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Firm Janta Hardware Stores and ors. Vs. B.S. Parihar, Asstt. Sales Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. No. 4 of 1962
Judge
Reported inAIR1962MP315; [1963]14STC67(MP)
ActsMadhya Pradesh General Sales Tax Act, 1959 - Sections 19(1); Madhya Pradesh General Sales Tax (Amendment) Act, 1961; Madhya Pradesh General Sales Rules, 1959 - Rule 33; Constitution of India - Article 226
AppellantFirm Janta Hardware Stores and ors.
RespondentB.S. Parihar, Asstt. Sales Tax Officer
Appellant AdvocateR.S. Dabir, ;I.S. Mishra and ;R.K. Verma, Advs.
Respondent AdvocateH.L. Khaskalam, Govt. Adv.
DispositionPetition allowed
Cases Referred and Consolidated Credit Corporation v. Gosney
Excerpt:
.....purchase of goods chargeable to tax under the act during any year has been under-assessed or has escaped assessment or assessed at a lower rate; it is also contended that the applicant was not given adequate opportunity to meet the case of re-assessment and the best judgment assessments made by the assessing authority were arbitrary, capricious and without the exercise of any judgment at all. where an assessment has been made under this act, and the commissioner, in consequence of any information, which has come into his possession, is satisfied that any sale or purchase of goods, chargeable to tax under this act, during any year has been under-assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made therefrom, the commissioner may at any..........three accounting years stated above were issued to the petitioner under section 19 of the act for escaped assessment. the notices directed the petitioner to appear before the sales tax officer with account-books for the period. it was mentioned in the notices that they had been issued on the basis of a report made by shri ghai, the sales tax inspector. it appears that on 10th october, 1961, the sales tax inspector paid a visit to the shop of the petitioner for checking the account-books. during this checking the inspector discovered that the applicant had maintained two sets of account-books for the three material years which indicated sale and purchase transactions in each year of the value ranging from rs. 1,20,000/- to rs. 1,40,000/-and that these sales had not been disclosed by the.....
Judgment:

Dixit, C.J.

1. This is an application under Article 228 of the Constitution or the issue of a writ of certiorari for quashing three re-assessment orders under Section 19 of the Madhya Pradesh General Sales Tax Act, 1958, in respect of three years from 1957 to 1960, imposing a total amount of Rs. 23,1 4.19 nP. as tax and penalty on the petitioner.

2. The petitioner was in the normal course assessed to sales tax for three years included in the period from 24th October, 1957 to 19th October, 1960. On 17th October, 1961 three notices in respect of the three accounting years stated above were issued to the petitioner under Section 19 of the Act for escaped assessment. The notices directed the petitioner to appear before the Sales Tax Officer with account-books for the period. It was mentioned in the notices that they had been issued on the basis of a report made by Shri Ghai, the Sales Tax Inspector.

It appears that on 10th October, 1961, the Sales Tax inspector paid a visit to the shop of the petitioner for checking the account-books. During this checking the Inspector discovered that the applicant had maintained two sets of account-books for the three material years which indicated sale and purchase transactions in each year of the value ranging from Rs. 1,20,000/- to Rs. 1,40,000/-and that these sales had not been disclosed by the petitioner in the returns filed for the three years during the period from 24th October, 1957 to 19th October, 1960. The Inspector wanted to seize those account-books. But two of the partners, Poonamchand and Ramkishan, obstructed the Inspector in the seizure of the books. A scuffle then ensued between the Inspector and the partners which led to the filing of a Challan under Sections 186, 333 and 353, I. P. C. against the two partners in a criminal Court at Raigarh. That prosecution is still pending.

3. The petitioner has questioned the validity of the assessment proceedings on the grounds that the issue of a valid notice under Section 19 is a condition precedent to an assessment under that provision; that before issuing a notice the assessing authority must be satisfied in consequence of any information which has come into his possession that any sale or purchase of goods chargeable to tax under the Act during any year has been under-assessed or has escaped assessment or assessed at a lower rate; that this satisfaction was a sine qua non for the issue of a notice; that the three notices were issued by the assessing authority merely on the basis of a report of the Sales Tax inspector with regard to the incident which occurred on 10-10-1961; and that they had not been issued because of any satisfaction of the assessing authority in consequence of any information coming into his possession with regard to the escaped assessment. It is also contended that the applicant was not given adequate opportunity to meet the case of re-assessment and the best judgment assessments made by the assessing authority were arbitrary, capricious and without the exercise of any judgment at all.

