. (i) The same was opposed by Sri. T.C.D. Sekhar, learned Government Pleader for Commercial Tax, contending that, since there is a willful evasion of tax, the period of limitation would be six [06] years in terms of Section 21 (5) of VAT Act. (ii) Insofar as the issue, as to whether the Petitioner herein has done work only in the State of Orissa, he would submit that, the same is a factual dispute, which cannot be gone into in this Writ Petition. 6. (i) In reply, Sri. P. Karthik Ramana, learned Counsel appearing for the Petitioner would submit that, even if Section 21(5) of the VAT Act is invoked, the period of assessment for 11 months i.e. ending February 2015 would be barred by limitation, meaning thereby that except for the month of March 2015 the authorities could not have imposed tax and penalty. P. Karthik Ramana, learned Counsel appearing for the Petitioner would submit that, even if Section 21(5) of the VAT Act is invoked, the period of assessment for 11 months i.e. ending February 2015 would be barred by limitation, meaning thereby that except for the month of March 2015 the authorities could not have imposed tax and penalty. (ii) Insofar as the plea, namely, that the Petitioner Firm is an unregistered Firm, he would contend that, it does not make any difference, whether it is a registered or unregistered Firm, as Section 21 VAT Act does not differentiate between the two. 7. In order to appreciate the rival contentions, it would be appropriate to refer to Section 21 (4) and (5) of the VAT Act, which are as under: “CHAPTER - V PROCEDURE AND ADMINISTRATION OF TAX Section 21 - Assessment (1) Where a VAT dealer or TOT dealer fails to file a return in respect of any tax period within the prescribed time, the authority prescribed shall assess the dealer for the said period for such default in the manner prescribed. (2) …………… (3) …………… (4) The authority prescribed may, based on any information available or on any other basis, conduct a detailed scrutiny of the accounts of any VAT dealer or TOT dealer and where any assessment as a result of such scrutiny becomes necessary, such assessment shall be made within a period of four years from the end of the period for which the assessment is to be made. (5) Where any willful evasion of tax has been committed by a dealer, an assessment shall be made to the best of his judgment by the authority prescribed within a period of six years of date of filing of the return or the first return relating to such offence. (6) …………… (7) …………… (8) ……………” 8. A reading of Section 21 (4) makes it clear that, based on the information available or on any other basis, the authority should conduct a detailed scrutiny of the accounts of any VAT dealer or TOT dealer and where any assessment as a result of such scrutiny becomes necessary, such assessment shall be made within a period of four years from the end of the period for which the assessment is to be made. 9. 9. The above provision provides for assessment based on detailed scrutiny of the accounts of VAT dealer and it has to be completed within a period of four years from the end of the period for which the assessment is to be made. 10. In the instant case, the assessment is for each of the months April 2014 to March 2015 and, according to the Petitioner, the assessment has to be done within a period of four years i.e., between the period 30.04.2018 to 28.02.2019. 11. Insofar as Section 21(5) of the VAT Act is concerned, it is to be noted that, if there is any willful evasion of tax by the dealer, the assessment shall be made to the best of his judgment by the authority prescribed within a period of six [06] years from the date of filing of the return or the first return relating to such offence. 12. To make Section 21(5) applicable to the case on hand, there must be willful evasion of tax committed by the dealer. 13. It is now to be seen, whether there was any wilful evasion of tax in the State of Andhra Pradesh by the Petitioner? 14. It is to be noted here that, the Petitioner herein failed to register himself under the VAT Act for the year 2014-15 and has not reported any turnover to the Commercial Department. Merely because the Petitioner has not taken registration under the provisions of the VAT Act in the State, the Act does not bar initiation of proceedings against unregistered dealer also. This fact is not disputed by both the Counsel. 15. A reading of Section 21(5), prima facie, makes it clear that if any willful evasion of tax has been committed by the dealer, an assessment shall be made, to the best of his judgment, by the authority within a period of six [06] years from the date of filing of the return. Whereas, Section 21(4) contemplates that the authority may, based on information available, conduct a detailed scrutiny of the accounts of any VAT dealer or TOT dealer. Therefore, if there is a willful evasion of tax by any dealer, whether registered or not under the provisions of the VAT Act, the authority has every right to assess the case of the Petitioner based on the material available. 16. Therefore, if there is a willful evasion of tax by any dealer, whether registered or not under the provisions of the VAT Act, the authority has every right to assess the case of the Petitioner based on the material available. 