Court held that retrospective amendments to assessment procedures cannot operate beyond the stipulated record retention period, ensuring taxpayer rights are protected.

JUDGMENT

Dated this the 9^th day of July, 2025 Petitioner has approached this Court seeking to quash Ext.P3 pre-assessment notice for the assessment year 2012-13. Petitioner has also sought for a declaration that the proceedings initiated as per Ext.P3 notice is ab-initio void and without jurisdiction and barred by limitation.

2. The specific case of the petitioner is that annual returns as well as the audit report for the 2012-13 were submitted by the petitioner as per Exts.P1 and P2. Thereafter Ext.P3 pre-assessment notice dated 26.02.2020 was issued after a lapse of seven years. Thereafter another notice was issued by the 1^st respondent as per Ext.P4. Petitioner relying on the judgment of this Court inMCP Enterprises v. State of Kerala and Another [2019 SCC OnLine Ker 6751] which is confirmed in State of Kerala v. MCP Enterprises [ 2022 SCC OnLine KER 6640 ] submits that the issue is already considered by this Court, and based on the said judgments, Ext.P3 notice issued is beyond the period of limitation and liable to be interfered with. The learned Counsel for the petitioner also relies on the unreported judgment of this Court in WP(C) No.32577 of 2018 and also the Division Bench judgment of this Court in Sales Tax OfÏcer (Works Contract) v. Leela Electric Powers Services [ 2025 KHC OnLine 1514 ] in support of his contentions.

3. The learned Government Pleader upon instructions submits that an amendment was carried out to Section 42 (3) of the KVAT Act which was brought in as per amendment Act 18 of 2016 with effect from 13.11.2016 which reads as follows:-

“(3) Notwithstanding anything to the contrary contained in this Act, if a dealer, -

(i) fails to file audited accounts referred to in sub-section (1), or (ii) fails to file revised annual return rectifying the mistake or omission, along with the audited statement of accounts and certificate or if the variance in the audited statement of accounts with the returns is not satisfactorily explained in the reconciliation statement prescribed, or (iii) fails to file the annexures, statements, certificates, declarations, including the statutory declarations to be filed under the Central Sales Tax Act, 1956 which are required to be filed along with the returns to prove the correctness of the concessional rate of tax, exemptions and exports claimed in the returns, or (iv) fails to declare any sale, purchase or inter-state stock transfer as evidenced from the documents prescribed under section 46 available with the assessing authority in the sales and purchase lists filed along with the returns, the assessment of such purchase lists filed along with the returns, the assessment of such dealer for the relevant year for the purpose of section 25 shall be treated as pending and the time-limit mentioned thereunder shall not be applicable in such cases.”

Based on the amended provision Section 42 (3) of the KVAT Act, the learned Government Pleader would submit that in case of four contingencies referred to in (3) brought in by the amendment, the authorities have every right to re-open the assessment without any limitation. The impact of the amendment carried out was subject matter of challenge in MCP Enterprises’ case cited supra and in paragraph 11 of the said judgment the Court has held as follows:

“11. In the result, these writ petitions are disposed by upholding the retrospective operation of section 42(3) of the KVAT Act, but declaring that the power to re-open assessments under the said provision cannot be exercised in relation to such assessments where the period for which the assessee concerned is obliged to retain the books of account under rule 58(20) of the KVAT Rules has expired. The retrospective operation of section 42(3) of the KVAT A