4. Section 19 of the Act was amended by the Madhya Pradesh General Sales Tax (Amendment) Act, 1961. The amendment came into force from the 1st June 1961. The notices that were issued to the petitioner on 17th October 1961 were not on the basis of the amended provision but they purported to be under Section 19 as it stood before the amendment. Section 19(1) in its original form ran as follows:

'Where an assessment has been made under this Act, and the Commissioner, in consequence of any information, which has come into his possession, is satisfied that any sale or purchase of goods, chargeable to tax under this Act, during any year has been under-assessed 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 five calendar years from the expiry of such year, after giving the dealer a reasonable opportunity of being heard and after making such inquiry, as he considers necessary, proceed in such manner as may be prescribed, to re-assess the tax, payable on such sale or purchase 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. ..................

After amendment, it reads as follows:

'Where an assessment has been made under this Act, and if for any reason any sale or purchase of goods chargeable to tax under this Act, during any period has been under-assessed 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 five calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard and after making such inquiry, as he considers necessary, proceed in such manner as may be prescribed, to reassess the tax, payable by such dealer, 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. ......'

It will be noticed that by the amendment the words 'the Commissioner, in consequence of any information, which has come into his possession, is satisfied that', which formerly occurred in Section 19, have been substituted by the words 'if for any reason'. As will be shown presently, this amendment is of a very important character. Now, Rule 33 of the Madhya Pradesh General Sales Tax Rules, 1959, so far as it is material here, prescribes that:

(1) Where: ........

(f) the sale or purchase of goods by a dealer during any period has been under-assessed or has escaped assessment or has been assessed at lower rate or any deduction has been wrongly made therefrom within the meaning of Sub-section (1) of Section 19, or ......

then in every such case, the assessing authority shall serve on the dealer a notice in form XVI specifying the default, escapement or concealment, as the case may be, and calling upon him to show cause by such date, ordinarily not less than 15 days from the date of service of the notice as may be fixed in that behalf, why he should not be assessed or re-assessed to tax and or penalty should not be imposed upon him and directing him to produce on the said date his books of accounts and other documents which the assessing authority may require and any evidence which he may wish to produce in support of his objection :

Provided that no such notice shall be necessary where the dealer, having appeared before the assessing authority, waives such notice.'

Form XVI with regard to notice under Section 19 (1) is as follows:

'I am satisfied that your sale or purchase during the period (S) from. . . . .to. . . .has been under-assessed/has escaped assessment/has been assessed at a lower rate/has been allowed in the assessment order to be reduced for purpose of tax by reasons of wrongly making a deduction therefrom and thereby rendered yourself liable to be reassessed and liable to penalty under Section 19(1) of the Act;'

No amendment in the form of the notice under Section 19 in conformity with the amendment effected in Section 19(1) has been made. The result is that though Section 19(1) has been amended in material particulars, the form reproduced above still continues to be used as the form of notice under Section 19(1).

5. If the matter had to be decided with reference to the unamended Section. 19, then we would have had no hesitation in rejecting the contention of the petitioner that the notices issued under Section 19 were bad and invalid and the reassessments made were without jurisdiction. But the case is now governed by the amended Section 19(1) and on that provision and Rule 33, as it stands, the notices issued to the petitioner are fundamentally defective and invalid. For the applicability of Section 19(1) the requisite conditions now are: (i) an assessment under the Act, (ii) there being for any reason in that assessment, any underassessment or escaped assessment or assessment at a lower rate or a wrong deduction, and (iii) the issue of a notice to the dealer, It is after the fulfilment of these conditions that a re-assessment can be made under Section 19 (1). It will be noticed that before the amandment, proceedings could be initiated if the assessing authority formed a tentative opinion about underassessment or escaped assessment after satisfying himself, in consequence of any information coming into his possession, that there has been under-assessment or escaped assessment. But the requirement now is of a certainty of there being for any reason an under-assessment or escaped assessment or assessment at a lower rate or a wrong deduction in the assessment which is sought to be reopened under Section 19 (1). This is the import of the words 'if for any reason any sale or purchase of goods chargeable to tax under the Act during any period has been underassessed or has escaped assessment.....' The underassessment or escapement of assessment or assessment at a lower rate or a wrong deduction must be for some reason. There must be thus a causative and rational connection between the reason stated and the consequence of under-assessment or escaped assessment or of an assessment at a lower rate or a wrong deduction. It is not necessary to speculate on the reason for the amendment. Whatever it may be, the result of the amendment actually effected is that proceedings under Section 19(1) cannot now be initiated merely on the chance of underassessment or escaped assessment or assessment at a lower rate or a wrong deduction being established in those proceedings. They can be founded now only on some definite facts showing under-assessment, or escaped assessment, or assessment at a lower rate, or a wrong deduction for any reason.

