GST update on whether best judgment assessment can be initiated only after due date of filing of annual return? 129/2020-21

A new concept of best judgement assessment has been introduced in GST regime wherein the proper officer may assess the tax liability of a person to the best of his judgment after taking into account all the relevant material which he has gathered in case, where a registered person fails to furnish return even after service of notice to file returns under section 46 of the CGST Act, 2017. There is time limit prescribed in section 62 of the CGST Act, 2017 for conducting best judgment assessment by the proper officer. It is stated in section 62(1) of the CGST Act, 2017 that best judgment assessment order is to be passed within a period of five years from the date specified under section 44 for furnishing of annual return for the financial year to which the tax not paid relates. Now, the question arose that is it possible to pass best judgment assessment order before the due date of furnishing of annual return or not? This issue was examined recently by the Hon’ble High court of Kerala in the case of M/S AMANI MACHINE CENTRE [WP NO. 2757 OF 2020] which is the subject matter of discussion in our present update.

The Hon’ble High Court explained that period of 5 years is the outer limit provided to the officer within which the assessing officer must complete the best judgement assessment. It does not, mandate that the steps for completing the best judgement assessment should be initiated only after 31st December, following the end of the financial year, in which the default as regards filing of monthly returns occurred. It is not indicative of any particular point in time from when (after detection of the default committed by the assessee) the assessing authority can proceed to complete the assessment on best judgement basis.

Accordingly, the High Court dismissed the writ petition filed by the petitioner and held that the authorities can initiate best judgment assessment due to the non-filing of returns by the tax payers even after the service of notice under section 46 of the CGST Act, 2017 irrespective of the fact that the due date of filing annual return has not expired.

This decision warns the assessees not complying with the requirement of filing returns to face the consequences thereon. The best judgement assessment is made on estimate basis and an element of guess work is bound to be present as section 62 does not explicitly require officer to call for accounts documents or other evidences or provide for an opportunity of being heard. This gives power to proper officer to pass an ex-parte order based on the documents and records available with him and without employing any investigational powers.

This is solely for educational purpose.

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GST update on whether best judgment assessment can be initiated only after due date of filing of annual return? 129/2020-21

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