Shirdi Saibaba Constructions V. The Assistant Commissioner (ST), Anantapuramu-I Circle and The State of Andhra Pradesh

WP/5350/2022

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M/s. Shirdi Saibaba Constructions, engaged in executing works contracts solely for government departments, opted for VAT payment under the Composition scheme. Discrepancies noted between the petitioner's VAT returns and income tax returns led to a revised show cause notice and subsequent assessment order by the Assistant Commissioner (ST), imposing a higher tax rate and a penalty for alleged willful tax evasion. The petitioner contested both the assessment and penalty orders, arguing they were beyond the statutory period of limitation and not in accordance with the principles of natural justice. The High Court's decision focused on the applicability of the extended period of limitation under the A.P VAT Act, 2005, and the proper application of the Composition scheme.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 798210 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 21-04-2025
• Assessment Year: misc
• Other Referred Cases: W.P.No.4805 of 2021
• Laws Referred To: A.P VAT Act, 2005
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: GP FOR COMMERCIAL TAX
• Assessee Lawyers: G CHETTY
• Keywords: Arbitrary; Capricious; Composition scheme; Ex-parte penalty order; Limitation; Mandamus; Natural Justice; Willful evasion of tax; Ex-Parte Best Judgment Assessment Order
• Section: 21(5); 21(5); 4(7)(b); 53(3); 4(7)(d)

Judgement Text

"m IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI (Special Original Jurisdiction) MONDAY, THE TWENTY FIRST DAY OF APRIL TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO AND THE HONOURABLE DR JUSTICE K MANMADHA RAO WRIT PETITION NOS: 5303 AND 5350 OF 2022 WRIT PETITION NO: 5303 OF 2022 Between: M/s. Shirdi Saibaba Constructions, 13/2/79, Shirdi Nagar, Near R.C. Nagar, Anantapur - 515001, Anantapur District, Andhra Pradesh, rep. by its Managing Partner, T. Chiranjeeva Reddy. ...Petitioner AND 1. The Assistant Commissioner (ST), The Assistant Commissioner (ST), Anantapuramu-I Circle, II Floor, PAR Heights, Gooty Road, Anantapur - 515001, Anantapur District, Andhra Pradesh. 2. The State of Andhra Pradesh, rep. by the Principal Secretary to the Government, Revenue (CT) Department, Andhra Pradesh Secretariat Buildings, Velagapudi, Guntur District, Andhra Pradesh ...Respondents Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue an appropriate Writ, Order or Direction particularly in the nature of Mandamus declaring that the impugned Ex- more Parte Best Judgment Assessment Order passed by the First Respondent vide AAO NO. ZH370321OD88147. dated 31-03-2021, for the Tax Periods 0^-0:4^20^4 to 31-10-2015, is tarred by limitation, arbitrary, capricious, violative of the principles of natural justice, contrary to law, contrary to the provisions of the AP VAT Act. 2005 and Rules made thereunder and illegal ‘ and consequently set aside the same. lA NO: 1 OF 2022 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased For the reasons stated in the affidavit filed in support of the main Writ Petition, it is prayed that pending disposal of the above Writ Petition, this Hon'ble High Court be pleased to grant stay of collection of the balance disputed tax of Rs. 50,14,541-00 assessed vide the impugned Assessment Order passed by the First Respondent vide AAO NO. ZH3703210D88147, dated 31-03-2021, for the Tax Periods 01-04-2014 to 31-10-2015. lA NO: 1 OF 2023 Petition under Rule 12(ii)(ii) of Writ Proceeding Rules - 1977 R/w Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to receive the counter copies on record by allowing the leave petition in the above writ petition. Counsel for the Petitioner; SRI. G NARENDRA CHETTY Counsel for the Respondents: GP FOR COMMERCIAL TAX WRIT PETITION NO: 5350 OF 2022 Between: 1. M/s. Shirdi Saibaba Constructions, 13/2/79, Shirdi Nagar, Near R.C. Nagar, Anantapur - 515001, Anantapur District, Andhra Pradesh, by its Managing Partner, T. Chiranjeeva Reddy. rep. ...Petitioner AND 1. The Assistant Commissioner (ST), The Assistant Commissioner (ST), Anantapuramu-1 Circle, il Floor, PAR Heights, Gooty Road, Anantapur- 515001, Anantapur District, Andhra Pradesh. 2. The State of Andhra Pradesh, rep. by the Principal Secretary to the Government, Revenue (CT) Department, Andhra Pradesh Secretariat Buildings, Velagapudi, Guntur District, Andhra Pradesh. ...Respondents Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court be pleased to issue an appropriate Writ, Order or Direction, i particularly in the nature of Mandamus declaring that the impugned Ex-Parte Penalty Order passed by the First Respondent vide AAO ZH3705210D91985, dated 21-05-2021, imposing Penalty u/S. 53(3) of the APVAT Act, 2005, equal to/100 percent of tax imposed by him vide his Ex- Parte Best Judgment Assessment Order vide AAO No. ZH3703210D8814 7, dated 31-03-2021, for the Tax Periods 01-04-2014 to 31-10-2015, is barred by limitation, arbitrary, capricious, violative of the principles of justice, contrary to law, contrary to the provisions of the AP VAT Act, 2005 and Rules made there under and illegal and consequently set aside the same. may more NO. natural lA NO: 1 OF 2029 Petition under Section 151 CPC stated in the affidavit filed in support of the petition, the High Court may be pleased to grant stay of collection of the disputed Penalty of Rs 00 imposed vide the Ex-Parte Penalty Order Respondent vide AAO NO. ZH370521OD91985 praying that in the circumstances . 