B.K. Choudhuri, J.
1. This order shall also govern the disposal of L. P. A. No. 208 of 1956.
2. These two appeals are against a common order made by Kotval J. in Miscellaneous Petition Nos. 12 of 1955 and 437 of 1954. The appeals have been filed by the Regional Assistant Commissioner of Sales Tax, the Deputy Commissioner of Sales Tax, and the State of Madhya Pradesh against a common respondent Ghanshyamdas son of Chhotelal, Karta and Manager of the joint family firm Chhotelal Keshavram of Rajnandgaon.
3. Shortly stated the facts are as follows : The respondent-firm, a registered dealer, was registered under the C. P. and Berar Sales Tax Act, 1947. The business of the respondent is carried on at several places, including Rajnandgaon, and the year of accounting is from Diwali to Diwali. The two cases with which we are dealing arise from the years 1949-50 and 1950-51. As a registered dealer, according to the rules, the respondent-firm was required to submit its return of turnover to the Sales Tax Officer.
For the year 1949-50 the respondent-firm submitted return on 30th September 1950, but only for one quarter, instead of for all the four quarters of the year. In respect of the year 1950-51 the respondent-firm did not submit a return at all. A notice was issued to the respondent-firm on 13th August 1954 in Form XI under Section 11, Sub-sections (1) and (2) of the Act in respect of the year 1949-50; and in respect of the other year a notice in Form XII under Section 11 (4) of the Act was issued on 15th October 1954.
The respondent-firm thereupon filed the two petitions for getting the notices declared void and for getting them quashed. The learned Single Judge (Kotval J.) by his order quashed the two notices and declared the assessment made by the Assistant Commissioner of Sales Tax illegal and also set it aside. These appeals have therefore been filed by the Department against that order.
4. The question that has arisen and which appealed to the learned Single Judge is whether Sections 11-A and 11 (5) of the Sales Tax Act control the present cases. According to the learned Single Judge, there is a period of limitation prescribed by these sections, which applies to these cases, and that action having been taken out of time it must be declaredillegal and all proceedings quashed. In doing so, the learned Single Judge relied upon the case of Firm Sheonarayan Matadin v. Sales Tax Officer, 1956-7 STC 623 (Nag) (A).
5. Considerable argument was addressed to us as to under which section the action can be said to have been taken by the Department, and reference was made in the course of argument to several cases decided by the Privy Council and other High Courts in India on the subject of the Law of income-tax. An analogy from the limitation prescribed in Section 34 of the Income-tax Act was taken for the purposes of showing that the same kind of limitation must be deemed to be applicable to the present statute,
6. The Sales Tax Act, unlike the Income-tax Act, is a permanent Act with a permanent department for the collection of tax. The levy of income-tax has to be renewed from year to year by the passing of a Finance Act, and assessment has to be made within the assessment year, unless authority is given therefore by the Income-tax Act, To take the analogy, therefore, of the Indian Income-tax Act would be inappropriate and before dealing with the arguments in the case we shall show also the salient points of distinction between the two statutes.
7. The Sales Tax Act first begins by giving a number of definitions, among which are the definitions of 'dealer', 'registered dealer', and 'turnover'. We are concerned only with these three definitions, but we do not consider it necessary to quote the definitions in extenso here. The distinction between a registered dealer and a dealer who is not registered is manifest throughout the Act. Whereas in the case of a dealer who has got himself registered no notice is required to be sent to him compelling him to submit his return because the law and the rules lay a duty on him to submit his return in a prescribed time and before a prescribed authority, in the case of an ordinary dealer who is not registered, if it is proposed to tax his turnover a notice has to be given to him.
'Turnover' in the Act means the aggregate of the amounts of sale prices received by a dealer etc. In other words, all those dealers whose turnover in a particular year exceeds the prescribed minimum are compelled to get themselves registered, and once they register themselves certain consequences ensue. From this point onwards the law applicable to a dealer and that applicable to a registered dealer is different, and it is necessary to quote certain sections.
