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Udipi Vasanta Vihar Vs. the Deputy Commercial Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number Writ Petition No. 1083 of 1963
Judge
Reported in[1969]23STC6(AP)
AppellantUdipi Vasanta Vihar
RespondentThe Deputy Commercial Tax Officer
Appellant Advocate K. Ranganathachari, Adv.
Respondent Advocate The Principal Government Pleader
DispositionPetition allowed
Excerpt:
.....the powers of the department under that sub-section to assessing such turnover as is shown to have escaped assessment and has not extended it to estimates depending upon inferences to be drawn by the department with power to make a best judgment assessment. 10. this section was amended by act 16 of 1963 and after amendment section 14(4) stands as follows :in any of the following events, namely, where the whole or any part of the turnover of a business of a dealer has escaped assessment to tax, or has been under-assessed or assessed at a rate lower than the correct rate, or where the licence fee or registration fee has escaped levy or has been levied at a rate lower than the correct rate, the assessing authority may, after issuing a notice to the dealer, and after making such enquiry as..........1959-60 on a turnover of rs. 79,900. thus rs. 87,555 has escaped. it is now proposed to assess the escaped turnover of rs. 87,555 at 3 per cent.4. messrs udipi vasanta vihar are hereby directed to file their written objections, if any, to the proposed assessment before me on 24th september, 1963, and prove their objections, if any, by producing the relevant documents, if any. if they fail to appear as directed, it will be considered that they have no objections to file and orders will be passed on the basis of the material available on record. no further adjournment will be given.'5. the petitioner contends that these proceedings sought to be initiated under section 14(4) of the andhra pradesh general sales tax act were illegal for two reasons. firstly, it is contended that the.....
Judgment:

Kuppuswamy, J.

1. The petitioner is a firm which is running a hotel. It has filed the above writ petition for the issue of a writ of prohibition restraining the respondent from taking further proceedings in pursuance of a notice dated 12th September, 1963, which was issued in the following circumstances:

2. For the year 1959-60 the petitioner was assessed to sales tax on a turnover of Rs. 79,900. Subsequently by reason of a watch placed on the premises it was found that on four days the average sales per day worked out to Rs. 535. Based on this the dealer's turnover for the year works out to Rs. 535X313 days (excluding holidays) i.e., Rs. 1,67,455. Therefore a notice was issued on 12th September, 1963, in the following terms:-

In continuation of the reference cited above Messrs Udipi Vasanta Vihar, Brodipet, are informed that the sales in their business premises were watched by the special staff with following results:- Date of watch Sales found :25-3-1960 Rs. 540.1126-3-1960 509.9827-3-1960 613.8829-3-1960 478.28--------------Total ... 2,142.25--------------

3. The average sales per day at this rate works out to Rs. 535. Basing on this, the dealer's turnover per year works out to Rs. 535X313 = 1,67,455. The dealer was already assessed to tax for 1959-60 on a turnover of Rs. 79,900. Thus Rs. 87,555 has escaped. It is now proposed to assess the escaped turnover of Rs. 87,555 at 3 per cent.

4. Messrs Udipi Vasanta Vihar are hereby directed to file their written objections, if any, to the proposed assessment before me on 24th September, 1963, and prove their objections, if any, by producing the relevant documents, if any. If they fail to appear as directed, it will be considered that they have no objections to file and orders will be passed on the basis of the material available on record. No further adjournment will be given.'

5. The petitioner contends that these proceedings sought to be initiated under Section 14(4) of the Andhra Pradesh General Sales Tax Act were illegal for two reasons. Firstly, it is contended that the authorities are not entitled to keep a continuous watch over the premises and any estimate of the escaped turnover based upon such a watch is, therefore, contrary to the provisions of the Act. Secondly, it is contended that Section 14(4) as it stood before the amendment by Act 16 of 1963 did not enable the authorities to make a best judgment assessment in proceedings under Section 14(4) of the Act. A notice in which the turnover for the whole year is estimated on the basis of certain average sales found to have taken place on watch for four days is therefore illegal. The first contention is based upon the decision in Lakshmana Rao & Sons v. Special Commercial Tax Officer, Vijayawada [1962] 13 S.T.C. 860. It was held therein that Section 28(2) of the Andhra Pradesh General Sales Tax Act does not authorise the Sales Tax Authorities to watch continually a hotel and its business from the moment it starts early in the morning till the whole day for several days. In that case the petitioners applied for a writ of mandamus or any other appropriate writ to be issued to the authorities to forbear from carrying on continuous supervision of the sales and supplies or other activities of the petitioners. From the mere fact that the authorities are not entitled to keep a continuous watch over the premises it does not follow that a notice issued under Section 14(4) wherein the escaped turnover is sought to be assessed on the basis of such a watch is illegal. Under Section 14(4) of the Act the authorities may issue a notice where the whole or any part of the turnover of business of a dealer has escaped assessment to tax, or has been under-assessed, or assessed at a rate lower than the correct rate or the licence fee or registration fee has escaped levy or has been levied at a rate lower than the correct rate. So long as those conditions are satisfied the mere fact that the sales in the business premises were watched and those sales during the days when the watch was made are taken into account does not vitiate a notice. In Annamalai Chettiar & Co. v. Deputy Commercial Tax Officer [1965] 16 S.T.C. 6R7, it is held that :

An assessment order based on documents or account books seized under Sub-sections (2) and (4) of Section 41 of the Madras General Sales Tax Act, 1959, which had been declared unconstitutional, is not illegal.

6. It was pointed out that :

It was one thing to say that search and seizure of documents and account books is illegal and it is quite another to say that the documents so seized cannot legally be used as evidence.

7. On the same analogy, we hold that it is not illegal to issue a notice on the ground that there has been escapement of turnover and the sales were watched by the staff with certain results.

8. The second ground of attack against the notice is that in the notice it is proposed to assess on a turnover which is arrived at after best judgment assessment, in that, the total turnover is computed by a process of inference from the total sales effected on four particular days and has no relation to the actual turnover suppressed. Section 14, Sub-section (4), stood before its amendment in 1963 thus:

Where, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax, or has been underassessed or assessed at too low a rate, or where the licence fee or registration fee has escaped levy or has been levied at too low a rate, the assessing authority may, at any time within a period of four years from the expiry of the year to which the tax or the licence fee or registration fee relates, assess the tax payable on the turnover which has escaped assessment or levy the correct amount of licence fee or registration fee, after issuing a notice to the dealer and after making such inquiry as he considers necessary. Such authority may also direct the dealer to pay in addition to the tax so assessed, a penalty not exceeding one and half times the amount of that tax, if the turnover had escaped assessment or had been under-assessed or assessed at too low a rate by reason of its not being disclosed by the dealer.

9. Dealing with the powers under this section it was held in The State of Andhra Pradesh v. Ravuri Narasimloo [1965] 16 S.T.C. 54, that in exercising the power under Section 14(4) the authorities cannot make a 'best judgment assessment'. It was pointed out that the Legislature had confined the powers of the department under that sub-section to assessing such turnover as is shown to have escaped assessment and has not extended it to estimates depending upon inferences to be drawn by the department with power to make a best judgment assessment.

10. This section was amended by Act 16 of 1963 and after amendment Section 14(4) stands as follows :

In any of the following events, namely, where the whole or any part of the turnover of a business of a dealer has escaped assessment to tax, or has been under-assessed or assessed at a rate lower than the correct rate, or where the licence fee or registration fee has escaped levy or has been levied at a rate lower than the correct rate, the assessing authority may, after issuing a notice to the dealer, and after making such enquiry as he may consider necessary, by order, setting out the grounds therefor,.-?

(a) determine to the best of his judgment the turnover that has escaped assessment and assess the turnover so determined;

(b) assess the correct amount of tax payable on the turnover that has been under-assessed ;

(c) assess at the correct rate the turnover that has been assessed at a lower rate;

(d) levy the licence fee after determining to the best of his judgment the turnover on which such fee is payable;

(e) levy the registration fee that has escaped levy ; or

(f) levy the correct amount of licence fee or registration fee in a case where such fee has been levied at a rate lower than the correct rate.

In addition to the tax assessed or fee levied under this sub-section, the assessing authority may also direct the dealer to pay a penalty as specified in Sub-section (8).

11. Therefore, it is argued on behalf of the respondent under Section 14(4)(a) the authority is empowered to determine to the best of judgment the turnover that escaped assessment.

12. It is however argued on behalf of the petitioner that the amended Section 14(4) has no retrospective effect so as to affect an assessment completed in 1962 long before the amendment with reference to the assessment year 1959-60. The Government Pleader, however, while admitting that the amendment has not been expressly or even by implication made retrospective, contends that it affects only procedure and hence will have to be given retrospective effect. It is well settled principle of law that a statute will not have any retrospective effect so as to affect vested rights, whereas the statutes affecting procedure have retrospective effect.

13. The question for consideration is whether the amended Section 14(4) in so far as it authorises the authority to determine the escaped turnover according to the best of its judgment is a provision merely affecting procedure. In our opinion, it is not one which affects procedure only. Under the previous section as interpreted by this Court in the decisions above referred to, the authority could only assess on the turnover which, was found to have actually escaped assessment and could not determine an escaped turnover according to best judgment, whereas under the amended provision, the authority can determine to the best of its judgment the turnover which escaped assessment. In other words, the very quantum of the turnover is different according as Section 14(4) without amendment is applied or Section 14(4) after amendment is applied. Thus it affects substantive rights of the parties, viz., the tax payable by the assessee. It cannot, therefore, be said that this section does not affect vested rights but is merely a matter of procedure.

14. In Lakshminarayana Chetty v. Additional Income-tax Officer [1956] 29 I.T.R. 419, dealing with Section 35 of the Income-tax Act relating to rectification of an assessment, it was pointed out by a Bench of this Court that as it enabled the authorities to correct an assessment it clearly affects vested rights which have accrued to the assessee and hence the well settled rule of construction precluded the Court from construing the section as retrospective unless the Act expressly or by necessary implication makes it retrospective.

15. In Income-tax Officer, V Circle, Madras v. Habibullah [1962] 44 I.T.R. 809, this decision was approved by the Supreme Court where it was observed :

In our view, it was rightly held in Kundan Lal v. Income-tax Officer, B. Ward, Amritsar [1959] 37 I.T.R. 337, following Lakshminarayana Chetty and Ors. v. Additional Income-tax Officer, Nellore [1956] 29 I.T.R. 419, that Clause (5) of Section 35 of the Indian Income-tax Act, which was enacted by the Income-tax (Amendment) Act, 1953, was not declaratory of pre-existing law, and as it clearly affected vested rights which had accrued to the assessee, must be deemed to have come into force from 1st. April, 1952. It had no greater retrospective effect than was expressly granted to it.

16. We, therefore, see no substance in the contention of the learned Government Pleader that it affects only procedure and therefore can be given retrospective effect. Therefore the case is governed by Section 14(4) as it stood before the amendment. As the notice proceeds upon the footing that the turnover will be assessed on the basis of best judgment computing the turnover by an inference based upon the sales on four days referred to in the notice, the notice is illegal by reason of the decision in The State of Andhra Pradesh v. Ravuri Narasimloo [1965] 16 S.T.C. 54. In the result, the writ petition is allowed with costs. Advocate's fee Rs. 100.


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