HILLWOOD TIMBERS V. DEPUTY COMMISSIONER-1

WA/951/2020

AI Insights

The case involves Hillwood Timbers, a dealer in timber and wooden furniture, who appealed against the judgment of a learned Single Judge dismissing their writ petition. The appellant was aggrieved by the assessment order under Section 25(1) of the KVAT Act, which proposed a tax on a differential turnover based on information from the Income Tax Department. The appellant contested that the figures used for the assessment were incorrect and unsubstantiated. The High Court found that the assessing authority had acted on unreliable material and thus allowed the appeal, setting aside the assessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 726116 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 25-01-2023
• Assessment Year: misc
• Laws Referred To: KVAT Act, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M M JASMINE
• Assessee Lawyers: PREMJIT NAGENDRAN
• Keywords: Assessment; Differential Turnover; Income Tax Act; KVAT Act; Unreliable information
• Section: 143(1); 25(1); 138

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P. WEDNESDAY, THE 25TH DAY OF JANUARY 2023 / 5TH MAGHA, 1944 WA NO. 951 OF 2020 AGAINST THE ORDER/JUDGMENT WP(C) 12026/2020 OF HIGH COURT OF KERALA APPELLANT/S: HILLWOOD TIMBERS MAKKARAPARAMBA, MALAPPURAM 676 507, REPRESENTED BY V. SCHAREEF MANAGING PARTNER. BY ADV PREMJIT NAGENDRAN RESPONDENT/S: DEPUTY COMMISSIONER-1 SPECIAL CIRCLE, STATE GST DEPARTMENT, MALAPPURAM 676 505. BY GOVERNMENT PLEADER SMT. M.M. JASMINE THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 25.01.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: :2: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 A.K.JAYASANKARAN NAMBIAR & MOHAMMED NIAS C.P ., JJ ............................................................ W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 .................................................................. Dated this the 25th day of January, 2023 JUDGMENT Jayasankaran Nambiar, J. The petitioner in Writ Petition No. 12026 of 2020 is the appellant before us, aggrieved by the judgment dated 18-6-2020 of the learned Single Judge in the Writ Petition. 2. The brief facts necessary to dispose of the Writ Appeal are as follows: The appellant is a dealer involved in sales of timber as well as manufacturing and marketing of wooden furniture, building materials etc. For the assessment year 2013-2014 under the KVAT Act, the appellant had filed returns disclosing a turnover of Rs. 12,61,29,080/-. Along with the return, the appellant also filed audited statements and Form 13 and 13A for the purposes of enabling the respondents to process the same. The appellant had also filed his return of income under the Income Tax Act with supporting documents including the :3: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 audited trading account etc. for the year ended 31-3-2014. 3. While so, on 19-3-2019, the respondents issued a notice under Section 25 (1) of the KVAT Act, proposing to assess the escaped turn over under the KVAT Act, based on certain information that was obtained by them from the Income Tax Department under Section 138 of the Income Tax Act, 1961. It was the case of the respondents that the appellant had been assessed to income tax on a turn over of Rs. 17,44,41,903/- as against the turn over of Rs.12,61,29,080/- conceded by him in the annual return for 2013-2014 under the KVAT Act. The notice issued to the appellant proposed tax on the differential turn over of Rs. 4,83,12,823/-. By a further notice dated 30-01-2020, the respondents also proposed further addition towards alleged purchase suppression and unaccounted local sales. Although the appellant preferred detailed replies to the said notices issued to him under Section 25 (1) of the KVAT Act, in particular, pointing out that there had been no assessment under the Income Tax Act since for the year in question (assessment year 2014-2015 under the Income Tax Act), the said department had merely accepted the returns filed by the appellant for the purposes of taxation and after processing the same, granted a refund to the appellant. The respondent, however, proceeded to confirm the demand of differential tax on a differential turn over of Rs. 4,83,12,283/- on the appellant. The proposed addition of turnover towards alleged purchase suppression and unaccounted tax was :4: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 dropped by the assessing authority after accepting the explanation given by the appellant. It was aggrieved by the finding of the assessing authority with regard to the addition of the differential turnover based on the alleged information obtained from the Income Tax Department, without reference to the completed assessment under the Income Tax Act for the year in question, that the petitioner approached this Court through the Writ Petition aforementioned, impugning the assessment order under Section 25 (1) of the KVAT Act. 4. The learned Single Judge dismissed the writ petition on finding that against the impugned assessment order, the appellant had an efficacious alternate remedy by way of an appeal before the statutory appellate forum and hence, this was not an issue that needed to be examined by this court in exercise of the powers under Article 226 of the Constitution of India. 