8. The return which dealers and registered dealers have to make are provided for in Section 10. It reads as follows :
'10. (1) Every such dealer as may be required so to do by the Commissioner by notice served in the prescribed manner and every registered dealer shall furnish such 'returns by such dates and to such authority as may be prescribed.
(3) If a dealer fails to comply with the requirements of a notice issued under Sub-section (1) or a registered dealer fails to furnish his return for any period within the prescribed time to the prescribed authority without any sufficient cause, the Commissioner may, after giving such dealer a reasonable opportunity of being heard, direct him to pay, by way of penalty, a sum not exceeding one-fourth of the amount of the tax which may be assessed on him under Section 11.
9. Section 11 deals with the assessment of tax. If the Commissioner is satisfied with the returns furnished by a dealer he assesses the dealer. Sub-section (2) of that section, however, provides 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 the returns; or
Sub-section (3) then provides that if the Commissioner is satisfied the Commissioner shall assess him. Sub-section (4) is material and may be quoted:
'(4) If a registered dealer
(a) does not furnish returns, in respect of any period by the prescribed date, or
(b) having furnished such returns fails to comply with any of the terms of a notice issued under Sub-section (2), or
(c) has not regularly employed any method of accounting, or if the method employed is such that, in the opinion of the Commissioner, assessment cannot properly be made on the basis thereof,
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 heard.'
We are of opinion that Sub-section (5) does not apply to the present cases; but since the learned Single Judge has referred to it and it may be necessary for us to repel his argument, we quote that sub-section also :
'(5) If upon information which has come into his possession, the Commissioner is satisfied that any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless wilfully 'failed to apply for registration', the Commissioner shall, at any time within three calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed in such manner as may be prescribed to assess to the best of his judgment the amount of tax due from the dealer in respect of such period and all subsequent periods; and the Commissioner may direct that the dealer shall pay by way of penalty in addition to the amount of tax soassessed a sum not exceeding one and a half times that amount.' (Underlined by us (here into ' ') ).
This sub-section in terms applies to an unregistered dealer.
10. Then comes Section 11-A, which was introduced in 1953. This was introduced retrospectively and reads as follows:
'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 underassessed 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 re-assess 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.
The learned Single Judge has relied on this section also and has held that it is applicable to these cases.
11. It, will, therefore, appear from the above that in so far as a registered dealer is concerned no notice has to be issued to him, because a duty has been laid upon him of submitting a return within the prescribed time and to the prescribed authority, as provided in the Rules. The rule in this connexion is Rule 19. If a registered dealer submits his return and it is scrutinized after a notice to him to bring his books of account and evidence in, the Commissioner, proceeds to assess him.
If the registered dealer does not furnish returns in respect of any period by the prescribed date, the Commissioner is empowered to proceed in the prescribed manner to assess the dealer to the best of his judgment, giving him an opportunity to show cause. The prescribed manner entails the sending of a notice to the registered dealer in Form X.... That form is a composite form for the purposes of several sections, and the Assistant Commissioner of Sales Tax is required to fill in only that portion which is applicable to the case of the particular registered dealer. In the present matter, when the firm did not make a return for the second year, a notice in Form XII was sent and the notice read:
'You being a registered dealer have failed to furnish a return(s) for the period(s) 10-11-1950 to 30-11-1951 and have already rendered yourself liable under Section 11 (4) to be assessed to the best of my judgment.'
In the other case, where the registered dealer submits a return which the Assistant Commissioner of Sales Tax wishes to verity, a notice in Form XI is sent under Section 11, Sub-sections (1) and (2). That notice requires a registered dealer to produce evidence in support of the return and to produce accounts, registers, etc, for the verification of the return.
12. Notices in the present cases where in Form XI and Form XII respectively. In one case where a return had been filed, albeit for one quarter only, a notice in Form XI was sent. In the other case, where no return was filed a notice in Form XII was sent. It is after this that the Assistant Commissioner of Sales Tax proceeded to assess in either case the firm according to the best judgment method.
