Skip to content


Kanhaiyalal Bahadursingh Vs. Commissioner of Sales Tax and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case Number Letters Patent Appeal No. 71 of 1958
Judge
Reported in[1962]13STC615(MP)
AppellantKanhaiyalal Bahadursingh
RespondentCommissioner of Sales Tax and anr.
Appellant Advocate M.R. Bobde and ; R.S. Dabir, Advs.
Respondent Advocate H.L. Khaskalam, Additional Government Adv.
DispositionAppeal allowed
Cases ReferredThe King v. Bloomsbury Income Tax Commissioner
Excerpt:
.....to have lapsed. it does not convey that scheme gets automatically lapsed. - it stated that the sales tax officer was satisfied that the appellant's turnover during the period from 1st april, 1953, to 31st march, 1954, had been under-assessed and that the deduction had been wrongly made from the turnover. that the assessee was not entitled to know the information on which the sales tax officer satisfied himself that the turnover had been underassessed or a wrong deduction had been made therefrom ;that it was not necessary to state in the notice issued to the assessee under section 11-a the reasons persuading the sales tax officer to issue the notice; 4. shri bobde, learned counsel for the appellant, argued that in the return filed by the opponents and even at the time of the hearing..........respect of sales of manganese ore during the period from 1st april, 1953, to 31st march, 1954, the sales tax officer, gondia, by his order on 26th july, 1955, found the gross turnover to be rs. 6,55,044-3-4 and held that the appellant was entitled to a deduction to the extent of this amount of turnover under section 27-a (1)(b) of the act. what the sales tax officer really meant was that under the aforesaid provision the sales being in the course of inter-state trade or commerce were not liable to be taxed. thereafter, the successor of the sales tax officer who made the assessment order on 26th july, 1955, sought the sanction of the commissioner of sales tax sometime in april, 1956, for a review of the assessment order dated 26th july, 1955. on 19th june, 1956, the deputy commissioner of.....
Judgment:
ORDER

P.V. Dixit, C.J.

1. This is a Letters Patent Appeal from an order of Bhutt, J. (as he then was) whereby he dismissed the appellant's petition under Article 226 of the Constitution of India for the issue of a writ of prohibition restraining the opponents from proceeding to make any assessment under Section 11-A of the Central Provinces and Berar Sales Tax Act, 1947.

2. The matter arises in this way. The appellant is a dealer in manganese ore. In respect of sales of manganese ore during the period from 1st April, 1953, to 31st March, 1954, the Sales Tax Officer, Gondia, by his order on 26th July, 1955, found the gross turnover to be Rs. 6,55,044-3-4 and held that the appellant was entitled to a deduction to the extent of this amount of turnover under Section 27-A (1)(b) of the Act. What the Sales Tax Officer really meant was that under the aforesaid provision the sales being in the course of inter-State trade or commerce were not liable to be taxed. Thereafter, the successor of the Sales Tax Officer who made the assessment order on 26th July, 1955, sought the sanction of the Commissioner of Sales Tax sometime in April, 1956, for a review of the assessment order dated 26th July, 1955. On 19th June, 1956, the Deputy Commissioner of Sales Tax addressed a letter to the Sales Tax Officer communicating the refusal of the sanction and at the same time suggesting that the assessment could be reopened under Section 11-A of the Act. He also added in the letter that the assessment of sales tax on the appellant for the year from 1st April, 1952, to 31st March, 1953, was under revision by the Commissioner under Section 22-B. Pursuant to this suggestion the Sales Tax Officer issued a notice to the assessee under Section-A. The notice called upon the appellant to show cause why he should not be re-assessed. It stated that the Sales Tax Officer was satisfied that the appellant's turnover during the period from 1st April, 1953, to 31st March, 1954, had been under-assessed and that the deduction had been wrongly made from the turnover. The appellant then filed a petition under Article 226 of the Constitution contending that the Sales Tax Officer had no jurisdiction to make any assessment under Section 11-A as he had no 'information' on which he could satisfy himself as to any of the matters mentioned in Section 11-A and that in fact he did not satisfy himself as to these matters. In the return which was filed on behalf of the opponents the date of the receipt of the information and its nature were not disclosed. It was merely averred that it came to the knowledge of the Sales Tax Officer that the deduction made from the turnover under Section 27-A of the Act was wrongly made.

