HC upholds validity of extending assessment orders' time limit during Covid

The Kerala High Court has upheld the validity of the Centre's move to extend the timeline for issuing the assessment orders after the show cause notices for Goods and Services Tax (GST) returns filed during the pandemic.

The order was issued on a specific case by a petitioner for top-up and recharge coupons of Bharat Sanchar Nigam Limited (BSNL) and some services for the Southern Railways.

“The petitioner challenged the assessment orders of the GST officials on the ground that they were time-barred and that his output tax liability was not auto-populated in the relevant form,” said Saurabh Agarwal, tax partner at EY.

Many other petitions were filed by businesses against the notifications in various courts. The Kerala High Court judgement can set a precedent in those cases.

The government extended the time period of assessment orders for returns filed for GST during the Covid-19 period by around four to ten months.

 

These returns, filed for 2017-18, 2018-19, and 2019-20, had the following deadlines: February 5, 2020, February 7, 2020, December 31, 2020, and February 28, 2021. The Centre's decision followed the recommendations of the GST Council in this respect.

The Union government invoked a force majeure clause for the extension of time limit through notifications.

Force majeure is a provision in a contract that frees both parties from obligation if an extraordinary event directly prevents one or both parties from performing.

The assessee challenged the notifications on the ground that no force majeure was present when these notifications were issued.

“The court observed that the government is empowered to extend the limitation period for taking actions that could not be completed or complied with due to force majeure. No one can deny that Covid-19 was a force majeure as it was a pandemic that caused large-scale human tragedy and suffering all over the world and paralysed the world, including economic activities,” it noted.

The court found no substance in the challenge to the notifications and dismissed the petition to that extent.

Many other petitions were filed by businesses against the notifications in various courts. The Kerala High Court judgement can set a precedent in those cases.

Agarwal advised businesses to review tax filings, especially reconciliations, for the past few years at least up to 2019-20 to avoid unknown tax exposure.