50,14,541- passed by the First dated 21-05-2021, uJS. 53(3) of the APVAT Act, 2005, for the Tax Periods 01-04-2014 to 31-10- 2015. Counsel for the Petitioner: SRI. G NARENDRA CHETTY Counsel for the Respondents: GP FOR COMMERCIAL TAX The Court made the following common order: APHC010084912022 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3525] MONDAY,THE TWENTY FIRST DAY OF APRIL TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO THE HONOURABLE DR JUSTICE K MANMADHA RAO WRIT PETITION NOs: 5303/2022 & 5350 of 2022 W.P.No.5303 of 2022 Between: ...PETITIONER Shirdi Saibaba Constructions AND ...RESPONDENT(S) The Assistant Commissioner St and Others Counsel for the Petitioner: 1.G NARENDRA CHETTY Counsel for the Respondent(S): 1. GP FOR COMMERCIAL TAX WRIT PETITION NO: 5350/2022 Between: M/s. Shirdi Saibaba Constructions ...PETITIONER AND ...RESPONDENT(S) The Assistant Commissioner St and Others Counsel for the Petitioner: 1.G NARENDRA CHETTY Counsel for the Respondent{S): 1. GP FOR COMMERCIAL TAX 2 The Court made the following common order; (per Hon’ble Sri Justice R. Raghunandan Rao) Heard Sri G. Narendra Chetti learned counsel, appearing for the petitioner and the learned Government Pleader for Commercial Taxes. 2. As the questions of fact and law raised in both these writ Petitions are one and the same, they are being disposed of, by way of the common order. 3. The petitioner was registered under the A.P VAT Act, 2005 and was carrying on the business of execution of Works Contracts. The petitioner executed Works Contracts, only for government departments, and no private works contracts were executed by the petitioner. The petitioner opted for payment of VAT under the Composition scheme as per Section 4(7)(b)&(d) of the A.P VAT Act, 2005 by submitting such option in Form VAT 250 before the Assistant Commissioner (Sales Tax), Anantapuramu, Circle-1, who is arrayed as respondent, online, and the respondent issued endorsements relating to all these forms. 4. The government departments were deducting tax at source, from the bills of the petitioner, @ 5% of the entire bills, and were paying the same to the Commercial tax Department, the petitioner had filed his returns, without paying any further tax as TDS of 5% was sufficient to meet the liability of the petitioner. 3 5. On 23.10.2020, the respondent issued a revised show cause notice stating that there were discrepancies between the Income Tax Returns of the petitioner, for the tax period 2014-15, and the monthly VAT returns filed by the petitioner for the same period and called upon the petitioner to show cause why the difference in turnover should not be treated as suppressed turnover and taxed accordingly. Apart from this, there was also a proposal to impose tax under Section 4(7)(b) & (d) of the A.P VAT Act, instead of under the composition scheme, on the ground that the petitioner had not produced the books of accounts and other VAT records. This would mean that the petitioner would have to pay tax @ 14.5% on the turnover of the petitioner, after a standard deduction of 30% instead of 5% under the composition scheme. 6. The 1 respondent, on 31.03.2021 had passed the assessment order levying tax @ 14.5% for the year 2014-15 and the year 2015-16 on a turnover of Rs.4,82,88,208/-. The petitioner was directed to pay a sum of Rs.50,14,541/- as tax after deducting the tax which had already been paid for this period. 7. Aggrieved by this order of assessment, the petitioner moved W.P.No.5303 of 2022 before this Court. The 1®* respondent, had thereafter, passed an ex parte penalty order, dated 21.05.2021, imposing penalty under Section 53(3) of the A.P VAT Act for a sum of 100% tax 4 imposed. Aggrieved by this order of penalty, the petitioner moved 1 W.P.No.5350 of 2022. The case of the petitioner is that the impugned order has been passed without considering the facts and the composition forms filed by the petitioners. Apart from this, the petitioner would also contend that the order of assessment and penalty are beyond limitation. 8. 9. Sri G. Narendra Chetti, learned counsel appearing for the petitioner would contend that the 1®‘ respondent had passed the assessment order by invoking the extended period of limitation, of six years, under Section 21(5) of the A.P VT Act, 2005. He would submit that such extended period of limitation, which can be invoked, only on willful evasion of tax, could not have been invoked in the present case as there is no willful evasion of tax. Learned counsel for the petitioner would submit that even if such extended period of limitation is permissible, a large part of the period, considered under the assessment order, would be barred by limitation. 10. Learned counsel for the petitioner would contend that the tax period in question is 2014-15 and 2015-16. Section 21(5) of the A.P VAT Act reads as follows: “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.” 5 11- This would mean that the period of six years would be returns. Under the scheme are filed within 20 days after the available from the date of filing of the of the expiry of every would have The six year period of limitation A.P VAT Act, the returns month. That would to be filed by 20**^ May, 2014. mean returns for the month of April, 2014 for assessment of this tax period Act, would be 20.05.2020. However even under Section 21(5) of the A.P VAT the assessment was carried 31.03.2021. Learned counsel for the petitioner would out on contend that in such up to February, 2015 is barred by circumstances, the assessment of tax limitation. 