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Bidar Sahakar Sakkare Karkhane Ltd. Vs. the State of Karnataka - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberSales Tax Revision Petition Nos. 75 and 76 of 1980
Judge
Reported inILR1984KAR973; [1985]58STC65(Kar)
ActsKarnataka Sales Tax Act - Sections 12-A, 15 and 21(2); Karnataka Sales Tax Rules - Rules 17 and 32; Madras General Sales Tax Rules, 1939 - Rules 14(2) and 17(1)
AppellantBidar Sahakar Sakkare Karkhane Ltd.
RespondentThe State of Karnataka
Appellant AdvocateK. Srinivasan and ;S.G. Shivaram, Advs.
Respondent AdvocateS. Rajendra Babu, Government Adv.
Excerpt:
.....17(1) of the madras general sales tax rules, 1939, which are somewhat similar to sections 21 and 12-a of the act, the madras high court observed :no doubt in a general sense both rule 14(2) as well as rule 17(1) serve a common purpose, viz......the deputy commissioner to revise the assessment. it was urged that the matter concerned with the escaped assessment and therefore, it was within the exclusive jurisdiction of the assessing authority under section 12-a of the act. but, the tribunal did not accept that contention. it observed that the assessing authority assumed the correctness of the case of the assessee that the harvesting charges were not liable to be taxed as forming part of the purchase price and since that part of the turnover was very much before the assessing authority, it could not be said to have escaped assessment. 3. it is not the case of the department at any stage that the assessing authority did apply his mind to the harvesting charges referred to in the trading result of the assessee. in fact to make the.....
Judgment:

Jagannatha Shetty, J.

1. These two petitions raise a common question as to the power of the Deputy Commissioner of Commercial Taxes under section 21(2) of the Karnataka Sales Tax Act (called shortly the 'Act').

S.T.R.P. No. 76 of 1980 is concerned with the assessment for the year 1971-72 and S.T.R.P. No. 75 of 1980 relates to the assessment for the year 1972-73. The assessee is a co-operative institution having a sugarcane factory at Bidar. In the Trading (and) Profit & Loss Accounts accompanying the returns for the said years, the assessee had included certain expenses incurred in the purchase of sugarcane to the factory. The assessing authority while concluding the assessment had omitted to include those charges in the taxable turnover. But the Deputy Commissioner in the exercise of his powers under section 21(2) of the Act set aside the assessment and directed the assessing authority to redo the assessment by including in the purchase turnover, the said expenses incurred by the assessee.

2. Being aggrieved by the order of the Deputy Commissioner, the assessee preferred appeals to the Appellate Tribunal, where the only question urged relates to the power of the Deputy Commissioner to revise the assessment. It was urged that the matter concerned with the escaped assessment and therefore, it was within the exclusive jurisdiction of the assessing authority under section 12-A of the Act. But, the Tribunal did not accept that contention. It observed that the assessing authority assumed the correctness of the case of the assessee that the harvesting charges were not liable to be taxed as forming part of the purchase price and since that part of the turnover was very much before the assessing authority, it could not be said to have escaped assessment.

3. It is not the case of the department at any stage that the assessing authority did apply his mind to the harvesting charges referred to in the trading result of the assessee. In fact to make the matter clear on this point, we asked Mr. Babu, learned Government Advocate, whether this is a case whether the assessing authority had applied his mind to the turnover relating to the harvesting charges. He frankly submitted that this is a case where the assessing authority did not apply his mind on the dispute turnover. He, however, maintained that, since the disputed turnover was not outside the record of assessment, the assessing authority under section 12-A and the Deputy Commissioner under section 21(2) of the Act have got concurrent jurisdiction to revise such assessment. The learned counsel elaborated his submission as follows :

(i) the turnover that has not been disclose in the original assessment record, but discovered by further investigation or information,

(ii) the turnover that has been disclosed in the assessment records, in respect of which the assessing authority has applied his mind, but not assessed, and

(iii) the turnover that has been disclosed in the assessment records, but the assessing authority did not tax it, perhaps inadvertently without noticing it.

In the first instance, according to the learned counsel, it would be the exclusive jurisdiction of the assessing authority to take proceedings to assess the escaped turnover under section 12-A; in the second instance, it would be the exclusive jurisdiction of the revising authority to revise the assessment under section 21(2) and in the third instance, it would be equally open to the assessing authority and also the revising authority to revise the assessment.