13. The contention of the respondent is that these notices were given in breach of the limitation provided by Section 11-A of the Act, and that they could not be sent when a period of three calendar years had elapsed between the two points. It is on this ground that the learned Single Judge held that these notices were bad, both under Sections 11-A and 11 (5) of the Act, which provide for sending notices. The short question, therefore, is whether these notices can be said to have been sent under these sections and whether there is any limitation for sending the kind of notices which were actually sent.
14. Section 1-1 (5) is wholly inappropriate. I Section 11-A deals with four matters. It lays down that if in consequence of any information the Commissioner is satisfied that any turnover of a dealer (a) has been under-assessed or (b) has escaped assessment or (c) has been assessed at a lower rate or (d) that any deduction has been wrongly made therefrom, the Commissioner may within three calendar years from the expiry of such period re-assess or assess, as the case may be, the tax payable on that turnover.
It is clear enough that in neither of these two cases are (a), (c), and (d) material. At no stage was the respondent-firm either underassessed or assessed at a lower rate or any deduction from its turnover had been wrongly made. The argument, therefore, is that the present is a case where the turnover has escaped assessment and therefore the period of limitation prescribed by the section applies to these cases.
15. The meaning of the term 'escaped assessment' was given by their Lordships of the Privy Council in connexion with the Income-tax Act in Rajendra Nath v. Commr. of Income-tax, AIR 1934 PC 30 (B). There their Lordships observed that the phrase is not to be read as if it was equal to 'has not been assessed'. Their Lordships observed that this gave too narrow a meaning to the word 'assessment' and too wide a meaning to the word 'escaped'.
According to their Lordships, there was no escaped assessment if at any time there were pending proceedings for assessment of the assessee's income, which has yet to terminate in a final assessment. In doing so, their Lordships gave approval to a dictum of Rankin C. J. in Lachiram Basantlal v. Commr. of Income-tax, Bengal, 5 ITC 114 at p. 118: (AIR 1931 Cal 545 at p. 546) (C). This, in our judgment, is equally applicable here, even though the statutes are different.
The collocation of the phrases 'underassessed', 'has escaped assessment', 'assessed at a lower rate' and 'any deduction has been wrongly made therefrom' clearly shows that the stage is post one assessment at least We may here point out that the English practice is to use the phrases 'first assessment', 'additional assessment', and 'additional first assessment', which clearly brings out the effect of this section.
Where there has been a first assessment and there is something which has escaped assessment, there may be an assessment at a higher rate which would be an added assessment, or there may be an assessment on something which was never considered, which will be additional first assessment. Section 11-A 'cannot be said to govern cases where the assessment is being made for the first time, either on a return being made or where no return is made and action is taken under the 4th sub-section of Section 11, which we have quoted above. To the same effect were the observations of their Lordships of the Privy Council in Commr. of Income-tax v. Khemchand Ramdas, AIR 1038 PC 175 at p. 179 (D). There, their Lordships relying upon the last-mentioned case observed as follows :
'It had been argued on behalf of the appellant that the Act nowhere imposes any limit of time within which an assessment under the provisions of Sections 23 and 29 is to be made, and that the service of the notice of demand can therefore be made at any time. This is true. It had, in effect, been so determined by this Board in 61 Ind App 10: (AIR 1934 PC 30) (B). But it is not true that after a final assessment under those sections has been made, the Income-tax Officer can go on making fresh computation and issuing fresh notices of demand to the end of all time.
It is possible that the final assessment may not be made until some years after the close of the fiscal year. Questions of difficulty may arise and cause considerable delay. Proceedings may be taken by way of appeal and cause further delay. Until all such questions are determined and all such proceedings have come to an end there can be no final assessment. But when once a final assessment is arrived at, it cannot, in their Lordships' opinion, be reopened except in the circumstances detailed in Sections 34 and 35 of the Act (to which reference is made hereafter) and within the time limited by those sections.'
16. From these two cases it is quite clear that there has to be a final assessment before recourse can be had to the provisions analogous to the first sub-section of Section 11-A. Where a return is pending for consideration or where no return has been filed there cannot be said to be a final assessment, and the stage for the application of Section 11-A is not reached.