12. Learned counsel for the petitioner where a part of the period, limitation, it would be would also contend that under an assessment order, is beyond necessary to set aside the entire order and remand the matter back to the Assessing Officer, for passing a fresh assessment order in relation to the period which is within limitation. For this he relies upon the judgment of 16.08.2023, in W.P.No.4805 of 2021. purpose, a Division Bench of this Court, dated 13. Section 20(1) of the A.P VAT registered dealer shall submit payment of tax in the Act stipulates that every a return or returns along with the proof of manner and time, to such authority as may be prescribed. This return is subject to scrutiny, by the assessing authority. Under Section 21(4) such scrutiny can be carried out and an assessment 6 order can be passed by the authority within a period of four years from the end of the period for which the assessment is to be made. Section 21(5) states that this period would be six years from the date of filing of the return or the first return relating to such an offence, where there is willful evasion of tax. 14. The period for which a return is to be filed, is not set out in the main Act. However, Section 20(1) of the A.P VAT Act states that the period may be prescribed. That is, the period was left open to be prescribed under the rules made under this Act. The period for which returns would have to be filed, under the A.P. VAT Act, would be the calendar month. There is also no dispute that the petitioner had been filing returns for each calendar month. Rule 23(1) also stipulates that returns for each month would have to be filed on or before 20'^ day of succeeding month. 15. A conjoint reading of all the aforesaid provisions would mean that a best judgment order, of assessment, in the case of willful evasion of tax, by the dealer, would mean that the period of assessment, of six years, for every month would commence from the 20'*^ day of the succeeding month, where returns have been filed in time. As there is no dispute that the returns have been filed, by the petitioner, within the prescribed time, the limitation of every month would have to be taken into account. In such circumstances, the order of assessment, dated 7 ft* 31.03.2021, is beyond the period of limitation set out for the months of April to February of the financial year 2014-15. Since the assessment order is beyond the period of limitation, the order of assessment, dated 31.03.2021, passed by the 1®' respondent is to be set aside for the period r April, 2014 to February, 2015. Learned counsel for the petitioner contends that a Division 16. Bench of this Court, by its order dated 16.08.2023, in W.P.No.4805 of 2021, had held that in such circumstances, the entire order would have to be set aside and remanded to the extent of the period of which limitation would still be available. We have gone through the said order, and do not find any such ratio. However, the fact remains that the period beyond limitation would have to be excluded and a fresh computation of the tax that would have paid would have to be undertaken. For this purpose, it would be more appropriate that the entire order is set aside and the matter is remanded for a fresh assessment, by the Assessing Officer, for the period which is within limitation. Apart from this, the petitioner has also raised a ground that the levy of tax @ 14.5%, without giving the benefit of the composition scheme, is impermissible as the Assessing Authority had not verified the forms of composition given by the petitioner and endorsed by the 1®* respondent. 1 I 8 The order of Penalty, dated 21.05.2021, is based upon the' order, dated 31.03.2021. Once the order of assessment itself has been set side, the order of penalty would not survive. 17. For all the aforesaid reasons, both the Writ Petitions allowed set-aside the order of assessment, passed by the 1®* respondent on 31.03.2021 as well as the order of penalty, passed by the 1 respondent on 21.05.2021. However, it would be open to the 1 respondent to pass a fresh order of assessment against the petitioner, for the tax period March, 2015 to March, 2016, after giving due opportunity of hearing to the petitioner and after considering all the objections being raised by the petitioner. It would also be open to the 1\"* respondent- Assessing Officer to take up penalty proceedings, if the warranted, after an order of assessment had been passed. There shall be no order as to costs. 18. are St St same is As a sequel, miscellaneous petitions, pending if any, shall stand closed. Sd/- SHAIK MOHD. RAFI ASSISTANT REGISTRAR W 2(r //TRUE COPY// SECTION OFFICER To, 1. The Assistant Commissioner (ST), Anantapuramu-1 Circle, II Floor, PAR Heights, Gooty Road, Anantapur - 515001, Anantapur District, Andhra Pradesh. 2. The Principal Secretary to the Government, State of Andhra Pradesh, Revenue (CT) Department, Andhra Pradesh Secretariat Buildings, Velagapudi, Guntur District, Andhra Pradesh. 3. One CC to Sri. G Narendra Chetty Advocate [OPUC] 4. Two CCs to GP for Commercial Tax, High Court Of Andhra Pradesh. [OUT] 5. Three CD Copies HIGH COURT DATED:21/04/2025 1 COMMON ORDER WP.No.5303 AND 5350 of 2022 ALLOWING THE WPS WITHOUT COSTS "