M/S INVENGER TECHNOLOGIES PRIVATE LIMITED V. THE JOINT COMMISSIONER OF COMMERCIAL TAXES

WP/10727/2017

AI Insights

The case involves M/s. Invenger Technologies Private Limited, which challenged the order of the Joint Commissioner of Commercial Taxes (Appeals) that dismissed their appeal regarding a reassessment of their taxable turnover and the imposition of penalties and interest under the Karnataka Value Added Tax Act, 2003. The petitioner argued that their right to natural justice was violated as the final hearing was conducted in their absence, preventing them from rebutting the respondents' arguments. The Revenue contended that no new facts were presented during the hearing, and thus, there was no violation of natural justice. The court found that the principles of natural justice were indeed violated and ordered a rehearing.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 726937 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-03-2017
• Assessment Year: misc
• Laws Referred To: Constitution of India, Karnataka Value Added Tax Act, 2003, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T K VEDAMURTHY
• Assessee Lawyers: K J KAMATH
• Keywords: Audit; Interest; Natural Justice; Penalty; Reassessment; Software Service; VAT-100; Writ of Certiorari
• Section: 133A; 226; 36; 227; 72(2)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF MARCH 2017 BEFORE THE HON’BLE MR.JUSTICE RAGHVENDRA S. CHAUHAN Writ Petition No.10727/2017 & Writ Petition Nos.11704-11714/2017 (T-RES) Between : M/s. Invenger Technologies Private Limited Invenger Towers, Kottara, Mangaluru-575006. …Petitioner (By Sri K. J. Kamath, Advocate) And : 1. The Joint Commissioner of Commercial Taxes (Appeals), Mangaluru-575001. 2. The Deputy Commissioner of Commercial Taxes, (Audit)-4, DVO, Mangaluru-575001. …Respondents (By Sri T. K. Vedamurthy, AGA) These Writ Petitions are filed under Articles 226 & 227 of the Constitution of India praying to quash the order of respondent No.1 dated 01.03.2017 as per Annexure-A by issuing a writ of certiorari or any other writ or an order in the nature of a writ and direct the respondent No.1 to furnish to the petitioner all the details and documents produced by respondent No.2 to the respondent No.1 in the proceedings and etc. These Writ Petitions coming on for preliminary hearing this day, the Court made the following : 2 ORDER The petitioner has challenged the legality of the order dated 1.3.2017, passed by the Joint Commissioner of Commercial Taxes (Appeals), whereby the learned Commissioner has dismissed the appeal filed by the petitioner. 2. Briefly the facts of the case are that the petitioner- Company is engaged in providing software service business. It is registered at the local VAT office. The audit of the petitioner-Company was taken up on 30.9.2013. According to the petitioner, the audit proceedings commenced on 6.5.2015, and continued till 7.5.2015. During this proceeding, certain discrepancies were noticed by the respondent. Therefore, on 17.5.2015, a proposition notice was issued to the petitioner. According to the respondent, the petitioner-Company had received a consideration of Rs.12,50,000/- as transaction related to software service to M/s. Shell MRPL Aviation and Fuel Services Pvt. Ltd., Bengaluru. However, the said amount was not declared as local transaction in VAT-100 filed by the petitioner in the electronic filing system of the department. 3 3. While the petitioner-Company declared an additional income of Rs.1,50,00,000/- before the Assistant Commissioner of Income Tax, in the proceedings filed under Section 133A of the Income Tax Act, 1961, the petitioner had failed to reflect the corresponding sales turnover of such business income in the VAT-100 filed with the department. 4. In response to the proposition notice, the petitioner appeared before the respondent, and explained his side of the case. However, by order dated 23.12.2016, the respondent No.2, namely the Deputy Commissioner of Commercial Taxes (Audit), reassessed the total and taxable turnover of the petitioner for the period March 2012, as Rs.19,35,48,387/-, and also levied penalty under Section 72(2) of the Karnataka Value Added Tax Act, 2003 (`KVAT Act’ for short), and further imposed an interest under Section 36 of the KVAT Act. 5. Since the petitioner was aggrieved by the said assessment order, he filed an appeal before the Commissioner of Commercial Tax (Appeals). However, by order dated 4 1.3.2017, the learned Commissioner has dismissed the appeal. Hence, this petition before this Court. 6. Mr. K. J. Kamat, the learned counsel for the petitioner, has vehemently pleaded that while passing the impugned order, the petitioner’s right under the principles of natural justice have been violated by the learned Commissioner. For, the petitioner’s counsel was heard on 20.1.2017, but behind the back of the petitioner’s counsel, and the petitioner, on 2.2.2017, the learned Commissioner heard the arguments of the respondents. However, on 2.2.2017, neither the petitioner, nor his counsel were present. Therefore, the arguments of the respondents were heard behind the back of the petitioner, and the impugned order was passed thereafter. Therefore, the petitioner did not have a chance to rebut the contentions raised by the learned counsel for the respondents. Thus, according to the learned counsel, the impugned order deserves to be set aside by this Court. 7. Mr. T. K. Vedamurthy, the learned counsel for the Revenue, has pleaded that no new facts have been mentioned 5 by the learned counsel for the respondents on 2.2.2017. In fact, the learned counsel for the respondents has merely reiterated the stand of the department. Thus, even if the learned counsel for the petitioner was not granted the chance of rebuttal, even then the principles of natural justice have not been violated by the learned Commissioner. Therefore, the learned counsel for the Revenue has supported the impugned order. 8. Heard the learned counsel for the parties. 9. It is, indeed, trite to state that although the learned Commissioner may not be bound by the technicality of law, but nonetheless, the learned Commissioner is bound by the principles of natural justice. Since one of the principles of natural justice is to hear the other side, a mere illusionary holding of a proceeding is insufficient. Merely by giving the learned counsel for the petitioner a chance to be heard, it would not satisfy the requirement of “hearing the other side”. The requirement of hearing the other side would also include the right of the petitioner to rebut any plea or contention raised by the learned counsel for the respondents. Even if no new 6 facts have been introduced by the respondents, even then, the right to rebut the contentions raised by the respondents necessarily have to be given to the petitioner. Giving an opportunity of hearing is not merely a ceremony to be performed, but an opportunity of hearing has to be given to the petitioner in order to ensure that the petitioner is satisfied that justice has been done to it. Therefore, the contention raised by the learned counsel for the respondents that since no new facts were submitted, and since the respondent had relied upon its original position, there was no need to give right of rebuttal to the petitioner, the said contention is unacceptable. For the reasons stated above, these Petitions are hereby allowed. The order dated 1.3.2017, passed by the learned Commissioner of Commercial Taxes (Appeals), 1st respondent, is set aside. The learned Commissioner is directed to hear both the parties simultaneously, and to give ample opportunity to the petitioner to meet out the case of the department. The said exercise shall be completed within a period of one month from the date of receipt of certified copy of this order. The parties 7 shall appear before the learned Commissioner of Commercial Taxes (Appeals) on 10th of April 2017. The respondents are directed not to take any coercive action against the petitioner till the appeal is finally decided by the learned Commissioner of Commercial Taxes (Appeals). Sd/- JUDGE *bk/- "