Section 29(4) of Punjab VAT Act 2005 provides that an assessment u/s
29(2) or 29(3) may be made within three years after the date when the annual statement was filed or due to be filed, whichever is later.
Proviso to the said sub section further provides that where circumstances so warrant, the Commissioner may, by an order in writing, allow assessmnent of a taxable person or of a registered person after three years, but not later than six years from the date, when annual statement was filed or due to be filed by such person, whichever is later.
Thus it is clear from the plain reading of the above section that an
assessment under section 29(2) and 29(3) of PVAT Act 2005 can be made within three years from the last date of filing of annual statement (which is 20th November in case of taxable person and 20th August in case of Registered person) or the actual date of filing of annual statement whichever is later.
Period of three years is mandatory: Although the word “may” has been used u/s 29(4) above, which may suggest at first instance that the assessment may also be made even after the period of three years and such period of three years is not mandatory and only directory, but it is to be noted that at the same time the proviso to the said sub section provides that commissioner may allow the assessment after such period of three years and not later than six years after an order in writing, where circumstances so warrant.
Thus the combined reading of the section 29(4) and proviso to it, suggest that an assessment of a taxable person or registered person can be made only within a period of three years from the last date or actual date of filing annual statement whichever is later and to make assessment after such period, an order of commissioner in writing where circumstances so warrant, justifying such extension of period, is required. Hence the period of three years as mentioned u/s 29(4) should be treated as mandatory and not directory.
Whether notice is required to be issued before extension of period: One may argue that proviso to section 29(4) doesnot provides for issuance of notice to the dealer before an order for extension of period for assessment is made. It simply states that if the circumstances so warrant the commissioner may allow assessment u/s 29(2) or 29(3) after a period of three years but not later than six years from the last or actual date of filing annual statement, whichever is later.
It is here to be noted that as discussed above the period of three years as mentioned u/s 29(4) is mandatory in nature therefore if an assessment is not made within a period of three years from the last or actual date of filing annual statement, then a vested right accrues in favour of dealers if no assessment for the year in question is framed within the such period of three years as contemplated u/s 29(4) and if extension is granted without affording an opportunity to the dealer concerned then the order contemplated will be prejudicial to the interests of the dealer and will be violative of rules of natural justice as contemplated under article 14 of our constitution.
In a similar case namely M/S A.B Sugars Pvt. Ltd. V. State of Punjab (2010) 15 STM 90, wherein the order of extension of period of assessment passed under section 11(10) of Punjab General Sales Tax Act, 1948 (which was almost similar to section 29(4) of PVAT Act 2005) was challenged on the ground that no opportunity of being heard was provided to the dealer before making such order of extension u/s 11(10) of PGST Act, 1948.
The Hon’ble High Court relied on various judgments and by quoting the observations made by the Hon’ble Supreme Court observed as under:-
“The Commissioner cannot arrive at valid and acceptable reasons unless he affords an opportunity of hearing to the assessee. It is well settled that principles of natural justice have to be implied in a statue even if there is no specific provision, made in a statue unless there is a express exclusion or it could be inferred from statutory provision being a necessary intendment”.
It was further observed-
“In order to impose procedural safeguards, this court has read the requirement of natural justice in many situation when the statue is silent on this point. The approach of this court in this regard is that omission to impose the hearing requirement in the statue under which the impugned action is being taken doesnot exclude hearing it may be implied from the nature of the power particularly when the right of party is affected adversely. The justification for reading such a requirement is that the court merely supplies omission of the legislature(vide Mohinder Singh Gill v. Chief Election Commissioner B….) and except in case of direct legislative negation or implied exclusion (vide SL Kapoor v Jagmohan….).
29(2) or 29(3) may be made within three years after the date when the annual statement was filed or due to be filed, whichever is later.
Proviso to the said sub section further provides that where circumstances so warrant, the Commissioner may, by an order in writing, allow assessmnent of a taxable person or of a registered person after three years, but not later than six years from the date, when annual statement was filed or due to be filed by such person, whichever is later.
Thus it is clear from the plain reading of the above section that an
assessment under section 29(2) and 29(3) of PVAT Act 2005 can be made within three years from the last date of filing of annual statement (which is 20th November in case of taxable person and 20th August in case of Registered person) or the actual date of filing of annual statement whichever is later.
