M/S BHIMA JEWELLERS V. THE DEPUTY COMMISSIONER OF

WP/16525/2012

AI Insights

The case involves M/S Bhima Jewellers, which challenged the reassessment orders and demand notices issued by the Deputy Commissioner of Commercial Taxes under the Karnataka Value Added Tax Act, 2003. The reassessment was based on admissions of undisclosed sales made by one of the partners during an income tax raid. The petitioner argued that the reassessment violated principles of natural justice as their books, crucial for contesting the reassessment, were seized by the Income Tax department. The respondents contended that the reassessment was based on admissions rather than the seized books. The court found that there was an effective statutory remedy available to the petitioner under the KVAT Act, which should be exhausted before seeking relief under Articles 226 and 227 of the Constitution.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 694232 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-07-2012
• Assessment Year: misc
• Other Referred Cases: United Bank of India v. Satyawati Tondon & Ors. (AIR 2010 SC 3413), 35 STC 484, 124 STC 423, 76 STC 132
• Laws Referred To: Karnataka Value Added Tax Act, 2003, Karnataka Value Added Tax Rules, 2005
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: T K VEDAMURTHY
• Assessee Lawyers: R V PRASAD
• Keywords: Income Tax raid; Jurisdiction; Natural Justice; Reassessment; Unaccounted sales; Seized books
• Section: 37; 36; 87; 87; 173; 72(2); 39(2)