6. Now, it cannot be disputed that the issue of a notice is a condition precedent to the validity of an assessment under Section 19(1). Under Section 19(1) the dealer has a right to be heard and of making his submissions against the re-assessment. This right implies the issue of a notice to the dealer giving him such information as will enable him to show cause against the re-assessment and to question the jurisdiction of the taxing authority to proceed under Section 19(1). The dealer must, therefore, be informed of the facts constituting under-assessment or escaped assessment or assessment at a lower or wrong deduction, and the reason or reasons for that. Rule 33 enjoins the issue of a notice by the assessing authority in form XVI specifying the default, escapement or concealment as the case may be. It is important to note that Rule 33 uses the expression 'the assessing authority shall serve on the dealer a notice in form XVI..' and not the words 'the assessing authority shall serve on the dealer a notice in accordance with form XVI.' There is a vital distinction between the words 'in accordance with form XVI' and 'in form XVI'. A notice would be substantially in accordance with the prescribed form if it does not depart from the prescribed form in any material respect. But when the rule says that the notice shall be 'in form XVI', that means that the form must be strictly and literally followed. This distinction between the two expressions is well established -- See In re Heseltine; Woodward v. Heseltine, (1891) 1 Ch 464, Thomas v. Kelly, (1888) 13 AC 506, and Consolidated Credit Corporation v. Gosney, (18S5) 16 QBD 24. The notices that were issued to the petitioner were no doubt in form XVI. But that form, though valid for the issue of a notice under Section 19(1) as it stood before the amendment, is wholly inconsistent with, and altogether outside, the scope of the amended Section 19(1). Each of the three notices stated that the Assistant Sales Tax Officer was satisfied that the petitioner's sale or purchase during the material period had been under-assessed/had escaped assessment and that the applicant had rendered himself liable to assessment and to penalty under Section 19(1) of the Act. These notices cannot, therefore, be regarded as valid notices under Section 19(1) giving to the petitioner information about the escaped assessment and the reasons leading to the escapement of the assessment. It was absolutely essential for the rule-making authority to amend form XVI so as to bring it in conformity with the amended Section 19(1). But this was not done. Form XVI as it stands is altogether invalid and a notice issued in that form, though it may fulfil the requirement of Rule 33(1) of the issue of a notice in form XVI, cannot be regarded as a valid notice for the purposes of Section 19(1). The notices issued to the petitioner were, therefore, bad in law and the re-assessment proceedings initiated on those notices and the assessments made cannot but be held to be without jurisdiction.

7. It was urged on behalf of the sales tax authority that the petitioner had an alternative remedy of an appeal and even of a revision which was equally efficacious and the petitioner should not be given any relief in these proceedings. It is no doubt true that alternative remedies were available to the petitioner. But the notices issued to the applicant and the re-assessment proceedings taken are so patently defective and without, jurisdiction that we do not think that the existence of an alternative remedy should be allowed to stand in the way of quashing the notices and the assessment proceedings and orders.

8. For these reasons, this petition is allowed and thethree notices for re-assessment and the imposition ofpenalty issued to the petitioner on 17th October 1961, theassessment proceedings taken pursuant to those notices andthe three assessment orders made on 30th November 1961,in those proceedings are all quashed. We leave the partiesto bear their own costs. The outstanding amount ofsecurity deposit shall be refunded to the petitioner.


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