17. In the present cases the authority for the action which the Assistant Commissioner of Sales Tax has taken is from the 4th sub-section of Section 11. That sub-section enables the sales tax authorities to make a best judgment assessment when no return has been filed. It also enables the Sales Tax Department to assess tax where in compliance with the notice books of account are produced but in the opinion of the Department the assessee does not regularly employ any method of accounting or the method employed is such that in the opinion of the Commissioner assessment cannot be properly made on the basis thereof. It also enables the Commissioner to make a best judgment assessment where a notice is given under Sub-section (2) of Section 11 and the assessee fails to comply with the terms of the notice.
18. It will appear from this that at no stage was there any question of any escaped assessment as such. The question of escaped assessment arises only if there is a final assessment under the Act and some information is received subsequently by the Commissioner on the basis of which he feels that some turnover' which ought to have been assessed was not so assessed. That would be a case of escaped assessment, but not where the turnover of the person is being found out or verified and he is, being assessed in the first instance.
19. Reliance was placed upon certain rulings in which the period of limitation prescribed by Section 34 of the Indian Income-tax Act was sought to be made applicable to action under Section 22 of that Act. We have already pointed out that income-tax is a temporary measure from year to year, and the assessment has to be made within a particular time. Indeed, under the Income-tax Act a notice is incumbent, whether general or individual.
When a general notice was not made incumbent proceedings under the Income-tax Act could only commence after notice to the assessee. The notice had to be given within the assessment year, and if not given then, as their Lordships pointed out in the first of the two cited cases, resort could only be taken 60 Section 34 and notice had to be given within the year following the assessment year. No such limitation here is prescribed, at any rate for a registered dealer under Section 11. For a registered dealer the Act itself is the notice and proceedings for assessment commence the moment the year is over and Rule 19 begins to operate.
When the registered dealer has filed his return the assessment proceedings are on the way, and if they are not attended to due to want of time or leisureliness on the part of the Department it cannot be said that the process of first assessment is over. It is after the first assessment has been made and there is something which needs to be corrected or some' assessment to be added to the assessment, already made that Section 11-A comes into the picture. Whenever such a contingency arises the rectification of the assessment for any of the four reasons detailed by us above has to be made within three calendar years as stated in the section. This limitation cannot be read backwards into Section 11.
As their Lordships themselves observed, following the dictum of Rankin C. J., there is no action for escaped assessment when the assessment proceedings themselves are pending.Their Lordships in the two cases to which we have referred stated that there was no other period of limitation prescribed in the Income-tax Act. We feel that we should say the same of the present Act as well. Assessment proceedings are not limited by time in this Act and can be carried on beyond a year or even beyond three years.
How far it would be better to limit these proceedings by time by way of rules or enactments is not a matter for us to say; but we do not think that we can read the limitation provided by Section 11-A back into Section 11, Sub-sections (1) to (4). There is no logic in a taxing statute. In some of the cases which have been cited before us an attempt has been made to read into Section 11 or a cognate section the limitation found in a section cognate to Section 11-A. No doubt, if turnover is to be 'additionally assessed' or 'additionally first assessed' under Section 11-A the Department must take proceedings within three calendar years. If they do not, then the old transactions cannot be opened.
The reason of this rule of limitation seems to be that the registered dealers or dealers should not be subjected to harassment for all time to come after a final assessment. For this purpose once an assessment has been made, if an assessee is to be additionally assessed, action has to be taken within three calendar years; but where the matter is already started on either the return of the assessee or for want of return by the assessee, the proceedings cannot be said to be hit by any rule of limitation, because no rule of limitation has been so provided.
20. In our opinion, without going into the rulings which have been cited dealing with income-tax matters -- and we have already said that the Income-tax Act is a statute of a different kind,-- Section 11-A was not applicable to the two cases before us. In applying the rule of limitation contained in Sections 11-A and 11 (5) to these cases the learned Single Judge was in error. We accordingly set aside the order of the learned Single Judge and allow the appeals with costs. Counsel's fee Rs. 50/- in each case.