By TIOL News Service

BANGALORE, MAY 08, 2015: THE revision petitioner is engaged in the business of providing passive infrastructure telecom services to its operators and is registered under the Karnataka Value Added Tax Act, 2003 (KVAT Act for short). The petitioner is assessed to VAT under the provisions of the KVAT Act and has been discharging its tax liability from time to time since its registration on 4.12.2007.

The dispute in the present revision petition relates to the month of January 2009. For the said tax period, petitioner had filed a 'nil' return on 20.2.2009, which was within the prescribed twenty days period. It is the case of the petitioner that it was unable to ascertain the turnover for the month in question on account of certain software issues at the Head Office and therefore, to comply with the filing of the return required by the due date, it had filed a 'nil' return. However, subsequently when the correct facts and figures were available with the petitioner, it voluntarily filed a revised return on 16.3.2009 which was without any receipt of intimation or notice from the respondent authorities. In the said revised return, petitioner disclosed a turn over of over Rs.7 crores and discharged the entire tax liability along with interest upto 16.3.2009.

Theses facts are not disputed by the parties . It is also not disputed that the revised return, as well as the tax and the interest deposited by the petitioner, were duly accepted by the respondents, meaning thereby that the revised return filed by the petitioner had been accepted by the Department. The validity of the revised return or the tax and interest deposited by the petitioner has not been questioned by the Department at any stage.

Then, after a gap of more than three years, on 18.6.2012, a notice was issued requiring the petitioner to submit a reply as to why penalty under S.72 (2) of the KVAT Act be not imposed for understatement of tax liability, which was more than 5% of the tax paid during the period in question. In response to the same, petitioner submitted its reply on 2.7.2012. Thereafter, on 16.7.2012, the 2nd respondent / Assistant Commissioner passed an order imposing penalty of Rs.8 ,82,408 /-, being 10% of the alleged understated tax liability. On the same date, a demand notice was also issued by the Assistant Commissioner . Challenging the same, petitioner filed an appeal before the Joint Commissioner (Appeals ) which was dismissed on 15.2.2013. A second appeal was filed by the petitioner before the Karnataka Appellate Tribunal which was also dismissed by the Tribunal vide its order dated 29.1.2014. Aggrieved by the said orders, this revision petition has been filed under S.65 (1) of the KVAT Act before the Karnataka High Court.

The question before the High Court is as to whether in the facts and circumstances of the case, when the petitioner had itself voluntarily filed the revised return under S.35 (4) of the Act and had also deposited the tax along with interest, which was not as a result of any inspection or receipt of information or evidence by the Prescribed Authority, could penalty be still imposed under S.72 (2) of the KVAT Act?.

S.35 (1) of the KVAT Act provides for filing of return within twenty days after the end of the preceding month. In the present case, the said period of twenty days was to expire on 20.2.2009, on which date the petitioner had filed its return for the relevant tax period of January, 2009. Sub-section (4) of S.35 provides for filing of revised return which could be filed within six months from the end of the relevant tax period. In the present case, petitioner had filed the revised return within twenty four days i.e., on 16.3.2009 and had also deposited the admitted tax and interest for the delayed period. Subsection (7) of S.42 provides for payment of tax along with the revised return, which the petitioner has undisputedly deposited.

Now the question for consideration would be, whether it would be the 'revised return' furnished by the petitioner to be considered as the 'return' under sub-section (2) of S.72 or would it be the 'original return' filed on 20.2.2009 to be considered as the 'return' for the purpose of the said sub-section. The definition of 'return' under sub-section (28) of S.2 clearly means to be a 'return' including a 'revised return'.

As such, the High Court was of the firm view that under the KVAT Act, there cannot be any dispute that 'revised return' is also a 'return'.

Now the question is whether there can be two returns under consideration at the same time. Once a revised return has been filed and accepted by the Department, the original return gets obliterated and the only return which remains for consideration would be the revised return, as there cannot be two live returns pending consideration of the Department. In the present case, as a matter of fact, not only the revised return had been filed by the petitioner, but the same was also accepted by the respondents, and the validity of the revised return is not in question or in dispute. Once the revised return has been accepted and acted upon by the parties, then it is only the revised return which has to be taken as the sole return for the purpose of sub-section (2) of S.72 .

Section 72(2) of the KVAT Act provides that a dealer, who, for any prescribed tax period, furnishes a return which understates its liability to tax by more than 5% of its actual liability of tax, shall be liable to a penalty equal to 10% of the amount of such tax understated.

As the High Court has already held that for the prescribed tax period, the return to be considered was the revised return filed on 16.3.2009 and not the original return filed on 20.02.2009, which had been nullified or obliterated after the filing and acceptance of the revised return, then, it cannot be said that there was any understatement of the tax liability by the petitioner to any extent in its revised return (which was the only return to be considered), as in terms of the said revised return, the entire tax along with interest, had been paid.

In such view of the matter, High Court was of the opinion that in the facts of the present case, the provision of sub-section (2) of S.72 of the KVAT Act would not be attracted.

The revision petition is allowed and the order of the Tribunal as well as the authorities below are set aside.

(See 2015-TIOL-1174-HC-KAR-VAT)