Know the Provisions relating to Assessment under GST-Assessment of Non-Filers of Return
Relevant Section-: Section 62 read with Section 46 of CGST Act, 2017
Applicable Rule- Rule 100 and Rule 142 of CGST Rules 2017
GSTR-3A: Notice to return defaulter u/s 46 for not filing return-To be issued Electronically
ASMT-13: Assessment order under Section 62
DRC-07: Summary of the order-To be uploaded electronically
DRC-08: Summary of Rectification /Withdrawal Order-To be uploaded electronically
- Applicability of Section
Provisions of Section 62 are applicable wherein a registered person fails to furnish return under Section 39 and 45 of the CGST Act, 2017 even after service of notice under Section 46 of CGST Act, 2017. Section 39 of CGST Act, 2017 pertains to Furnishing of returns from GSTR-3/3B, GSTR-4, GSTR-5, GSTR-6 and GSTR-7. Section 45 of CGST Act, 2017 pertains to Final Return in Form GSTR-10.
Therefore, proceedings under Section 62 of CGST Act, 2017 cannot be initiated against a registered person for failure to file GSTR-1, since GSTR-1 is a statement under section 37 of CGST Act, 2017. Similarly, for non-filing of Annual Return/TCS Return proceedings cannot be initiated under Section 62 against the registered person, since Annual Return is filed under Section 44 and Return for Tax Collected at Source is filed under Section 52 of CGST Act, 2017.
Further, proceedings under section 62 can only be initiated against a registered person. In case of unregistered person, proper officer has to issue notice under Section 63 of CGST Act, 2017 and not under Section 62 of CGST Act, 2017.
2. Section 62 creates an overriding impact over provisions of Section 73 and 74 of CGST Act, 2017
Section 62 creates an overriding impact over anything contrary contained in provisions of Section 73 and 74 of CGST Act, 2017.
3. Notice for non-filing of return under section 46 of CGST Act, 2017 to be issued before initiation proceedings under Section 62
Proper officer can initiate proceedings under Section 62 only in cases wherein notice for non-filing of returns has been given under section 46 of CGST Act, 2017 and registered person fails to furnish returns even after the issue of notice. Notice for non-filing of return has to be issued electronically under Form GSTR-3A. Without issue of notice for non-filing of return under Section 46 of CGST Act, 2017, no assessment under section 62 can be completed by the proper officer.
4. Assessment of Liability to best of judgement of Proper officer and taking into account all the relevant material which is available or which he has gathered
Proper officer may proceed to assess tax liability of the said person to the best of his judgement taking into account all the relevant material which is available or which he has gathered. The assessment of the liability can only be to best of the judgement only after taking into account all the relevant material which is available or which he has gathered.
5. Time Limit for passing the order
Proper officer has to issue an assessment order under GSTR ASMT-13 within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. Summary of the order issued under ASMT-13 has to be uploaded electronically in FORM DRC-07.
6. Withdrawal of order passed under Section 62 of CGST Act, 2017
If a registered person furnishes a valid return within thirty days of service of assessment order under sub-section (1) of Section 62, said assessment order shall be deemed to have been withdrawn but liability for payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue. Withdrawal of order shall be made in Form DRC-08 and shall be electronically uploaded by the proper officer.
7. No Separate Notice required to be given under Section 62
If notice under section 46 of CGST Act, 2017 has served electronically under Form GSTR-3A upon the registered person for non-filing of return under section 39 or Section 45, and registered person does not files return in pursuance of the said notice, Section 62 does not mandate any further service of notice. In such cases, Section 62 read with Rule 100 empowers the proper officer to issue Assessment order under FORM GST ASMT-13 and a summary thereof to be uploaded electronically in FORM GST DRC-07
8. Litmus test to be passed by the order passed by the proper officer to the best of his Judgement
The section does not give an unfettered power to the assessing officer and the guess wok involved in the order of best judgement has to be made on the basis of material available on record and information gathered by the assessing officer. Few of the relevant Judicial Ruling on the matter are as follows:
- Assessing Authority must not act dishonestly or vindictively or capriciously
Privy Council in Commissioner of Income-tax v. Laxminarayan Badridas considered the meaning of “to the best of his judgement” wherein it observed:
“He (the assessing authority) must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee’s circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary.”
- Assessing officer needs to consider all relevant material on record
Division Bench of the Calcutta High Court in Jagadish Prosad Pannalal v. Member, Board of Revenue, West Bengal AIR 1951 Cal 154, 55 CWN 244, confirmed the assessment made by the sales tax authorities, as in making the best judgment assessment the said authorities considered all the available materials and applied their mind and tried their best to come to a correct conclusion.
Further Division Bench of the Patna High Court in Doma Sahu Kishun Lal Sao v. State of Bihar AIR 1952 Pat 357, 1953 (1) BLJR 196 refused to interfere with the best judgment assessment of a Sales Tax Officer as he took every relevant material into consideration, namely, the situation of the shop, the rush of the customers and the stock in the shop and also the estimate made by the Assistant Commissioners in the previous quarters.
- Judgement should have reasonable nexus to the available material and circumstances of the case
Apex Court in the matter of State Of Kerala vs C. Velukutty on 2 December, 1965 held that limits of the power are implicit in the expression “best of his judgment”. Judgment is a faculty to decide matters with wisdom truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guess- work in a “best judgment assessment”, it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case.
Hon’ble Apex in the said matter set aside the order by Assessing Officer holding that in this case there was no material before the assessing authority relevant to the assessment and the impugned assessments were arbitrarily made by applying a ratio between disclosed and concealed turnover in one shop to another shop of the assessee. It was only a capricious surmise unsupported by any relevant material. The High Court, therefore, rightly set aside the orders of the Tribunal.
Apex Court in the matter of Raghubar Mandal Harinder Mandal v. State of Bihar 1957 AIR 810, 1958 SCR 37
“No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess: but the estimate must be related to some evidence or material and it must be something more than mere suspicion.”
Similar ratio was laid down by the Apex Court in the matter of Brij Bhushan Lal Parduman Kumar vs Commissioner Of Income Tax 1979 AIR 209, 1979 SCR (2) 16.
- Figures does not have to be proved to the exact amount determined
In the case of Lake Palace Hotels and Motels Pvt. Ltd vs Commissioner Of Income-Tax (1195) 213 ITR 735, it was held that in a best judgment assessment guess-work is necessary and it is not required that the figure has to be proved to the exact amount determined by the taxing authorities.
- Basis of Computation to be disclosed in the order
In the matter of Ganga Prasad Sharma vs Commissioner of Income-Tax on 12 March, 1980 Equivalent citations: 1981 127 ITR 27 MP it was held that
Neither the ITO nor the Commissioner has referred to any material for applying the flat rate of 15 per cent, while estimating net profits. It was now well settled that while making a best judgment assessment, though there must necessarily be guess-work in the matter, it must not be arbitrary. In the instant case, the basis on which the computation is made is not disclosed in the order. Learned counsel for the department was unable, to support the impugned order.
- If the estimate is bonafide and on rationale basis, it cannot be disturbed by the Court even though it might not be the most appropriate
In the matter of Sangrur Vanaspati Mills Ltd. vs Commissioner Of Income-Tax on 7 July, 2005 Equivalent citations: (2007) 211 CTR P H 439, 2006 283 ITR 267 P H, Punjab and Haryana High Court held that
The best judgment assessment must have some reasonable nexus to the available material and circumstances of each case. If the estimate made by the Assessing Officer is a bona fide estimate and is based on rational basis, it cannot be disturbed even when the court may think that it is not the most appropriate basis.