3. The learned single Judge thought it unnecessary to determine the scope of Section 11-A as in his opinion Sections 11-A, 22-A and 22-B were all enabling sections and overlapping to a certain extent and that the Sales Tax Officer could reopen the assessment under any of these provisions. He further held that Section 11-A (1) of the C.P. and Berar Sales Tax Act was analogous to Section 34(1)(b) of the Income-tax Act; that the assessee was not entitled to know the information on which the Sales Tax Officer satisfied himself that the turnover had been underassessed or a wrong deduction had been made therefrom ; that it was not necessary to state in the notice issued to the assessee under Section 11-A the reasons persuading the Sales Tax Officer to issue the notice; and that the reasons were only for the 'subjective satisfaction' of the Sales Tax Officer. On this view, the petition under Article 226 was dismissed by the learned single Judge.

4. Shri Bobde, learned counsel for the appellant, argued that in the return filed by the opponents and even at the time of the hearing before the learned single Judge the information which came into the possession of the Sales Tax Officer after the making of the assessment order dated 25th July, 1955, and on which the Sales Tax Officer satisfied himself that there was an under-assessment or wrong deduction was not disclosed; that this disclosure was necessary in order to enable the Court to see that the satisfaction of the Sales Tax Officer was based on such information and no other; that Section 11-A of the Act was not supplementary to Section 22-A or 22-B; that it empowered the Sales Tax Officer to assess the turnover which had escaped assessment or had been under-assessed or had been reduced by a wrong deduction ; and that the Sales Tax Officer had jurisdiction to take proceedings under Section 11-A only if he was satisfied as to the matters mentioned in Section n-A in consequence of any information received by him after the assessment sought to be reopened. Learned counsel proceeded to say that as the information on which the Sales Tax Officer issued the notice under Section 11-A was not disclosed, it must be taken that he was not in possession of the information contemplated by Section 11-A and that therefore in the absence of any such information he had no jurisdiction to issue the notice that he did.

5. In our judgment, the contention put forward by Shri Bobde on behalf of the assessee must be accepted. Section 11-A (1) is 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 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 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.

The wording of the section is plain enough to show that the Commissioner can proceed to assess or re-assess under that section only if he is satisfied in consequence of any information which has come into his possession that any turnover of a dealer has been under-assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made therefrom. There is no dispute that the powers under Section 11-A have been validly delegated by the Commissioner to the Sales Tax Officer. The requisite conditions for the applicability of Section 11-A are : (1) the receipt of information, (2) the satisfaction of the Commissioner or the Sales Tax Officer as to the matters mentioned therein, and (3) the issue of a notice to the dealer. It is after the fulfilment of these conditions that the final determination of the liability or the extent of liability for the escaped assessment can be made.

6. The precise question that arises in this case is as regards the effect to be given to the opening words of Section 11-A(i), 'If in consequence of any information which has come into his possession, the Commissioner is satisfied...' Now it is clear that the expression 'any information which has come into his possession' means, in the context, information which has come into his possession subsequent to the making of the assessment order in question. The information which was already in the possession and knowledge of the taxing authority at S-79 the time of the making of the order of assessment is not any information which has come into his possession after the original assessment. If with the information in his possession at the time of passing the assessment order the Sales Tax Officer takes a certain view of facts, figures and of the prevailing law and holds that certain sale transactions are not liable to tax under Section 27-A (1)(b), he cannot subsequently on the basis of the information which was already in his possession and within his knowledge act under Section 11-A even though the assessee had escaped assessment. Such a case would be a case of mere change of opinion on the same state of facts and not a case of finding as a result of new information that the dealer has escaped assessment in some respect. The satisfaction of the taxing authority in the matter of any turnover escaping assessment must be thus on information received by him subsequent to the assessment. No doubt, under Section 11-A it is the satisfaction of the Commissioner or the Sales Tax Officer which is necessary for action under that provision. The question of satisfaction being a subjective matter cannot be challenged in a court of law except on the ground of mala fides. But there must be causative and rational connection between the information and the satisfaction. Now the matter of the receipt of information subsequent to the assessment, its nature and its connection with the satisfaction cannot be said to be subjective matters. They are all objective, which have to be and can be determined in a court of law whenever it is questioned that the taxing authority did not come into possession of any information contemplated by Section 11-A. We do not find ourselves in agreement with the view of the learned single Judge that the assessee is not entitled to know the information on which the taxing authority acts under Section 11-A. Under Section 11-A the dealer has a right to be heard and of making his submissions against the assessment and re-assessment. This right implies that he should have such information as will enable him to show cause against the assessment or re-assessment and to question the jurisdiction of the taxing authority to proceed under Section 11-A if he has not come into possession of any information subsequent to the assessment or if there is no causative and rational connection between the information received by the Sales Tax Officer and his satisfaction thereon.