Judgement Text

"W.P.Nos.16525-16544/2012 - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 20TH DAY OF JULY 2012 BEFORE THE HON’BLE MR. JUSTICE H.G.RAMESH W.P.Nos.16525-16544/2012 (T-RES) BETWEEN: M/S BHIMA JEWELLERS REPRESENTED BY ITS MANAGING PARTNER SRI B.KRISHNAN AGED ABOUT 64 YEARS NO.45/5, DICKENSON ROAD BANGALORE-560 042 … PETITIONER [BY SRI R.V.PRASAD, ADVOCATE FOR M/S VASAN ASSOCIATES, ADVOCATES) AND: 1. THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (AUDIT-5.2) DVO-5, VTK-2, 5TH FLOOR KORAMANGALA BANGALORE-560 047 2. THE COMMISSIONER OF COMMERCIAL TAXES V.T.K.BUILIDING KALIDASA ROAD GANDHINAGAR BANGALORE-560 009 … RESPONDENTS (BY SRI T.K.VEDAMURTHY, GP) THESE WP’s ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDERS OF RE-ASSESSMENT DATED 8.5.2012 PASSED UNDER SECTION 39(2) OF THE ACT AND THE CONSEQUENTIAL NOTICES OF DEMAND, ALL DATED 8.5.2012 BY RESPONDENT-1 PERTAINING TO THE ASSESSMENT PERIODS FEBRUARY 2009 AND MARCH 2009, APRIL 2009 TO MARCH 2010 AND APRIL 2010 W.P.Nos.16525-16544/2012 - 2 - TO SEPTEMBER 2010 IN THE CASE OF THE PETITIONER VIDE ANNEXURES-G TO G5. THESE W.P’s COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: O R D E R H.G.RAMESH, J. (Oral): These writ petitions are directed against the orders of reassessment dated 08.05.2012 passed under Section 39(2) of the Karnataka Value Added Tax Act, 2003 (‘the KVAT Act’ for short) pertaining to the periods – February 2009 & March 2009, April 2009 to March 2010 and April 2010 to September 2010 and consequential notices of demand dated 8.5.2012, copies of which are produced as Annexures-G to G5. 2. I have heard Shri R.V.Prasad, learned Counsel appearing for the petitioner and Shri T.K.Vedamurthy, learned HCGP appearing for the respondents. 3. Two contentions were urged by the learned Counsel for the petitioner in support of the writ petitions. Firstly, the impugned reassessment orders W.P.Nos.16525-16544/2012 - 3 - are violative of the principles of natural justice inasmuch as the books of accounts relating to the period in question were seized by the Income Tax authorities and the Reassessment Officer did not summon the said books of accounts though he was conferred with such a power under Section 87 of the KVAT Act read with Rule 173 of the Karnataka Value Added Tax Rules, 2005 (‘the Rules’ for short). The only other contention is that the prescribed authority i.e., the re-Assessing Officer had no jurisdiction to pass the reassessment orders. In support of his submissions, he relied on the judgments of this Court reported in 35 STC 484 & 124 STC 423 and also the judgment of the Allahabad High Court reported in 76 STC 132. 4. On the contrary, the learned Government Pleader for the respondents submitted that as per the endorsement dated 20.03.2012 at Annexure-C, the re-Assessing Officer who had passed the impugned re-assessment orders was authorised to be the W.P.Nos.16525-16544/2012 - 4 - prescribed authority under the KVAT Act. Hence, the submission of the learned Counsel for the petitioner that the re-Assessing Officer had no jurisdiction to pass the reassessment orders is without any merit. Nextly, he submitted that the reassessment is based on the unaccounted sales as per the admissions made by one Shri B.Krishnan, who is one of the partners of the petitioner-firm and not on the basis of any books of accounts. 5. In the light of the above submissions, the only question that falls for my determination in these writ petitions is as to Whether this is a fit case to warrant interference under the extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution of India, when there is an effective statutory remedy of appeal available to the petitioner under the provisions of the KVAT Act as against the impugned re-assessment orders? W.P.Nos.16525-16544/2012 - 5 - 6. It is relevant to refer to the following stated in one of the proposition notices dated 13.03.2012 as it is stated that the other two notices are also similar: “……………………………………………….. ….As per the information obtained from income tax authorities with regard to IT raid at your premises and at branches on 2.9.2010 disclose that Sri B.Krishnan, one of the partners had admitted vide letter dated 27.10.2010, the undisclosed income and the sale is as follows: Admission of Undisclosed Income 1) M/s Bhima Jewellers: undisclosed income admitted Rs.50,00,000-00 Asst. year under IT: 2008-09 The above admission of undisclosed income relates to unaccounted sales from different branches for different financial year. The quantitive details are as under. Sl.No. Branch Financial year 2008-09 (in gms) 1) Dickenson Road 41340.94 (from 4.2.2009) 2) Koramangala 17442.15 (from 13.02.2009) 3) Jayanagar 19205.87 (from 17.02.2009 4) Rajajinagar - Total 77988.960 The above are all admitted figures made by you before the IT authorities. For W.P.Nos.16525-16544/2012 - 6 - the period from February 2009 to March 2009, the undisclosed sale is in a Quantity of 77988.96 gms of Gold Ornaments. These are admitted as undisclosed sale of gold ornaments. That means sale of gold articles plus wastages collected plus making charges. These wastages and making charges respectively are at 8% and 8%, which are normal business practices in the market. The sale value has to be arrived at considering the prevailing gold price at the relevant time plus making charges and wastages collected. From the VAT point of view, the above unaccounted sales have to be treated as suppressed sales and tax at 1% has to be paid on such unaccounted sales. The market sale price during 2008-09 is at Rs.1,650-00 excluding the Making charges and wastages. Accordingly, the sale value of the unaccounted sales is arrived at by adding making charges and wastages as follows: Year Unaccounted sales in gms Unaccounted sales of Gold in Rupees Wastages & making charges (8% + 8% = 16% Total unaccount- ed sales value of gold ornaments VAT Payable @ 1% 2008 - 09 77988.960 128681784.00 20589085.00 149270869.00 1492708.00 W.P.Nos.16525-16544/2012 - 7 - The above transactions are taken into account for the purpose of respondent- assessments U/s.39(2) of the Act for the tax periods February 2009 and March 2009. In view of the above, the re-assessments for the tax periods February 2009 and March 2009 are proposed U/s.39(2) of KVAT Act, 2003 and also proposed to levy penalty U/s.72(2) of the KVAT Act, 2003 and Interest U/s.36 & 37 of the Act as under. ………….………………………………………….” (Underlining supplied) 7. Shri R.V.Prasad, learned Counsel appearing for the petitioner, does not dispute that the admission referred to in the proposition notices is not denied in the reply filed by the petitioner but he contends that the stage of denial had not come at that point of time as the petitioner did not have the benefit of the books of accounts which was seized by the Income Tax department. There is no dispute that the proposition notices were issued prior to passing of the impugned reassessment orders. One of the notices is at W.P.Nos.16525-16544/2012 - 8 - Annexure-A and the petitioner also replied to all the proposition notices as could be seen from the Annexures produced. The impugned re-assessment is based on the admissions of one of the partners of the petitioner-firm and not on any books of accounts seized by the Income Tax department. As per Annexure-C, the re-Assessing Officer was authorised to do the reassessment. 8. In the light of the above facts, in my opinion, this not an appropriate case warranting interference under the extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution of India. In this context, it is relevant to refer to the following observations made by the Hon’ble Supreme Court in United Bank of India v. Satyawati Tondon & Ors. (AIR 2010 SC 3413) relating to exercise of jurisdiction under Articles 226 and 227 of the Constitution of India: “17………………………………………………. Unfortunately, the High Court overlooked W.P.Nos.16525-16544/2012 - 9 - the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.” W.P.Nos.16525-16544/2012 - 10 - 9. In view of the above, I decline to entertain these writ petitions, however, with liberty to the petitioner to avail of the statutory remedy of appeal under the KVAT Act in accordance with law. Learned HCGP assures the Court that respondent No.1 will not take any coercive steps to recover the impugned demand for a period of two weeks to enable the petitioner to avail of the statutory remedy of appeal in accordance with law. Petitions dismissed. Sd/- JUDGE Yn/ata. "