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Commissioner Sales Tax, U.P. vs Sugan Chand Shyam Lal, Agra

High Court Of Judicature at Allahabad|21 May, 1970

JUDGMENT / ORDER

JUDGMENT Pathak, J.
1. This is a reference under Section 11 (1) of the U. P. Sales Tax Act on the following question:
"Whether under the facts and circumstances of the case the proceedings for assessment in this case should not have been taken to be the proceedings for "escaped assessment" under Section 21 of the U. P. Sales Tax Act and should have been held to be only the first assessment under Rule 41(5) of the U. P. Sales Tax Rules as mentioned in the notice for assessment issue to the asses-see ?"
2. The assessee is a partnership firm which appears to have enjoyed a brief period of existence only. Business was commenced on February 13, 1957 and was closed on July 8, 1957. The dissolution of the firm followed on October 5, 1957, Admittedly, notice of the dissolution was not conveyed to the sales tax authorities.
3. The assessee did not file any return of its turnover under the U. P. Sales Tax Act for the period during which it had carried on business during the assessment year 1957-58. On March 11, 1959, and again on May 20, 1959 two notices were issued by the Sales Tax Officer purporting to be under Rule 41 (5) of the U. P. Sales Tax Rules. They were followed by a third notice dated November 2, 1960. The firm having been dissolved all the notices were served, it is said, by affixation to the last known place of the business. On December 1, 1960, the Sales Tax Officer made an ex parte assessment order, purporting to be under Rule 41 (5). The assessment order was set aside in appeal and the case was remanded for fresh assessment. The assessee applied in revision and contended that the entire assessment proceedings should have been annulled and the remand order was contrary to law. The revision application was allowed by the Additional Judge (Revisions) Sales Tax. The Additional Judge (Revisions) held, relying upon Ghanshyam Das, v. Regional Asstt. Commr. of Sales Tax, (1963) 14 STC 976 = (AIR 1964 SC 766) that as no return had been filed by the assessee it was a case where the turnover had escaped assessment and, therefore, the proceeding lay under Section 21 of the Act. In adopting this view, the additional Judge (Revisions) declined to follow the decision of this Court in Kishan Lal Gopi Krishna v. Commr. of Sales Tax, Sales Tax Ref. No. 397 of 1961, D/- 30-7-1963 (All). Accordingly, he allowed the revision application and quashed the entire proceeding for the assessment year 1957-58. At the instance of the Commissioner of Sales Tax the present reference has been made. It came on for hearing before a Division Bench of this Court, which being of opinion that the decision of this Court in Gopikrishna Kishan Lal (supra) required reconsideration in view of the decision of the Supreme Court in Ghanshyamdas, (1963) 14 STC 976 = (AIR 1964 SC 766) (supra) referred the case to a larger Bench.
4. Section 7 (1) of the U. P. Sales Tax Act requires every dealer, who is liable to pay tax under the Act, to submit a return or returns of his turnover at such intervals and within such period as is prescribed. Section 7 (2) provides that if the assessing authority is satisfied that the returns submitted are correct and complete he shall assess the tax on the basis thereof. Section 7 (3) reads:--
"If no return is submitted by the dealer under Sub-section (1) within the period prescribed in that behalf or, if the return submitted by him appears to the assessing authority to be incorrect or incomplete the assessing authority shall, after making such enquiry as he considers necessary, determine the turnover of the dealer to the best of his judgment and assess the tax on the basis thereof:
Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity for proving the correctness or completeness of the return submitted by him. Section 21 provides:--
"21, Assessment of tax on the turnover not assessed during the year. (1) If the assessing authority has reason to believe that the whole or any part of the turnover of the dealer has, for any reason, escaped assessment to tax for any year, the assessing authority may, after issuing notice to the dealer, and making such enquiry as may be necessary, assess or re-assess him to tax:
Provided that the tax shall be charged at the rate at which it would have been charged had the turnover not escaped assessment or full assessment, as the case may be.
Explanation. -- Nothing in this Sub-section shall be deemed to prevent the assessing authority from making an assessment to the best of its judgment.
(2) No order of assessment under Sub-section (1) or under any other provision of this Act shall be made tor any assessment year after the expiry of four years from the and of such year:--
Provided that where the notice under Subsection (1) has been served within such four years the assessment or re-assessment to be made in pursuance of such notice may be made within one year of date of the service of the notice even if the period of four years is thereby exceeded;