16. As seen from the record, in the instant case, though the Petitioner was issued a notice to submit explanation and also to appear for personal hearing, it appears that the dealer neither filed any objections nor attended the personal hearing. The Order also discloses that the dealer was also provided with final opportunity of being heard and was requested to appear on 27.03.2021 at 11.00 A.M. Having received the endorsement, the dealer submitted written explanation on 27.03.2021. It is also to be noted here that, the Petitioner submitted his written explanation on 27.03.2021 and the Order impugned also came to be passed on the very same day itself. In the said explanation, the dealer submitted that the work done by him under the sub-contract for the financial year 2014-15 was in the State of Orissa and the VAT was paid by the main contractor in the State of Orissa and that no work was done in the State of Andhra Pradesh. He also disclosed the three main contractors, under whom he worked as sub-contractor. 17. A perusal of the Order further discloses that, in the three [03] work orders referred to therein, it was noticed that, the work orders were allotted to Andhra Pradesh address, but the Order does not indicate that works were done in the State of Andhra Pradesh. It also appears from the Order impugned that the dealer failed to submit documentary evidence to show that the main contractor has paid tax in the State of Orissa. 18. If the Petitioner is not liable for assessment in the State of Andhra Pradesh, question of deciding the present petition on the ground that the Assessment Orders are barred by limitation would not arise. If the limitation, as contemplated under Section 21 of the VAT Act, is sought to be invoked, it has to be decided firstly as to whether the Petitioner is liable to pay tax in the State of Andhra Pradesh and, thereafter, it has to be decided whether the provisions of Section 21 (4) or (5) would operate against the Petitioner. If the limitation, as contemplated under Section 21 of the VAT Act, is sought to be invoked, it has to be decided firstly as to whether the Petitioner is liable to pay tax in the State of Andhra Pradesh and, thereafter, it has to be decided whether the provisions of Section 21 (4) or (5) would operate against the Petitioner. Even along with the affidavit filed in support of this Writ Petition, the Petitioner has not placed on record any material to show that the main contractor has paid VAT in Orissa State, except a letter, dated 30.03.2021, stating that the works have been executed in the State of Orissa and that VAT and other taxes have been duly paid by M/s. Gayathri Projects Limited. But proof of payment of tax are not enclosed along with the letter. 19. As stated earlier, even if the Petitioner is unregistered in the State of Andhra Pradesh and if an Assessment Order is passed on a premise that the Petitioner has failed to pay the tax in the State of Andhra Pradesh, the issue relating to period of limitation or that the Assessment Order came to be passed beyond the period of limitation can be decided. If the limitation of four [04] years for passing of the Assessment Order is taken into consideration, the entire Assessment Order would be barred by limitation. If the period of six [06] years it taken into consideration, except for the month of March 2015, all other periods except for March 2015 would be barred by limitation. 20. But, the plea of the Petitioner appears to be that he is not liable to pay any tax in the State of Andhra Pradesh, as no work was done by him. According to him, the Assessment Order itself refers to work orders, which indicate that the work was executed in the State of Orissa and that the address of Office at Rajamahendravaram was given only for correspondence and convenience. Further, the proceedings against the Petitioner came to be initiated basing on income tax returns. As stated above, payment of taxes by the main contractor in the State of Orissa are not placed on record, even for the month of March, 2015, leave alone for other period. If the main contractor has not paid the tax in State of Orissa, it would be willful evasion of tax. 21. As stated above, payment of taxes by the main contractor in the State of Orissa are not placed on record, even for the month of March, 2015, leave alone for other period. If the main contractor has not paid the tax in State of Orissa, it would be willful evasion of tax. 21. For the aforesaid reasons and with a view to give an opportunity to the Assessee to establish that the works were executed only in the State of Orissa and that the main contractor has paid VAT for the said works, the order under challenge is set aside and the matter is remanded back to the Assessing Authority to deal with the same afresh after giving an opportunity to the Petitioner, to file documents in support of the plea taken now in this Court. If the Petitioner fails to submit documents in proof of payment of tax by the main contractor and that the works were executed only in State of Orissa and that nothing happened in the State of Andhra Pradesh, except having an Office for correspondence, the authority may pass orders in accordance with the law. It is needless to mention that the plea of limitation, if any, with regard to passing of assessment orders which are impugned in this Writ Petition may also be raised before the concerned. It is made clear that the observations made in the order are only for deciding the case on hand and the same shall not influence the authorities while deciding the matter. 22. With the above direction, the Writ Petition is disposed of. No order as to costs. 23. As a sequel, interlocutory applications, if any, pending shall stand closed.