In support of the contention, Mr. Babu relied upon the observations of this Court in Rallis India Limited v. State of Mysore [1965] 16 STC 130 and in particular, the following passage :

'It is true that in certain respects the revisional jurisdiction of the Commissioner overlaps the original jurisdiction of the assessing authority under rule 32, e.g., a turnover which is included in the assessee's return but left unassessed by oversight or on an erroneous view of the law. Such an error can be rectified either by the assessing authority by having recourse to rule 32 or by the revisional authority under section 15.'

4. Mr. Srinivasan, learned counsel for the petitioner, submitted that the observation of this Court in the above case is only an obiter and, even assuming it to be otherwise, that case was concerned with the turnover that was disclosed in the assessee's return and not in the trading result of the assessee as in the present case. He also urged that the above observation runs counter to the several decisions of the Supreme Court.

5. It seems to us that the contention of Mr. Srinivasan appears to be justified. There can be little doubt or dispute as to the relative jurisdictions of the Deputy Commissioner and the assessing authority under sections 21(2) and 12-A of the Act respectively. While considering the similar provisions under another enactment, the Supreme Court in State of Kerala v. K. M. Cheria Abdulla and Company : [1965]1SCR601 indicated the limitations to which such revisional power is subject :

'It would not invest the revising authority with power to launch upon enquiries at large so as either to trench upon the powers which are expressly reserved by the Act or by the Rules to other authorities or to ignore the limitations inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by rule 17 in the assessing officer and is to be exercised subject to certain limitations, and the revising authority will not be competent to make an enquiry for reassessing a taxpayer.'

This view has been reiterated by Supreme Court in Swastik Oil Mills Ltd. v. H. B. Munshi : [1968]2SCR492 and in Bombay Ammonia Pvt. Ltd. v. State of Tamil Nadu : [1976]3SCR856 . It is thus clear that the revisional power cannot be exercised in respect of a matter which falls within the power to reassess the escaped turnover. The revising authority, in other words, should not trench upon the powers which are expressly reserved to the assessing authority under section 12-A of the Act. The Deputy Commissioner, in exercise of his revisional jurisdiction, should not ignore that limitation.

6. There is yet another reason for not accepting the contention of Mr. Babu. Section 12-A of the Act provides :

'12-A. Assessment of escaped turnover. - (1) Where for any reason the whole or any part of the turnover of a dealer has escaped assessment to tax ..........'

It is clear from these provisions that the reason for the turnover escaping assessment is immaterial. The turnover might escape for any reason. It might be by oversight, mistake or by design. If the record reveals no application of mind by the assessing authority in respect of a part of the turnover, then, it must be deemed to have escaped assessment. It would be therefore a clear case falling within the exclusive jurisdiction of the assessing authority for reassessment, no matter whether that part of the turnover was in or outside the record of assessment. If, on the other hand, the assessing authority has applied his mind and erroneously excluded any part of the turnover, then certainly it would be a case for the revisional authority to revise the assessment.

The view that we have taken finds support from the decisions of this Court in Nagaraja Overseas Traders v. State of Mysore [1974] 33 STC 315 and in Chikanarasimhiah v. Assistant Commissioner of Commercial Taxes, Bangalore City Division, Bangalore [1971] 28 STC 98. These are converse cases, but the principles stated are not different.

The view taken by the Madras High Court in the Full Bench decision in State of Madras v. Louis Dreyfus and Company Ltd. [1955] 6 STC 318 (FB) also lends support to our conclusion. While dealing with the scope of rules 14(2) and 17(1) of the Madras General Sales Tax Rules, 1939, which are somewhat similar to sections 21 and 12-A of the Act, the Madras High Court observed :

'No doubt in a general sense both rule 14(2) as well as rule 17(1) serve a common purpose, viz., to gather revenue which has improperly escaped but while rule 14(2) is directed to the correction of improper or illegal assessment orders which have levied less or more tax than justified, rule 17(1) lays emphasis on escaped turnover. The distinction between the two provisions might be expressed by saying that rule 14(2) deals with escaped assessments and rule 17(1) with escaped turnovers, notwithstanding that the latter also would mean that a lesser amount of tax has been levied. So understood the two provisions would be completely reconcilable and the two jurisdictions - to revise assessments and to reopen them - would each be assigned to the proper authority.'

In the light of these principles, since the assessing authority did not apply his mind to the dispute turnover, the revising authority could not have invoked the powers under section 21(2) of the Act.

In the result, we allow these revision petitions and set aside the orders of the Tribunal and the Deputy Commissioner.

7. In the circumstances, we make no order as to costs.


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