Period of three years is mandatory: Although the word “may” has been used u/s 29(4) above, which may suggest at first instance that the assessment may also be made even after the period of three years and such period of three years is not mandatory and only directory, but it is to be noted that at the same time the proviso to the said sub section provides that commissioner may allow the assessment after such period of three years and not later than six years after an order in writing, where circumstances so warrant.
Thus the combined reading of the section 29(4) and proviso to it, suggest that an assessment of a taxable person or registered person can be made only within a period of three years from the last date or actual date of filing annual statement whichever is later and to make assessment after such period, an order of commissioner in writing where circumstances so warrant, justifying such extension of period, is required. Hence the period of three years as mentioned u/s 29(4) should be treated as mandatory and not directory.
Whether notice is required to be issued before extension of period: One may argue that proviso to section 29(4) doesnot provides for issuance of notice to the dealer before an order for extension of period for assessment is made. It simply states that if the circumstances so warrant the commissioner may allow assessment u/s 29(2) or 29(3) after a period of three years but not later than six years from the last or actual date of filing annual statement, whichever is later.
It is here to be noted that as discussed above the period of three years as mentioned u/s 29(4) is mandatory in nature therefore if an assessment is not made within a period of three years from the last or actual date of filing annual statement, then a vested right accrues in favour of dealers if no assessment for the year in question is framed within the such period of three years as contemplated u/s 29(4) and if extension is granted without affording an opportunity to the dealer concerned then the order contemplated will be prejudicial to the interests of the dealer and will be violative of rules of natural justice as contemplated under article 14 of our constitution.
In a similar case namely M/S A.B Sugars Pvt. Ltd. V. State of Punjab (2010) 15 STM 90, wherein the order of extension of period of assessment passed under section 11(10) of Punjab General Sales Tax Act, 1948 (which was almost similar to section 29(4) of PVAT Act 2005) was challenged on the ground that no opportunity of being heard was provided to the dealer before making such order of extension u/s 11(10) of PGST Act, 1948.
The Hon’ble High Court relied on various judgments and by quoting the observations made by the Hon’ble Supreme Court observed as under:-
“The Commissioner cannot arrive at valid and acceptable reasons unless he affords an opportunity of hearing to the assessee. It is well settled that principles of natural justice have to be implied in a statue even if there is no specific provision, made in a statue unless there is a express exclusion or it could be inferred from statutory provision being a necessary intendment”.
It was further observed-
“In order to impose procedural safeguards, this court has read the requirement of natural justice in many situation when the statue is silent on this point. The approach of this court in this regard is that omission to impose the hearing requirement in the statue under which the impugned action is being taken doesnot exclude hearing it may be implied from the nature of the power particularly when the right of party is affected adversely. The justification for reading such a requirement is that the court merely supplies omission of the legislature(vide Mohinder Singh Gill v. Chief Election Commissioner B….) and except in case of direct legislative negation or implied exclusion (vide SL Kapoor v Jagmohan….).
“The principles of natural Justice have taken deep root in the judicial conscience of our people. Where the statue is silent about the observance of the principles of natural justice, such statutory silence is taken to imply compliance with the principles of natural justice. The implication of natural justice being presumptive it may be excluded by express words of statue or by necessary intendment.”
Hon’ble High court had relied on judgment of the Hon’ble Supreme Court reported in case of Rash Lal Yadav v. State of Bihar, (1994) 5 SCC 267 (SC). Para 9 of the judgment which deals with this issue and reads thus:-
“what emerges from the above discussion is that unless the expressly or by necessary implication excludes the applications of the rule of natural justice, courts will read the said requirement in enactments that are silent and insist on its application even in cases of administrative action, having civil consequences.”
Conclusion: Thus from above it can be concluded that before making an order of extension of period of limitation of three years for assessment as contemplated u/s 29(4) an opportunity of being heard must be provided to the dealer concerned. Such opportunity can be very well provided by issue of a show cause notice to the dealer concerned. Manner of Service of notice under PVAT Act 2005 has been prescribed under Rule 86 of PVAT Rules, hence the service of notice in such case should also be as per rule 86.
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