Revision u/s 64 of KVAT Act After Grant of Karasamadhana Scheme Benefit Not Permissible: Karnataka HC [Read Order]

Omkar Land Developers,petitioner-assessee,was issued a notice under Section 39 of the KVAT Act on 12.01.2021, alleging wrongful claim of labour deductions without Books of Account and denial of TDScredit due to lack of acknowledgment.

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The petitioner failed to respond or appear, and the Prescribed Authority confirmed the tax demand at 14.5% along with interest and penalty through an order dated 15.03.2021.

The petitioner filed an appeal, and the First Appellate Authority partly allowed it on 24.08.2021, accepting the claim of labour charges, ITC, and TDS credit after verifying the Books of Account. The remaining demand was confirmed, but the petitioner was permitted to opt for the Karasamadhana Scheme, 2021.

The petitioner applied under the Scheme, and by order dated 28.12.2021, the waiver of interest and penalty was granted. The balance tax demand was also paid.

Later, the Revisional Authority issued a notice under Section 64, claiming the appellate order was prejudicial to revenue. The petitioner objected, stating that once benefits under the Scheme were granted, revision was not permissible. However, the Revisional Authority passed an order on 25.11.2024, setting aside the appellate order and restoring the original reassessment. Aggrieved, the petitioner filed the present appeal before the High Court.

Justice S.G.Pandit and Justice T.M.Nadaf considered whether the Revisional Authority could initiate proceedings under Section 64 of the KVAT Act after the petitioner had already availed benefits under the Karasamadhana Scheme, 2021. It answered this in the negative.

The Court noted that the reassessment order was partly modified by the First Appellate Authority. For the remaining demand, the petitioner applied under the Karasamadhana Scheme within the prescribed time. The application was accepted on 28.12.2021, granting waiver of interest and penalty, and the petitioner paid the tax dues in full.

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According to Clause 5.7 of the Scheme, benefits would not apply if suo motu revision had already been initiated before the Scheme came into effect. In this case, no such revision was pending at that time. The revision notice was issued much later, on 16.02.2024.

The Court held that once the benefits under the Scheme were granted and finalised, reopening the case under Section 64 would defeat the purpose of the Scheme. It found the revision order to be unreasonable and invalid.

The appeal was allowed, and the Revisional Authority’s order dated 25.11.2024 was set aside.

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