Kiran Raj

The Andhra Pradesh High Court has ruled that a tax assessment order issued by the Commercial Tax Officer, Addanki Circle, was beyond the statutory limitation period and is therefore non-est in law. The Court allowed two writ petitions challenging the assessment order, the subsequent penalty notice, and the attachment of the petitioner’s bank accounts and immovable property. It held that the assessment was time-barred under the Andhra Pradesh Value Added Tax Act, 2005, and directed the release of the attached assets.

The petitioner, a registered dealer under the Andhra Pradesh Value Added Tax Act, 2005, filed the writ petitions concerning tax demands for the period from June 2, 2014, to June 13, 2017. The assessment order was issued on August 24, 2021, followed by a penalty notice dated September 16, 2021. The petitioner argued that these orders were issued beyond the four-year limitation period prescribed under Section 21(4) of the Act, which expired on June 30, 2021.

The petitioner initially challenged only the orders of attachment of his bank accounts and immovable property. However, after receiving the assessment order, the petitioner amended his writ petition to also contest the validity of the assessment. It was contended that the petitioner had not been served with either the assessment order or the penalty notice before the attachments took place.

The Assessing Officer submitted that the petitioner had deliberately avoided service of notices and failed to cooperate with the assessment process. It was argued that notices were sent to the petitioner’s last known business address by registered post, and they were served on July 28, 2021. The penalty notice, dated September 16, 2021, was also claimed to have been served on October 4, 2021. The Assessing Officer further submitted that the writ petitions were not maintainable as there was an effective alternative remedy of appeal.

The respondents contended that the assessment order was issued under a best judgment assessment due to the petitioner’s failure to attend the proceedings or provide necessary records. The Government Pleader for Commercial Tax argued that the case fell under Section 21(5) of the Act, which provides an extended six-year limitation period where there is willful suppression of facts or tax evasion. The assessment order, it was submitted, was valid under this provision.

The Court examined the assessment order and noted that it was based entirely on a best judgment assessment relying on the returns filed by the petitioner. The judgment stated: "There is nowhere any mention of suppression of facts, much less, willful suppression of facts, resulting in willful evasion of tax, which is the sine qua non for invoking Section 21(5) of the Act."

The Court observed that the assessment order did not establish tax evasion or suppression of material facts and therefore did not satisfy the conditions for extending the limitation period under Section 21(5). The judgment further stated: "As the impugned assessment order has been passed beyond the period stipulated under Section 21(4) of the Act, it must be held that the impugned order is beyond limitation and non-est."

Since the assessment order had been passed after the statutory period under Section 21(4) had expired, the Court held that it was not legally sustainable. Consequently, it ruled that the penalty notice issued on September 16, 2021, was also invalid.

The Court further examined the attachment of the petitioner’s bank accounts and immovable property, which had been carried out in pursuance of the assessment order. It found that since the assessment order itself was held to be beyond limitation, the consequential attachments also could not stand. The Court, therefore, set aside the attachment proceedings and directed that the petitioner’s bank accounts and immovable property be released.

In its final order, the Court allowed both writ petitions and set aside the assessment order, penalty notice, and attachment proceedings. The judgment stated: "Accordingly, both the writ petitions are allowed setting aside the impugned assessment order of the Commercial Tax Officer, Addanki Circle, dated 24.08.2021 and penalty notice dated 16.09.2021. Consequently, all the consequential proceedings of attachment of bank account as well as the immoveable property of the petitioner are also set aside. There shall be no order as to costs."

The Court concluded that the tax demand was beyond limitation and could not be enforced. The order also clarified that all pending miscellaneous applications related to the case would stand closed.

Case Title: Chakkas Enterprises vs. The Chief Commissioner of State Taxes & Others 

Case Number: W.P. No. 30501 of 2023 & W.P. No. 16819 of 2024

Bench: Justice R. Raghunandan Rao and Justice Harinath N.

[Read/Download order]