Provided further that nothing contained in this section limiting the time within which any assessment or re-assessment may be made shall apply to an assessment or re-assessment made in consequence of, or to give effect to, any finding or direction contained in an order under Section 8, 10 or 11 Explanation.-- Where the assessment proceedings relating to any dealer remained stayed under the orders of any Civil or other competent Court, the period during which the proceedings remained so stayed shall be excluded in computing the period of limitation for assessment provided under this sub-section."
5. The contention on behalf of the Commissioner of Sales Tax is that as the assessee had failed to submit its return of turnover for the assessment year 1957-58, the turnover had escaped assessment and could be taxed under Section 7 (3). The case for the assessee is that Section 7 (3) can be invoked only where a return has been filed but not within time, and where a return has not been filed at all as in the present case, recourse can be had to Section 21 only.
6. Learned Counsel for the Commissioner has relied on two decisions of the Supreme Court. One is Ghanshyamdas (supra) and other Anandji Haridas and Co. (P). Ltd. v. S. P. Kasture, (1968) 21 STC 326 = (AIR 1968 SC 565). In both cases the Supreme Court was concerned with Section 11 (4) (a) and Section 11-A of the C. P. and Berar Sales Tax Act, 1947. The material portion of those provisions is set out hereunder:--
"11. If a registered dealer (a) does not furnish returns in respect of any period by the prescribed date ..... the Commissioner shall in the prescribed manner assess the dealer to the best of his judgment:
Provided that he shall not so assess him in respect of the default specified in Clause (a) unless the dealer has been first given a reasonable opportunity of being beard."
"11-A (1) If in consequence of any information which has come into his possession, the Commissioner is satisfied that any turnover of a dealer during any period has been under-assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made therefrom, the Commissioner may, at any time within three calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he considers necessary, proceed in such manner as may be prescribed to reassess or assess, as the case may be, the tax payable on any such turnover; and the Commissioner may direct that the dealer shall pay, by way of penalty in addition to the amount of tax so assessed, a sum not exceeding that amount.
(2) The assessment or reassessment made under Sub-section (1) shall be at the rate at which it would have been made, had there been no under-assessment or escapement.
(3) (a). Nothing in Sub-sections (1) and (2) (i) shall apply to any proceeding (including any notice issued) under Section 11. .....
7. In Ghanshyamdas, (1963) 14 STC 976 = (AIR 1964 SC 766) (supra) the Supreme Court examined the scope of the expression 'escaped assessment' under the aforesaid Act and held that the turnover cannot be said to escape assessment if assessment proceedings are already pending but where the dealer has failed to file his return and no proceeding for assessment has been initiated by the assessing authority, it may be said that turnover has escaped assessment. In that event, the Supreme Court observed, recourse to Section 11-A was permissible provided the proceeding was taken within limitation. This case was followed by Anandji Haridas and Co. (P) Ltd., (1968) 21 STC 326 = (AIR 1968 SC 565) (supra). The question there was whether Section 11 (4) (a) of the C. P. and Berar Sales Tax Act, 1947, contravened Article 14 of the Constitution. The Supreme Court pointed out that as the dealer had not filed his return, turnover had escaped assessment and it was open to the assessing authority to treat the case either under Section 11 (4) (a), which prescribes no period of limitation for completing the assessment, or under Section 11-A which provides a period of limitation in that behalf. A case of escaped turnover, the Court observed, fell under both Section 11 (4) (a) and Section 11-A and, therefore, could be considered under either provision, but as a proceeding taken under Section 11 (4) (a) was not circumscribed by any bar of limitation while a proceeding taken under Section 11-A (1) was limited by such a provision to the benefit of the dealer, Section 11 (4) (a) was a discriminatory provision liable to be struck down as violating Article 14.
8. We have also been referred to Addl. Asst. Commr. of Sales Tax v. Firm Jagmohandas Vijay Kumar, (1970) 25 STC 74 (SC). The Supreme Court, in that case, considered the provisions of Section 8 (1) (b) and Section 10 of the Madhya Bharat Sales Tax Act, 1950, which substantially correspond to Section 11 (4) (a) and Section 11-A of the C. P. and Berar Sales Tax Act, 1947. The Sales Tax Officer had commenced proceedings for the assessment year 1955-56 under Section 8 (1) (b). The proceedings were set aside in revision by the commissioner who remanded the case for fresh assessment. The Sales Tax Officer then served a fresh notice and resumed the assessment proceeding. The dealer raised an objection that the Sales Tax Officer had no jurisdiction to proceed to tax the sales made in the year 1955-56 because the period of three years contemplated by Section 10 of the Act for making the assessment had expired. The objection found favour with the High Court in a writ petition. On appeal, the Supreme Court held that once the proceedings for assessment had been initiated under Section 8 (1) (b) it could not be said that the turnover had escaped assessment so as to attract the provisions of Section 10 unless those proceedings had come to a close.
