1. At the instance of the Commissioner of Sales Tax, Madhya Pradesh, the Tribunal (Board of Revenue) has made this reference under Section 44(1) of the Madhya Pradesh General Sales-tax Act, 1958. The questions of law which have been formulated for our opinion, are as follows :
1. Whether, in the facts and circumstances of the case, it was incumbent on this Tribunal to decide the question of enhancement of tax pressed on behalf of the applicant on 17-8-1965
2. Whether, in the facts and circumstances of the case, the non-applicant's second appeal No. 205-III/62 should not have been dismissed as not pressed
2. The material facts, as they appear from the statement of the case, which are also undisputed, may be shortly stated. The assessee is a registered dealer who mainly carries on the business of manufacturing and selling bidis. His head office is at Sihora in Jabalpur district and his branch offices are situate at several places in this State and also in Utter Pradesh. For the period 1950-51 (Diwali year), the Assistant Commissioner of Sales-tax, by his order dated 31st August 1957, made a best judgment assessment on a gross turn-over of Rs. 14 lacs. Being aggrieved by that assessment, the asses-see appealed to the Deputy Commissioner of Sales-Tax, Jabalpur, who, by his order dated 27th March 1961, gave substantial relief by reducing the tax levied from Rs. 11,016-5-0 to Rs. 4,158-0-0. The assessee then preferred a further appeal. The State Government filed an application under Section 38 (5) of the Act for enhancement of the assessment. The appeal and the application for enhancement came up for hearing on 17th August 1963 when the Board of Revenue passed the following order.
' Shri A.P. Sen for the appellant . and Shri M.C. Jain for the respondent. Shri Sen states that he does not press the appeal and wants to withdraw it. Petition for enhancement of assessment filed by Sri M.C. Jain. Heard counsel. The appeal is dismissed as not pressed. '
While the appeal was dismissed as not pressed, no order was passed on the application for enhancement of the assessment. It was in these circumstances that the Tribunal made this reference at the instance of the Commissioner.
3. Having heard the counsel, we have formed the opinion that both the questions must be answered in the affirmative. Section 38 (5) of the Act, which provides for the powers exercisable in disposing of an appeal, includes the power to enhance the assessment. If an assessee could be free to withdraw his appeal at any time he desires--and he would in all probability exercise this right if he is convinced that the appellate authority is disposed to enhance the assessment--he would be in a position to prevent the appellate authority from exercising the power of enhancement. It has, therefore, been held that it is not open to an assessee, who has preferred an appeal, to withdraw it so as to prevent the appellate authority from enhancing the assessment. In regard to income-tax, the leading English case is R. v. Income-tax Special Commissioners; Ex parte Elmhirst, 1935 All ER 808. This was followed in Commissioner of Income-Tax, Punjab v. Shah Nawaz Khan . The principle was adopted and applied in a case under the Central Provinces and Berar Sales-Tax Act, 1947, also in Mohanlal Hargovinddas v. State of Madhya Pradesh : AIR1962MP245 . The relevant observations are :
' Another limb of the argument put forward to sustain this ground is that the appellate authority did not permit the petitioners to withdraw the appeals and is insisting upon enhancing the tax. In our opinion, no exception can be taken to this course adopted by the appellate authority. Lord Hewart C. J., who delivered the judgment of the Kings Bench Division in 1935-20 Tax Cas 381 observed at page 384:--
' The fact that the notice of appeal had been given not merely made it possible but made it obligatory upon the Commissioners that they should take certain steps not merely or primarily in the interests of the individual Appellant but in the performance of their duties imposed upon them in the interests of the general body of the tax-payers to see what the true assessment ought to be, and that process, a public process directed to public ends, cannot be stopped at the option or the whim of the Appellant who after giving notice begins to realise that if he pursues his appeal it may be the worse for him The matter has passed out of his hands; he has given rise by his notice of appeal not merely to the opportunity but to the duty of performing a public task which may have an effect entirely opposite to that which he contemplated and desired. It seems to me that there is no ground whatever for suggesting that these Commissioners, acting in this way, on these facts, are seeking to do something which they are not entitled to do. On the contrary, they are performing their plain duties and there is no case at all for prohibition.' The Court of Appeal affirmed this decision. Romer L. J. stated (at pages 395 396) :
' The question that we have to determine in this case is whether, when a tax-payer has served a notice of appeal and so brought into effect the machinery designed by Section 133 for the purpose of completing the assessment, he can stop the further working of that machinery either by withdrawing the appeal or by refusing to be present at the hearing of the appeal. If that be right and he can in that way stop the working of the machinery, then, as it appears to me, he is in a position to prevent any final assessment being made upon him at ail under the Act. That would be an extraordinary intention to impute to the Legislature In my opinion that, is not the effect of the Act. In my opinion the Income-tax payer has no more power, after he has served the notice of appeal and so brought into operation the machinery of procedure set up for it in part VII of the Act, to stop the machinery of procedure than he is in the position to stop the machinery of procedure for the ascertainment of his liability to tax in any other part of the Act.' We think, similar considerations must persuade us to reject the contention that the petitioners could, either by withdrawing the appeals or by refusing to be present at the hearing of the appeals, prevent the appellate authority from determining on the facts found what the true assessment ought to be. '
4. In this case, the Tribunal allowed the assessee to withdraw his appeal and dismissed it as not pressed without passing any order on the application for enhancement of the assessment. It appears that, in so doing, it did not duly advert to the position that it could consider the application for enhancement only so long as the appeal was pending. The consequence was that, with the dismissal of the appeal, the application for enhancement also came to be disposed of without even being considered. In our opinion, that application could not be dealt with in this manner. The Tribunal is empowered to enhance the tax. That power is coupled with the duty imposed on it to ascertain what the true assessment ought to be and also to enhance the assessment, if the circumstances so require or justify. This is a public duty imposed on it in the interests of the general body of tax payers and it cannot neglect or decline to perform that duty only because the assessee, realising that if he pursues his appeal it may be the worse for him, has sought leave to withdraw it. The learned counsel for the assessee also fairly concedes that this is so.
5. It is, however, urged that this case is governed by the Central Provinces and Berar Sales-Tax Act, 1947, as in force in 1950-51 and, since there was, at the material time, no provision for a second appeal against an assessment, the appeal in this case as well as the application for enhancement of assessment must be regarded as incompetent. This question has not been referred to us and we must decline to express any opinion thereon. When the case goes back to the Tribunal, the assessee may, if he is so advised, raise it there,
6. We answer the two questions referred to us in the affirmative. The Commissioner shall have his costs of this reference from the assessee who shall bear his own costs. Hearing fee Rs 100.