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The State of Andhra Pradesh Vs. Donthala Rajaiah - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberT.R.C. No. 34 of 1958
Judge
Reported in[1960]11STC819(AP)
AppellantThe State of Andhra Pradesh
RespondentDonthala Rajaiah
Appellant AdvocateD.V. Sastry, Adv. for ;The Second Government Pleader
Respondent Advocate K. Ranganathachari, Adv.
DispositionPetition dismissed
Excerpt:
.....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 there from, the commissioner may at any time within three calendar years from the expiry of such period, after giving the dealer a reason-able 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; if the commissioner was satisfied with there turn furnished by a dealer, he could assess the dealer on the basis of the return. if the commissioner is not so satisfied, he shall serve the dealer with a notice appointing a place and day and directing him (i) to..........on the assessee for the preceding year 1952-53, his turnover for that year mus be deemed to have escaped assessment within the meaning of rule 32(1) of the hyderabad general sales tax rules and as it was not passed within three years from the end of the year 1952-53, i.e. on or before 31st march, 1956, it was barred by time.4. since the controversy in this case has to be resolved with reference to rules 16 and 32, it is convenient to read them here. rule 16(2)says:on the receipt of the return in the form a the assessing authority shall, if he is satisfied after such scrutiny of the accounts and such enquiry as he considers necessary that the return is correct and complete, finally assess on the basis of the return the tax or taxes payable under section 3, section 4, section 6 or.....
Judgment:

Chandra Reddy, C.J.

1. The Government of Andhra Pradesh has applied under Section 22(1) of the Andhra Pradesh General Sales Tax Act to revise the order of the Sales Tax Appellate Tribunal accepting the appeal of the respondent.

2. The respondent, who is a dealer in kirana, oil-seeds, tobacco and cloth made a return voluntarily on the 30th of December, 1955, for the assessment year 1952-53 showing a taxable turnover of Rs. 7,240. The Sales Tax Officer, after taking the return on file, rejected it as incorrect and incomplete and made a best judgment assessment on 2nd May, 1956, on a turnover of Rs. 30,000 for the first time. The appeal carried by the assessee to the Deputy Commissioner, Appellate Sales Tax, proved unsuccessful. On further appeal to the Sales Tax Appellate Tribunal, the assessment was set aside as being time-barred. In this revision, the view of the Tribunal is canvassed.

3. It is urged on behalf of the revenue that the assessment in dispute being an original assessment, it is not barred by time as no time is pres-cribed for making the assessment by the Hyderabad General Sales Tax Act. On the other hand, the position taken by the assessee is that as the return was not filed before the 15th of May, 1953, as prescribed by Rule 16(1) of the Hyderabad General Sales Tax Rules and as the Sales Tax Officer had not passed any order during the year 1953-54 imposing a tax on the assessee for the preceding year 1952-53, his turnover for that year mus be deemed to have escaped assessment within the meaning of Rule 32(1) of the Hyderabad General Sales Tax Rules and as it was not passed within three years from the end of the year 1952-53, i.e. on or before 31st March, 1956, it was barred by time.

4. Since the controversy in this case has to be resolved with reference to Rules 16 and 32, it is convenient to read them here. Rule 16(2)says:

On the receipt of the return in the Form A the assessing authority shall, if he is satisfied after such scrutiny of the accounts and such enquiry as he considers necessary that the return is correct and complete, finally assess on the basis of the return the tax or taxes payable under Section 3, Section 4, Section 6 or notification under Sub-section (1) of Section 7, or Sub-section (2) of Section 11, for the preceding year or for the part of the year to which the return relates as the case may be.

5. By notification dated 15th June, 1955, the clause 'or for the part of the year to which the return relates as the case may be' was inserted. But that does not govern the instant case for the reason that it was not in existence either in the, relevant year 1952-53 or in the succeeding year 1953-54. Rule 32(1) enacts :

If for any reason the whole or any part of the turnover of business of a dealer or licensee has escaped assessment to the tax levy in any year or if the licensee fee has escaped in any year, the assessing authority or licensing authority, as the case may be, may at any time within the year or the three years from the end of the year to which the tax or licensee fee relates, assess the tax payable, on the turnover which has escaped assessment or levy the licensee fee after is suing a notice to the dealer or licensee and after making such enquiry as he considers necessary.