5. Before us, it is the submission of Sri. Premjith Nagendran, the learned counsel for the appellant, that the appellate remedy against the assessment order impugned in the writ petition is not an efficacious one, in as much as, this is a case where the assessing authority has acted on unreliable information for the purposes of completing the assessment on the appellant under the KVAT Act and bringing to tax in his hands a differential turnover which is not justified. In particular, he relies on Exts. P9 and P10 documents obtained from the Income Tax Department that would show that the return of income for the :5: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 assessment year 2014-2015 under the said Act (which corresponds to the previous year 2013-2014, which is the assessment year under the KVAT Act) was processed under Section 143 (1) of the Income Tax Act on 20-08-2014 and pursuant to the said processing, the appellant was sanctioned a refund of Rs. 25,680/- which was paid to him as early as on 23rd December 2014. He also places reliance on the document produced as Annexure-A1 along with I.A. No. 2 of 2022 in the present Writ Appeal to demonstrate that the return of income that was filed before the Income Tax Department covering the previous year 2013- 2014 relevant to assessment year 2014-2015 under that Act, had in fact disclosed only a figure of 12,61,29,079.66 as the total turn over and not the amounts shown by the respondents in the notice issued under Section 25 (1) of the KVAT Act. It is his submission, therefore , that when the assessment proceedings under the Income Tax Act had clearly adopted the figure of 12,61,29,079.66 as the figure representing the total turnover of the appellants for the year 2013-2014, in the absence of any reliable documents to suggest otherwise, the respondents could not have adopted a different figure, even if the same was obtained from the Income Tax Department in terms of Section 138 of the Income Tax Act. 6. Per Contra, it is the submission of the learned Government Pleader Smt. Jasmine that the learned single Judge was correct in relegating the appellant to the alternate remedy of pursuing an appeal :6: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 before the appellate authority, since it is trite that on disputed questions of fact, this Court will not normally interfere in proceedings under Article 226 of the Constitution of India. It is also her submission that, at any rate, the respondents cannot be faulted for having relied on the figures furnished to them by the Income Tax Department in response to information sought in terms of Section 138 of the Income Tax Act, and therefore, the impugned order of the assessing authority did not call for any interference in this proceedings. 7. On a consideration of the rival submission, we find force in the submissions of Sri. Premjith Nagendran, the learned counsel for the appellant that this was a case where the assessing authority chose to act on unreliable material for the purposes of confirming the demand of differential tax on the appellant. With a view to ascertaining the basis on which the assessing authority proceeded to confirm the demand of differential tax on the appellant, we perused the files available with the Government to ascertain the material that was relied upon by the department while completing the assessment proceedings against the appellant under Section 25 (1) of the KVAT Act. On a perusal of the files, we find that in response to a query from the KVAT department, the Income Tax Department had shared the turnover details of four units belonging to the Hillwood group, of which only M/s Hillwood Timbers is the appellant before us. Although the statement furnished by the Income Tax Department to the KVAT department shows figures that :7: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 are stated to represent the returned turnover and assessed turnover of the appellant herein, the files do not actually contain a copy of the return of income filed by the appellant before the Income Tax Department for the purpose of corroborating the same. The file also does not give details of any assessment order, probably because the covering letter issued by the Income Tax Department itself states that an assessment order is not a document that would come under the purview of under Section 138 of the Income Tax Act. At any rate, what we find from the material produced before us in this appeal is that, as against the unsubstantiated figures relied upon by the department, there are documents produced by the learned counsel for the appellant that would clearly reveal that for the assessment year 2014-2015 under the Income Tax Act (corresponding to the assessment year 2013-2014) under the KVAT Act), the return of income submitted by the appellant was accepted by the Income Tax Department after processing the same, and a refund was granted to them. The said return of income which is also produced before us clearly shows that what was returned by the appellant during the said year was a turnover of Rs. 12,61,29,079.66 and not Rs.17,29,81,656 as alleged by the respondents. 8. We, therefore, find that it is the figure of 12,61,29,079.66 that has to be taken as the figure representing taxable turnover for assessment under the KVAT Act and the proceedings initiated against the appellant for assessment of a differential turnover by relying on the :8: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 unsubstantiated figures obtained from the Income Tax Department, which have been demonstrated to be wrong through the documents produced by the appellant, cannot be justified. 9. We, therefore, allow this Writ Appeal by setting aside the impugned judgment of the learned Single Judge and allowing the Writ Petition by quashing Ext. P8 order of the Assessing Authority with consequential reliefs to the appellant. Sd/-A.K.JAYASANKARAN NAMBIAR, JUDGE Sd/-MOHAMMED NIAS C.P ., JUDGE ani/ /TRUE COPY/ :9: W .A. No. 951 of 2020 in Writ Petition No. 12026 of 2020 APPENDIX OF WA 951/2020 PETITIONER ANNEXURES Annexure A1 COPIES OF VAT RETURN AND IT RETURN WITH COPIES OF TRADING ACCOUNTS, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ALONG WITH AUDIT REPORTS "