Recently, in M/S. Paharpur Cooling Towers Limited v. State of Kerala & Ors, the Kerala High Court held that the limitation provided u/s 25(1) is only applicable for initiation of proceedings under the KVAT Act and it does not, in any way, bars the conclusion of proceedings. The Court clarified that the only mandate provided under the section is that the proceedings must be completed within a reasonable time.
The bench was hearing a writ petition through which the petitioners contended that the limitation provided under Section 25(1) of the Act is applicable to completion proceedings also.
Diving deeply into the facts of the case, the bench observed “In the present case only the first stage has occurred before the limitation period and hence, there can be no enquiry made or proceedingscontinued after the limitation period, is the argument. This Court is unable to countenance such contention since the Full Bench has clearly held that the words ‘proceed to determine’ would only require initiation of proceedings before the limitation period. Initiation of proceedings can only be with a notice and the mandate of an enquiry definitely has to be complied with by the Assessing Officer, but, there can be no limitation period provided for that enquiry.”
The petitioner further contended that there should be a limitation for conclusion of theproceedingspost amendment to the Act in 2010 extending the time for completion of assessments.
“The proviso, as it reads, only indicates that completion of assessments including those in which an extension is made under Section 25B and expiring on 31.03.2015, would stand extended up to 31.03.2016. There is no limitation for completion of assessment provided therein. In the present case the assessment year is 2010-2011 and the limitation for initiating proceedings, under Section 25(1) expires only on 31.03.2016. The notice impugned herein is dated 19.03.2016; within the limitation period as provided under Section 25(1) of the KVAT Act. The argument is that the proviso deems conclusion of assessment within the extended period.”
“The proviso is a well-known devise of statutory construction, which cannot be interpreted as stating a general rule and creates either a qualification of or an exception from, what is stated in the substantive section or rule. It cannot be said to include or add what is not available in the original enactment.”
Section 25B relates to extension of period of completion, beyond the period specified in sections 24 and 25 of the Act. “While section 24 prescribes a limitation period of three years to reject the return and complete the assessment, section 25(1) of the Act does not speak of any limitation period as to the final determination or conclusion of the proceedings and specifically refers to the initiation of the proceedings to determine the escaped assessment to tax within a period of five years from the last date of the year to which the return relates.”
“The third proviso to section 25 (1) extends period for completion of assessment including an extension made under Section 25B. Section 25B confers powers on the Deputy Commissioner to extend the time for completion of investigation or enquiry, for good and sufficient reasons notwithstanding Sections 24 and 25, thus enabling extension of the period of completion of the assessment beyond the period specified in those Sections. Section 25(1) does not speak of any limitation for completion of the proceedings. In such circumstances, if at all extension of completion of assessment is permitted by the Deputy Commissioner, that would not enable the State to initiate proceedings after the limitation period is overnor can a limitation be found from the proviso.”
Referring to the Full bench decision in Cholayil Private Limited v. Assistant Commissioner (Assessment), the bench opined thatno time limit has been provided under the Act for completion of proceedings. “even if anextension is made under Section 25B, the same would not enable the State to initiate proceedings after expiry of the period of limitation provided under sub section (1) of Section 25 of the Act. As a corollary the proceedings initiated before the limitation period would not be rendered nugatory merely for the reason that it was not concluded within the period allegedly provided in the third proviso, for the simple reason that the third proviso read with Section 25B does not provide a period of limitation.”
Read the full text of the Judgment below.