6. The first question is whether the department has no jurisdiction to make an assessment on the basis of the return which was voluntarily made after the expiry of the period as contended for the respondent. It is argued that as the clause 'or for the part of the year to which the return relates as the case may be' was absent in Rule 16(2), unlike in Rule 11(2) of the Madras General Sales Tax (Turnover and Assessment) Rules corresponding to Rule 16(2) of the Hyderabad General Sales Tax Rules, the assessing authority could not make any levy after the expiry of three years. In our opinion, the omission of this clause does not make any difference for this purpose. It is open to the department to accept a return submitted by an assessee as the basis of assessment even after the expiry of the period prescribed by the statutory rules. There is no legal bar to complete the assessment on the return so made. Though the assessee could not claim as of right to have the delay condoned in the submission of the return, it was competent for the taxing authority to excuse the delay in the exercise of its discretion and make the assessment on the basis of it. There can, therefore, be no obstacle in the way of the department making an assessment on the basis of the return voluntarily submitted more than 3 years of the close of the relevant accounting year.

7. This leads us to the question as to whether the department could reject the return and make a best judgment assessment after the lapse of three years from the end of the year to which the tax relates; in other words, whether such a case falls within the purview of Rule 32.

8. It is urged by Sri Venkatappayya Sastry on behalf of the department that Rule 32 could have no application to assessments made for the first time, that it would be attracted only to a case where there was an assessment at which a part of the turnover had escaped assessment and which was sought to be assessed subsequently and that, at any rate, that rule will not come into operation when the delay in filing there turn is condoned and the return is taken on record. It is contended by the learned counsel that 'rejection' of return can only mean refusal to take the return on file.

9. We shall first take up the second head of the argument as it can be easily disposed of. In our opinion, there is no warrant for reading such a limitation into the rule. The word 'rejection' is of wide import and takes in non-acceptance of the return. Failure to believe it or to give credence to it amounts to its rejection. The meaning of the word 'reject' as given in Chambers Twentieth Century Dictionary is 'to discard, to refuse to accept, admit or accede to.' One of the meanings of the word 'reject' as given in the Oxford English Dictionary is 'to refuse to recognise, acquiesce in, submit to or adopt'. There is, there-fore, no warrant for giving such a limited connotation to the word 'reject'. By making the best judgment assessment, the taxing authority has ignored the return, though it was taken on file. It is significant that in the memorandum of revision petition it is stated that the assessing authority had rejected the return and determined the turnover to the best of his judgment.

10. That apart, it is seen from Rule 13 that all that is necessary before the turnover is determined by the officer to the best of his judgment is that he should find that the return submitted by the assessee appears to be incorrect or incomplete. The rule does not employ the expression 'rejection'. Therefore, when the assessing authority does not accept it as the basis for assessment, resort is to be had to Rule 13 It is clear that it is under Rule 13 that the estimate was made by the department.

11. The only question that survives is whether the assessment should be dealt with in accordance with rule

12. As already said, the counsel for the department invites us to hold that for making the first assessment, no time limit is set by the Act and that Rule 32 is inapplicable to such a case. It is said that that rule comes into play only when a part of the turnover escapes the notice ofthe assessing officer at the time of the first assessment and that is sought to be rectified by assessing the escaped turnover. Support is sought for this view from Regional Assistant Commissioner of Sales Tax, Nagpur Region v. Ghanshyamdas Chhotelal [1958] 9 S.T.C. 179 There, Hidayatullah, C.J. and Choudhuri, J., were interpreting Section 11-A of the C.P. and Berar Sales Tax Act, which is analogous to Rule 32 to be construed by us and it runs as follows

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 there from, the Commissioner may at any time within three calendar years from the expiry of such period, after giving the dealer a reason-able 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.

13. The provision in that Act which corresponds to Rule 16 of the Hyderabad General Sales Tax Rules is Section 11(4). The learned Judges held that Section 11-A of that Act did not govern cases where the assessment was being made for the first time, either on a return being made or where no return was made and action was taken under Section 11(4) that assessment proceeding could be carried on beyond a year or even beyond three years and that the limitation indicated in Section 11-A could not be imported into Section 11, Sub-section (1) to (4). This ruling does lend some support to the view pressed upon us by the department.

14. But this decision did not find favour with a Full Bench of the Bombay High Court presided over by Chagla, C.J., in Bisesar House v. State of Bombay [1958] 9 S.T.C. 654. Here also the learned Judges were construing the same section as in the Madhya Pradesh case. Section 11 dealt with the assessment of tax. If the Commissioner was satisfied with there turn furnished by a dealer, he could assess the dealer on the basis of the return. However, (2) of that Section provided as follows:

If the Commissioner is not so satisfied, he shall serve the dealer with a notice appointing a place and day and directing him

(i) to appear in person or by an agent entitled to appear in accordance with the provisions of Section 11-B;

(ii) to produce evidence or have it produced in support of there turns or.

