IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.T.SANKARAN WEDNESDAY, THE 9TH APRIL 2008 / 20TH CHAITHRA 1930 S.T.Rev..No. 130 of 2005 ---------------------------------- ORDER DATED 25TH MARCH, 2004 IN TA NO.631/2003 OF THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOTTAYAM .................... PETITIONER/APPELLANT/ASSESSEE : ----------------------------------------------------- SHIBU ZACHARIAH, GOVT. CONTRACTOR, KOTTAVIRUTHIL, THALAVADY P.O., ALLEPPEY DISTRICT. BY ADV. SRI.E.P.GOVINDAN & SRI.A.J.ANTONY RESPONDENT/RESPONDENT/REVENUE: ---------------------------------------------------------- STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, TRIVADNRUM. BY SR.GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 09/04/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & K.T.SANKARAN, J. ------------------------------------------ S.T.Rev.No.130 of 2005 ------------------------------------------ Dated, this the 9th April, 2008 ORDER H.L.Dattu, C.J. Petitioner has registered himself as a contractor with the Kerala Water Authority. He is also a dealer registered under the provisions of the Kerala General Sales Tax Act, 1963 ('the Act' for short). 2. For the assessment year 2001-02, the petitioner had filed his annual returns before the assessing authority, declaring the total contract amount received at Rs.3138098/-. In the return so filed, he had requested the assessing authority to levy tax at the compounded rate as provided under Section 7(7) of the Act. The assessing authority while quantifying the tax liability, has permitted the petitioner to pay tax at compounded rate under Section 7(7A) of the Act. 3. Petitioner was unsuccessful before the first appellate authority as well as before the Tribunal. That is how he has presented this tax revision case before us. 4. The assessee has framed several questions of law for our consideration and decision. However, at the time of hearing of this revision petition, Sri.E.P.Govindan, learned counsel appearing for the assessee, would submit that the assessing authority, if for any reason, was not prepared to accept the returns filed by the assessee, ought to have issued a proposition notice, proposing to reject the return filed by the assessee and thereafter should have proceeded to quantify the tax liability. Since that has S.T.Rev.No.130 of 2005 2 not been done, according to the learned counsel, the order of assessment passed by the assessing authority is contrary to the provisions of the Kerala General Sales Tax Act and also to the principles of natural justice. 5. Sri.Muhammed Rafiq, learned senior Government Pleader appearing for the Revenue, sought to justify the impugned order. 6. We have carefully perused the order of assessment passed by the assessing authority. In the assessment order it is clearly noticed by the assessing authority that the assessee had filed his annual returns conceding the contract amount received in a sum of Rs.3138098/- and at the same time had requested the assessing authority to permit him to pay tax at the compounded rate under Section 7(7) of the Act. This request of the assessee is not accepted by the assessing authority. In our view, if for any reason, the assessing authority was of the opinion that the petitioner is not entitled to the claim made in the returns filed, he ought to have issued a proposition notice, inter alia, proposing to reject the returns and to go for best judgment assessment or in the alternative to levy tax under Section 7(7A) of the Act at the rate of 5%. Without issuing such a proposition notice, the assessing authority could not have rejected the returns filed by the assessee and could not have proceeded to quantify the tax liability to pay compounded rate under Section 7(7A) of the Act at the rate of 5%. 7. This lacuna in the order of assessment ought to have been noticed by the first appellate authority as well as by the Tribunal. Since they have not done so, in our opinion, the order of assessment passed by the assessing authority and the orders passed by the first appellate authority and the Tribunal S.T.Rev.No.130 of 2005 3 requires to be set aside and the matter requires to be remanded back to the assessing authority to pass a fresh order in accordance with law keeping in view the observations made by this Court in the course of the order. We do so. All the contentions of the parties are left open. 8. Consequently, I.A.No.732 of 2005 is rejected. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (K.T.SANKARAN) JUDGE vns/DK