Power to extend time of assessment cannot be exercised after the expiry of presribed period of assessment #indianlaws

The Supreme Court held that upon the lapse of the period of limitation prescribed, the right of the Department to assess an assesse gets extinguished and this confers a very valuable right on the assesse. If the Commissioner is permitted to grant the extension even after the expiry of original period of limitation prescribed under the Act, it will give him right to exercise such a power at any time even much after the last date of assessment. When the last date of assessment in respect of the relevant Assessment Years expired, it vested a valuable right in the assesse which cannot be lightly taken away. Section 11(10) has to be interpreted in the manner which is equitable to both the parties. It was accordingly held that power to extend the time is to be exercised before the normal period of assessment expires. SC

Issue involved in the instant appeals pertained to the interpretation to be accorded to Section 11(10) of Punjab General Sales Tax Act, 1948 (“Act”). The relevant assessment years for the purpose of present appeals were 2000-01, 2001-02, 2002-03 and 2003-04. The assessee had filed quarterly returns in respect of the aforesaid Assessment Years. In terms of Section 11(3) of the Act, time-limit for completing the assessment provided therein is three years from the end of the year. Accordingly, assessments were to be made by 30th April, 2004 for the Assessment Year 2000-01, 30th April, 2005 for the Assessment Year 2001-02, 30th April, 2006 for the Assessment Year 2002-03 and 30th April, 2007 for the Assessment Year 2003-04. No assessment was made in respect of any of these Assessment Years by the aforesaid stipulated dates. Notices were served upon the assesse for the aforesaid Assessment Years after the expiry of three years. The assesse took an objection that these notices were sent beyond the period of assessment and, therefore, it was not permissible for the Assessing Officer to issue notice after the expiry of three years and carry on with the assessment proceedings. Section 11(10) of the Act empowers the Commissioner to extend the period of three years for passing the order of assessment for such further period as he may deem fit, after recording in writing the reasons for extending such period. Commissioner disregarded the “time barred” objection for notices served granted extension. This order of extension along with assessment orders were challenged before the Tribunal, which however dismissed the plea raised by the assesse by upholding finding of commissioner. It was the contention of the assesse that when the normal period of limitation for passing assessment order by the Assessing Officer was three years, as per Section 11(3) of the Act, the power to extend the period could be exercised within the said period of three years and not after the expiry of limitation period. High Court in appeal accepted the contentions of Assesse holding that once the period of limitation expires, the immunity from subjecting itself to the assessment sets in and the right to make assessment gets extinguished. Therefore, when the period of limitation prescribed in the Act for passing the assessment order expires, thereafter, the Commissioner is debarred from exercising his powers under Section 11(10) of the Act and cannot extend the period of limitation for the purposes of assessment. The Revenue filed the instant appeals against the above impugned finding of the High Court. The Court observed that as per the provision in question wherever return is filed by the assesse, assessment is to be made within a period of three years from the last date prescribed for furnishing the return in respect of such period. On the other hand, in those cases where return is not filed or any dealer, who is liable to pay the tax under the Act, does not get himself registered therein, the period of assessment prescribed is five years. Here the matter was treated as not concerning with the alternate situation as in the instant appeals not only the assesses were registered dealers, they had also filed their returns regularly within the prescribed period and, therefore, assessments were to be completed within a period of three years from the last date prescribed for furnishing the returns, which is the normal period prescribed. Section 11(10) empowers Commissioner to extend a period of three years. However, there is no upper limit prescribed for which the period can be extended, thus such an extension can be given, theoretically, for any length of time. This discretion is, however, controlled by obligating the Commissioner to give his reasons for extension, and such reasons are to be recorded in writing. Such an order of extension of time, naturally, is open to judicial review, albeit within the confines of law on the basis of which such judicial review is permissible. It was held upon the lapse of the period of limitation prescribed, the right of the Department to assess an assesse gets extinguished and this confers a very valuable right on the assesse. Extension of time for assessment has the effect of enlarging the period of limitation and, therefore, once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore, there would be no question of extending the time for assessment when the assessment has already become time barred. A valuable right has also accrued in favour of the assesse when the period of limitation expires. If the Commissioner is permitted to grant the extension even after the expiry of original period of limitation prescribed under the Act, it will give him right to exercise such a power at any time even much after the last date of assessment. When the last date of assessment in respect of the relevant Assessment Years expired, it vested a valuable right in the assesse which cannot be lightly taken away. Section 11(10) has to be interpreted in the manner which is equitable to both the parties. It was accordingly held that power to extend the time is to be exercised before the normal period of assessment expires. The impugned finding of the High Court was accordingly upheld and accordingly the Revenue appeals were dismissed. [State of Punjab & Ors. vs. M/s. Shreyans Indus Ltd. etc.] (SC, 04.03.2016) Civil Appeal Nos. 2506-2511 of 2016