9. The question before us is whether the proceedings already taken under Rule 41 (5) of the U. P. Sales Tax Rules must be attributed to the jurisdiction of the Sales Tax Officer under Section 21 of the U. P. Sales Tax Act. When taking the assessment proceeding, what tile Sales Tax Officer did in effect was to exercise the jurisdiction under Section 7 (3) of the Act. Section 7 (3) provides that if no return is submitted by the dealer within the period prescribed in that behalf the Sales Tax Officer shall determine the turnover of the dealer to the best of his judgment and assess the tax on the basis thereof. Now, it does appear that for the purposes of the controversy before us, Section 7 (3) and Section 21 of the U. P. Sales Tax Act may be considered as in pari materia with Section 11 (4) (a) and Section 11-A of the C. P. and Berar Sales Tax Act, 1947. If that be so, then upon the reasoning adopted by the Supreme Court in Ghanshyamdas, 1963) 14 STC 976 = (AIR 1964 SC 766) Supra) and Anandji Haridas and Co. (P) Ltd., 1968) 21 STC 326 = (AIR 1968 SC 565) supra) we must hold that on the failure of the assessee to furnish his return, the turnover "escaped" assessment and it was open to the Sales Tax Officer to proceed either under Section 7 (3) or under Section 21, and that when he proceeded under Section 7 (3) and made an assessment he acted within his jurisdiction. The assessment made under Section 7 (3) cannot be considered as made under Section 21. Upon this, it would seem that the question referred in this case stands disposed of.
10. In Sales Tax Ref. No. 397 of 1961, D/- 30-7-1963 (All) (supra) this Court proceeded on the assumption that 'escaped' turnover can be assessed only under Section 21 and that Section 7 (3) does not contemplate an assessment proceeding in respect of 'escaped' turnover. It was said, therefore, by Desai, C. J., that the two provisions were quite distinct from each other and were enacted to apply in mutually exclusive circumstances. That decision was rendered before either Ghanshyamdas (supra) or Anandji Haridas and Co. (P) Ltd., (1968) 21 STC 326 = (AIR 1968 SC 565) (supra) was decided by the Supreme Court and some of the reasons of Desai, C. J., in that case are opposed to the observations of the Supreme Court. In an appropriate case, the view taken in Kishan Lal Gopi Krishna, Sales Tax Ref. No. 397 of 1961, D/- 30-7-1963 (All) (supra) may be considered further. In the present case, having found that the assessment has been made in the exercise of the jurisdiction under Section 7 (3) and was rightly so made, the need for examining the scope of Section 21 does not arise.
11. The contention of learned Counsel for the assessee that Section 7 (3) can be invoked when a return has been filed though not in time, while a case where a return has not been filed at all falls under Section 21 only cannot be accepted. The distinction attempted by learned Counsel is not founded in good reason. According to Section 7 (3) if a return is not filed within time it is open to the Sales Tax Officer to proceed to make an assessment to the best of his judgment. The rights which the Act confers upon a dealer who files a return cannot be claimed by him if the return is not filed within time. It is only when the return is filed within time that the Sales Tax Officer is obliged to take it up for consideration and if it appears to be an incorrect or incomplete return then by reason of the proviso to Section 7 (3) he must afford an opportunity to the dealer to establish that it is a correct and complete return. If after the enquiry held by him he still finds that the return is incorrect or incomplete he is empowered by Section 7 (3) to make a best judgment assessment. There is no provision such as Section 139(4) of the Income Tax Act, 1961 entitling an assessee to furnish a return even beyond the time allowed by the statute. Section 7 (1) empowers the Sales Tax Officer to extend the date for submission of the return but unless the date is extended there is no obligation upon the Sales Tax Officer to consider the return filed out of time.
12. In the result, the assessment order under consideration must be considered as an order under Section 7 (3) of the Act read with Rule 41 (5) of the Rules and not as an order under Section 21 of the Act. The question referred is answered accordingly.
13. The Commissioner of Sales Tax is entitled to his costs which are assessed at Rs. 150/-. Counsel's fee is assessed in the same figure.
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Title

Commissioner Sales Tax, U.P. vs Sugan Chand Shyam Lal, Agra

Court

High Court Of Judicature at Allahabad

JudgmentDate
21 May, 1970
Judges
  • S Verma
  • R Pathak
  • T Mukherjee