7. The view of the learned single Judge that Sections 11-A(i), 22-A and 22-B are all enabling and overlapping provisions is not correct. Sections 22-A and 22-B deal with revision of assessments determined on a certain state of facts, figures and the prevailing law. Those provisions give to the Commissioner the power to reverse the decision of the taxing authority and form his own opinion as to the correct assessment on the facts and figures present at the time of the assessment before the taxing authority. There is no question under these provisions of assessment or re-assessment consequent to any new information received after the original assessment by the Sales Tax Officer. As to the analogy between Section 11-A of the Sales Tax Act and Section 34(i)(b) of the Income-tax Act, it is not accurate to say that these two provisions are completely analogous. Though they use similar phraseology in parts, they differ in material respects. It is worthy of observation that Section 11-A gives to the Commissioner the power to impose a penalty on a dealer on assessment or re-assessment under Section 11-A. This seems to indicate that the operation of Section 11-A is confined to cases where the assessee is at fault and not to cases where the taxing authority has committed a mistake. It is not necessary to decide this question and express a concluded opinion on it as here nothing is known about the information on which the Sales Tax Officer satisfied himself and issued a notice to the appellant under Section 11-A of the Act. Section 34(1)(b) of the Income-tax Act deals with cases where the escapement of assessment is not due to such omission or failure as is mentioned in Clause (a) on the part of the assessee. It is confined to cases where the Income-tax Officer has in consequence of information in his possession 'reason to believe' that income has escaped assessment or full assessment. Even with regard to the expression 'in consequence of any information in his possession' the Supreme Court has in Maharaj Kumar v. Income-tax Commissioner [1959] 35 I.T.R. 1, held that this means that the relevant information must have come into the possession of the Income-tax Officer subsequent to the making of the assessment order in question and this information must lead to his belief that income chargeable to income-tax has escaped assessment or full assessment. Section 11-A of the Sales Tax Act is much more explicit, and says 'inconsequence of any information which has come into his possession' and, therefore, the construction put by the Supreme Court on 'in consequence of information in his possession' must apply with greater force to the present case, In Maharaj Kumar's case, [1959] 35 I.T.R. 1, the Supreme Court construed 'information', for the purpose of Section 34(1)(b), Income-tax Act, as not limited to factual information but including information as to the true and correct state of the law and thus covering information as to relevant judicial decisions. The Supreme Court left open the question whether the Income-tax Officer or his successor can take action under Section 34 if he thinks that the original order of assessment was wrong without any fresh information from an external source. It is not necessary for us to consider whether the information on which the successor Sales Tax Officer satisfied himself was information as to facts or law described by the Supreme Court as included in the word 'information' or whether he invoked Section 11-A without any fresh external information thinking that the order of his predecessor was erroneous. For here nothing, whatsoever, is known about the information leading to the satisfaction of the Sales Tax Officer.