15. The full Bench decided that while it was competent for the Commissioner to proceed to assess the dealer on the basis of the return since it did not require the serving of any notice, notice under Section 11(2)was to be served within three years of the close of the assessment year. They held that the Commissioner had no power to issue a notice under Section 11(2) beyond the period of three years. In the opinion of the learned Judges, the limitation prescribed under Sections 11(5) and 11-Aof that Act had to be read back into Section 11(2). The learned Judges adopted the principle enunciated by them in Commissioner of Income-tax, Bombay City v. Narsee Nagsee & Co. [1957] 31 I.T.R. 164, which dealt with business profits tax and in which the position was to some extent similar to the one arising before the learned Judges. Chief Justice Chagla, who delivered the opinion of the Court, said that if Section 11-Awas not applicable to the initiation of proceedings for the first time, it would lead to an extraordinary result, namely, that the Legislature, while saving the subject from harassment of proceedings with regard to escaped assessment or under-assessment, permitted that harassment with regard to the very initiation of proceedings after the lapse of four years. The position stated by the learned Chief Justice, if we may say so with respect, is quite correct and the acceptance of the contention advance don behalf of the department would lead to anomalous results.

16. It was further observed by him

Turnovers escape assessment in the sense that for three years they have not been assessed to tax and after three years the taxing authority is seeking to tax them. In that sense we agree with the contention that it could be said that the failure on the part of the assess in authority to tax these turnovers would constitute an escaped assessment with in the meaning of Section 11-A.

17. We adopt the principle embodied in this passage.

18. To a like effect is the judgment of a Full Bench of the Madras High Court in State of Madras v. Louis Dreyfus and Company, Ltd. [1955] 6 S.T.C. 318 The ratio decidendi was stated by the learned Judges in the following passage :

Turnover escapes when it is not noticed by the officer because it is not before him by reason of any inadvertence, omission or deliberate concealment on the part of the assessee and that this would be the natural and normal meaning of the expression 'turnover which has escaped in Rule 17(1).

19. This principle was applied by the same Court to a case of first assessment in State of Madras v. Balu Chettiar [1956] 7 3.T.C. 519. There, the assessee did not file a return of turnover at any time for a year. The depart-ment estimated the turnover of the assessee at a particular sum on the basis of entries in his books and assessed him to pay a tax after the period of limitation prescribed by Rule 17(1), as it stood at the relevant time, had expired. The question arose whether that case fell within the scope of Rule 17(1) which corresponds to Rule 32(1) of the Hyderabad General Sales Tax Rules. The relevant portion of that rule before it was amended ran thus :

If for any reason the whole or any part of the turnover of busi-ness of a dealer has escaped assessment to the tax in any year...the assessing authority may at any time within the year or the two years next succeeding that to which the tax relates, determine to the best of his judgment the turnover which has escaped assessment and assess the tax payable on such turnover after issuing notice to the dealer and after making such enquiry as he considers necessary.

20. It was answered in the affirmative.

21. There are observations in State of Madras v. Ibrahim Kunhi [1956] 7 S.T.C. 617, which affirm this principle. It is true that. State of Madras v. Balu Chettiar [1956] 7 S.T.C. 519 was a case where no return was filed but the position is the same where a return is filed but no effect is given to it because its existence is ignored and the officer proceeds to make an assessment to the best of his judgment. In fact in the concerned rule, a case where a return is submitted and a case where it is not accepted are put on the same footing.

22. Apart from the precedents, the language of Rule 32 leaves no room for doubt that it covers a case of first assessment also. It contemplates cases where the whole of the turnover of the business has escaped assessment which could only be where no assessment has been made. Surely that expression would be wholly inappropriate as applied to acase where there was already an assessment but some of the turnover has escaped assessment for some reason or other. Further, the latter part of the rule says 'assess the tax payable on the turnover which has escaped assessment'. These words also make it abundantly clear that the rule covers assessments made for the first time. There is no reason to read a restriction into this rule.

23. In our opinion, the true position is that when once a return is filed or assessment proceedings are started in time the final, assessment need not be completed within three years since the Act does not lay down any period within which the final assessment should be made, although the officers are expected to make the final computation in the succeeding year. There is nothing in the Act or in the rules which fixes a definite period of limitation excluding the jurisdiction of the taxing authority to finalise it after the closing of the succeeding year. But where no return is made or if made has been rejected by the taxing authority for any of the reasons and the taxing authority has recourse to Rule 16, then it should be dealt with under Rule 32, i.e. within the period fixed under Rule 32.

24. In these circumstances we cannot accept this revision case and it has to be dismissed without costs.


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