8. It is thus clear that if in fact or in law there is no information which has come into possession of the taxing authority subsequent to the assessment, then it has no jurisdiction to assess or re-assess under Section 11-A. Now here the information which prompted the Sales Tax Officer to initiate proceedings under the said provision was not revealed in the return to the application under Article 226 or before the learned single Judge. Nor is it to be found in the record before us. The material before us shows that during the course of inspection the Assistant Sales Tax Commissioner found that the order of assessment passed on 26th July, 1955, was not correct. On the basis of this inspection note the Sales Tax Officer who succeeded the officer passing the assessment order moved the Commissioner for sanction for a review of the order of assessment. This was refused. Thereupon, on the suggestion of the Deputy Commissioner proceedings under Section 11-A were taken. It is worthy of note that the Commissioner himself had taken proceedings for a revision of the order of assessment for the year from 1st April, 1952, to 31st March, 1953. But it is not clear why in respect of the year in question the Sales Tax Commissioner advised the Sales Tax Officer to take proceedings under Section 11-A. Be that as it may, the information which afforded ground for reopening the assessment is nowhere to be found in the record before us and it appears that the taxing authority for reasons best known to itself commenced proceedings under Section 11-A. It may be perhaps on the view that the Sales Tax Officer had committed some error in the assessment made on 26th July, 1955. But the inability of the opponents to disclose the date of the receipt of the information and its nature cannot but be taken in the present case as indicative of the total absence of information contemplated by Section 11-A. The essential pre-requisite as to information was thus not fulfilled here. Therefore, the Sales Tax Officer had no jurisdiction to take proceedings under Section 11-A and the notice issued by him to the appellant was altogether untenable.

9. It must be emphasized that, here, there is total absence of any information giving jurisdiction to the competent taxing authority to proceed under Section 11-A. It is not as if there was some relevant information on which the taxing authority satisfied itself as to the turnover of the appellant escaping assessment or full assessment and the decision of the authority upon the existence of a state of things being questioned on the argument that the authority could not give itself jurisdiction by a wrong decision on facts. If that had been the situation, the case would have fallen within the category of cases referred by Lord Esher in The Queen v. Commissioner for Special Purposes of the Income Tax 21 Q.B.D. 313 at p. 319, where the legislature entrusts the tribunal or body with a jurisdiction which includes the jurisdiction to determine whether the preliminary state of facts exists as well as the jurisdiction, on finding that it does exist, to proceed further or to do something more. In that event, the decision of the Sales Tax Officer to proceed under Section 11-A could have been challenged only by an appeal under Section 22 of the Sales Tax Act to the prescribed appellate authority whose decision is final subject to the right of the person assessed to require a statement of the case to this Court under Section 23. In this connection, it would be pertinent to refer to the decision in The King v. Bloomsbury Income Tax Commissioner [1915] 3 K.B. 768. In that case the assessee sought a writ of prohibition against the Additional Commissioners and the General Commissioners of the Income Tax prohibiting them from making additional assessment under Section 52 of the Taxes Management Act, 1880. That provision gave to the Additional Commissioners power to make an additional assessment if the Surveyor discovered that any profits chargeable to the duties had been omitted from the first assessments or that any person so chargeable had not made a full and proper or any return or had not been charged to the said duties or had been under-charged in the first assessments. It was held that the Surveyor had jurisdiction to report if he discovered, i.e., if he honestly came to the conclusion upon the information in his possession, that a person chargeable had not made a full and proper return to income-tax and that the Additional Commissioners had jurisdiction then to make an additional assessment upon that person which was binding unless challenged by the means prescribed under the statutes, and further that the decision of the Additional Commissioners could only be challenged by an appeal to the General Commissioners under Section 57 (3) of the Taxes Management Act, 1880. Lord Reading, C.J., and Avory and Lush, JJ., all stressed the fact that there must be information before the Surveyor which would enable him acting honestly to come to the conclusion that a person was chargeable and if there was no such information, the Court could and should interfere to stop further proceedings by a writ of prohibition. On this authority the appellant is clearly entitled to a writ of prohibition to restrain the taxing authority from proceeding under Section 11-A against him, when it had not come into possession of any information envisaged by Section 11-A.

10. For these reasons we are of the opinion that this appeal should be allowed. The decision of the learned single Judge is accordingly set aside. The notice issued to the appellant under Section 11-A is quashed and the opponents are restrained from taking any proceedings against the appellant under Section 11-A of the Act. The appellant shall have costs of the petition under Article 226 of the Constitution and costs before us. Counsel's fee is fixed at Rs. 75 in each Court. The outstanding amount of the security deposit shall be refunded to the appellant.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //