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State of Orissa Vs. Sri Gurumurty Patra - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtOrissa High Court
Decided On
Case NumberS.J.C. Nos. 50 to 63 of 1969
Judge
Reported in[1973]31STC160(Orissa)
AppellantState of Orissa
RespondentSri Gurumurty Patra
Appellant AdvocateS.C. Mohapatra, Standing Counsel (S.T.)
Respondent AdvocateA.B. Misra, Adv.
Cases ReferredCommissioner v. Jadavji Narsidas
Excerpt:
.....in readymade garments, it has referred to slip 43 in bunch 3 and slip 38 dated 26th october, 1963. slip 27 and slip 29, wherein items like frocks, hawani and small pants, sewing-charges and genji have been mentioned. 17. regarding the business in gold and silver in 1959-60, contained in slip 33 of bunch 2, the assessee's plea was that it was in connexion with his nephew's marriage sometime in 1958-59. the first appellate authority did not accept it and said that the slip clearly indicated that the assessee had business in it. 1,150. 19. summarising the evidence, the first appellate authority says thus :the detail analysis as given above clearly conveys that the appellant has dealings in various items of goods and as such the business was there long since. the appellant has dealings in..........referred to as the act), this court called for a statement of facts from the additional member, sales tax tribunal (hereinafter referred to as the tribunal) on the following question of law:whether on the facts and in the circumstances of the case, the additional sales tax tribunal was right in annulling the assessments for the quarters ending 30th june, 1960, to 30th september, 1963? 2. facts, in short, leading to these references are as follows: the assessee-opponent (hereinafter called the assessee) is alleged to be carrying on business in grocery articles, stationery articles, oil-cakes, readymade garments and paddy in his village sharadhapur in nayagarh from 1955. though the assessee's liability to pay sales tax had accrued, yet he had not registered himself as a dealer......
Judgment:

K.B. Panda, J.

1. On applications made by the State of Orissa under Section 24(2)(b) of the Orissa Sales Tax Act, 1947 (hereinafter referred to as the Act), this court called for a statement of facts from the Additional Member, Sales Tax Tribunal (hereinafter referred to as the Tribunal) on the following question of law:

Whether on the facts and in the circumstances of the case, the Additional Sales Tax Tribunal was right in annulling the assessments for the quarters ending 30th June, 1960, to 30th September, 1963?

2. Facts, in short, leading to these references are as follows: The assessee-opponent (hereinafter called the assessee) is alleged to be carrying on business in grocery articles, stationery articles, oil-cakes, readymade garments and paddy in his village Sharadhapur in Nayagarh from 1955. Though the assessee's liability to pay sales tax had accrued, yet he had not registered himself as a dealer. Accordingly, a notice under Section 12(5) was served on him to produce his books of account. The assessee had no systematic accounts to produce. So the department held him liable from 1st April, 1960 and assessed him to tax for 14 quarters, i. e., from 6/60 to 9/63. The total tax comes to Rs. 1,292 which includes penalty under Section 12(5) at the rate of Rs. 10 per quarter excepting the first. These assessments were based on the report of the Sales Tax Inspector, who visited the business premises of the assessee on 1st November, 1963 and seized some purchase invoices (34), slips (109) and a pocket notebook that disclosed the extent of business of the assessee. The assessee asserted that his daily sales ranged from Rs. 7 to Rs. 10 and, as such, he was not liable to tax. The assessee preferred first appeals against the assessments but without success. In second appeal before the Tribunal he contended that he was not dealing in paddy, oil-cakes, readymade garments and there were no materials to determine his turnover to fix his liability to pay tax ; that when he had been noticed indicating that his turnover exceeded Rs. 10,000 preceding 30th June, 1963, the assessments for quarters preceding were not valid and that he could be, if at all, only liable to pay tax from 1st April, 1963. The learned Tribunal held that in the notice under Section 12(5), the assessee had been called upon to pay tax from 1st April, 1963 ; that the dates mentioned in the notice were not due to any clerical error; and that to accept the department's suggestion that the notice included the liability to pay tax from 6/60 would necessarily cause prejudice to him, On the extent of business of the assessee, it held that there was nothing to shothat the turnover of the assessee for a period of 12 months prior to 31st March, 1963, had exceeded Rs. 10,000. In this context, its findings were that (i) the appellate order does not shoany transaction in the year 1962 or up to 31st March, 1963, of the year 1963 ; (ii) the determination of G.T.O. by the assessing officer at Rs. 12,000 was arbitrary in the absence of any satisfactory data or reasons therefor ; and (iii) the assessee was selling kotha (belonging to the village) paddy and if the turnover of the sale of such paddy was excluded from the G.T.O., it would never exceed Rs. 10,000 to attract liability and so it annulled the assessments till 31st March, 1963. It further held that if assessments till 31st March, 1963, failed, there was nothing to shosubsequent liability from 1st April, 1963 and so finally annulled the assessments for the last two quarters, i. e., 6/63 and 9/63 and directed refund of tax, if paid.

3. Reference applications were filed by the State challenging the correctness of this order but the same were rejected on 19th April, 1969, by the Tribunal. Thereafter, the State of Orissa moved this court under Section 24(2) (b) of the Act and this court allowed the applications and asked for a statement of facts on the sole question of lamentioned above.

4. The learned standing counsel for the department, Mr. S.C. Mohapatra, raised the following points :

(i) That the jurisdiction to assess an unregistered dealer under Section 12(5) does not arise from giving a notice to him and, therefore, defect, if any, in any such notice, does not vitiate the assessments; and the assessee had got 'reasonable opportunity' of being heard which only the Act contemplates; and

(ii) that the Tribunal's conclusion is not binding as a finding of fact inasmuch as it did not consider the material evidence available on record to fix the liability of the assessee within 12 months prior to 1st April, 1960, or 1st April, 1963.

5. Mr. A.B. Misra, appearing for the assessee, endeavoured to support the findings of the Tribunal contending that the notice is mandatory ; that the notice is so defective that it had prejudiced the assessee; that there was no material to fix the liability of the assessee from 1 st April, 1960, or 1st April, 1963 ; that though the Tribunal has not properly expressed itself yet has taken into consideration the materials placed on record regarding the extent of business of the assessee and, therefore, no question of laarises out of its order.

6. We would deal with the question of issue of notice and its validity first. Section 12(5) of the Act runs thus:

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 without sufficient cause failed to apply for registration, the Commissioner shall, after giving the dealer a reasonable opportunity of being heard, assess, to the best of his judgment, the amount of tax, if any, 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 so assessed, a sum not exceeding one and a half times that amount:

Provided that no penalty shall be levied for the quarter during which the dealer first or again becomes liable to pay tax under this Act.

Rule 22 of the Orissa Sales Tax Rules, 1947 (hereinafter referred to as the Rules) made under the Act, speaks about calling for returns from unregistered dealers. It says :.the Commissioner may serve upon him a notice in form VI requiring him to furnish within one calendar month of the receipt of the notice a return in form IV for such period as may be specified in the notice.

Form VI notice is a composite notice under Sections 11(1) and 12(5)/ 12(8) of the Act, issued under Rules 22, 23 and 28(2) of the Rules. It was seriously contended on behalf of the assessee that 'may serve' in this rule means 'shall serve' and that the notice served on the assessee in the instant case embodied :

That your gross turnover of sales had during the period not exceeding 12 months ending on 31st March, 1960, (sic) Rs. 10,000 and that you had nevertheless failed to apply for registration without sufficient cause (but later in the body it was stated)

you are required to submit a return in form IV within one calendar month from the date of receipt of notice showing the particulars of turnover for the quarters ending 30th June, 1960, to 30th September, 1963.

Evidently the two periods mentioned in the notice do not agree. The question for consideration is whether the error in the notice affects the jurisdiction to assess and, if not, whether prejudice was caused to the dealer so as to vitiate the proceedings.

7. In the case of Chatturam v. Income-tax Commissioner, Bihar [1947] 15 I.T.R. 302 (F.C.), their Lordships held:

The income-tax assessment proceedings commence with the issue of a notice....The jurisdiction to assess and the liability to pay the tax, however, are not conditional on the validity of the notice....The liability to pay the tax is founded on Sections 3 and 4, which are the charging sections. Section 22 etc., are the machinery sections to determine the amount of tax.

In the case of Harmukh Rai Jairam Das v. State A.I.R. 1952 Pat. 278, while considering the validity of a notice under the Bihar Sales Tax Act, 1947, it is said in the same line as follows :

Jurisdiction to assess and the liability to pay tax are not conditional on the validity of a notice. Section 13, though a part of the Act, imposes no charge on the subject and it is merely a part of the machinery of assessment. The liability to pay sales tax is founded upon Sections 4 and 5 of the Sales Tax Act which are the charging sections. It cannot be held on principle that the jurisdiction to assess and the liability to pay tax depend on the issue or non-issue of the notice under Section 13.... But where the failure to issue notice under Section 13(2) has caused prejudice to the assessee, the assessment made by the Sales Tax Officer is invalid.

In the case of Anandji Haridas & Co. (P.) Ltd. v. S.P. Kushare, Sales Tax Officer, Nagpur [1968] 21 S.T.C. 326 (339) (S.C.), their Lordships of the Supreme Court said as follows :

It is true that it is not a notice in respect of any particular quarter : it is a notice in respect of the period 1st January, 1953, to 31st December, 1953. In The State of Orissa and Anr. v. Chakobhai Ghelabhai and Company [1960] 11 S.T.C. 716 (S.C.), this court held that the issue of one notice under Section 12(5) of the Orissa Sales Tax Act, 1947, which section is similar to Section ll(4)(a), for several quarters was not contrary to laas the section makes reference to a period which might consist of more than one quarter....

The assessing authority by mistake had failed to strike out the first alternative shown in the printed form. That circumstance could not have prejudiced the appellants. It was held by this court in Chakobhai Ghelabhai's case [1960] 11 S.T.C. 716 (S.C.), referred to earlier, that such a mistake does not vitiate the notice issued....

We are unable to accept the contention of Mr. Gokhale that a notice under Section ll(4)(a) or 11A(1) is a condition precedent for initiating proceedings under those provisions or that it is the very foundation for the proceedings to be taken under those provisions.... All that Sections 11(4) and 11A(1) prescribe is that before taking proceedings against an assessee under those provisions, he should be given a reasonable opportunity of being heard. In fact, those sections do not speak of any notice....Therefore, the only question to be decided is whether the defects noticed in those notices had prejudiced the appellants. It may be noted that when the assessees received the notices in question, they appeared before the assessing authority, but they did not object to the validity of those notices....It is clear that the appellants were merely trying to take advantage of the mistakes that had crept into the notices. They cannot be permitted to do so.

In the case of Kunjilal v. Assistant Sales Tax Officer, Jabalpur Circle [1970] 26 S.T.C. 542, their Lordships of the Madhya Pradesh High Court observed thus:

As the requirement of a notice for initiating reassessment proceedings is not mentioned in Section 19 of the M.P. General Sales Tax Act, 1958, as such and is only prescribed under the Rules as a step for affording the dealer a reasonable opportunity of being heard (which is the requirement of the section), a defect in the notice cannot invalidate the proceedings unless it is shown that before the order of reassessment was made, the dealer was not afforded reasonable opportunity of being heard and he was prejudiced because of the defect in the notice.

From the aforesaid cases the following principles can be invoked :

(i) Non-issue of notice and mistakes in the issue of notice under Section 12(5) of the Act does not affect the jurisdiction of the assessing authority, if otherwise reasonable opportunity of being heard has been given;

(ii) Issue of notice as prescribed in Rule 22 constitutes a part of reasonable opportunity of being heard ; and

(iii) If, however, prejudice has been caused by non-issue of notice or mistakes in the notice, the proceeding would be vitiated.

8. Mr. Misra, on the other hand, relied on the case of Narayana Chetly v. Income-tax Officer [1959] 35 I.T.R. 388 (S.C.), where their Lordships observed thus :

The notice prescribed by Section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required that the Income-tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid then the validity of the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void.

The aforesaid view is based on the express language used in Section 34 of the Income-tax Act, 1922. This aspect of the matter has been specifically dealt with by the Supreme Court in Anandji Haridas & Co. (P.) Ltd. v. S.P. Kushare, Sales Tax Officer, Nagpur [1968] 21 S.T.C. 326 (340) (S.C). Their Lordships observed thus:

The notice contemplated under Rule 32 is not similar to a notice to be issued under Section 34(l)(b) of the Income-tax Act, 1922. All that Sections 11(4) and 11A(1) prescribe is that before taking proceedings against an assessee under those provisions, he should be given a reasonable opportunity of being heard. In fact, those sections do not speak of any notice. But Rule 32 prescribes the manner in which the reasonable opportunity contemplated by those provisions should be afforded to the assessee.

Rule 32 dealt with in the Supreme Court case more or less corresponds to Rule 22 (see Rule 32 quoted at page 333). Narayana Chetty v. Income-tax Officer, Nellore [1959] 35 I.T.R. 388 (S.C.), is thus distinguishable. It is not necessary to refer to a plethora of authorities cited on either side as the principles already indicated by us would cover this case.

9. Unlike the Income-tax Act, Section 12(5) of the Act does not postulate the issue of any notice. All that it says is that:.the Commissioner shall, after giving the dealer a reasonable opportunity of being heard, assess....

Therefore, the issue of a notice is neither mandatory nor any misdescription therein will render the assessment invalid, unless the assessee has been prejudiced thereby. In the instant case, the assessee appeared in consequence of the notice and only 'represented that he had no accounts. No objection was taken to the notice itself. Even in the memo. of appeal before the Tribunal wherein 12 grounds have been taken, there is not a whisper about the alleged prejudice caused to him for issue of a notice with mistakes. But it appears to have been argued before the Tribunal for the first time during the hearing.

10. On the aforesaid analysis we would hold that no prejudice was caused to the assessee due to mistakes in the notice.

11. The next point is about the propriety of annulment of assessments from 6/63 quarters. The learned Tribunal in this regard says:

If the assessment till 31st March, 1963, fails there is nothing to allow subsequent liability from 1st April, 1963....There is nothing to show that the liability for a period of 12 months prior to 31st March, 1963, exceeded Rs. 10,000. The officer himself has determined the annual gross turnover at Rs. 12,000 but he has not given any satisfactory data for it.

12. It was contended by Mr. Mohapatra that this finding of the Tribunal is not a finding of fact binding on this court, for it overlooked the various materials referred to in the order of the first appellate authority. Mr. Misra, on the other hand, contended that the Tribunal is the final court of fact and its finding of fact that the business of the assessee did not attract liability is not open to challenge in the High Court. The true legal position is given in the following passage:

It is not open to the court to discard the Tribunal's finding of fact, if there is some evidence to support the finding of the Tribunal on a question of fact, even if on a revieof the evidence the court might have arrived at a different conclusion. It must, however, appear that the Tribunal had considered evidence covering all the essential matters before arriving at its conclusion. If the conclusion of the Tribunal is based upon some evidence ignoring other essential matters, it cannot be regarded as a finding not giving rise to a question liable to be referred to the court. (See Income-tax Commissioner v. Indian Woollen Textiles Mills [1964] 51 I.T.R. 291 (S.C.).

The same view has been taken by this court in Bhagwati Prasad Misra v. Commissioner of Income-tax [1959] 35 I.T.R.97. Income-tax Commissioner v. Scindia Steam Navigation Co. Ltd. [1961] 42 I.T.R. 589 (S.C.) and Income-tax Commissioner v. Jadavji Narsidas [1963] 48 I.T.R. 41 (S.C) do not take any vieinconsistent with the aforesaid proposition.

13. The assessee had denied any business in oil-cakes, cloth, readymade garments, gold and silver and paddy. The judgment of the first appellate authority is very clear and it has dealt with many aspects of the case which appear not to have been gone into by the Tribunal. As already stated, the assessments are based on purchase invoices (34), chits (109) and pocket notebook that were found in the business premises of the assessee on 1st November, 1963. While dealing with these materials, the first appellate authority has cited some instances. In that context it dealt with cash memo. dated 16th October, 1963, under item 1, cash memo, dated 3rd September, 1960, under item 2, cash memo, dated 4th April, 1961, under item 3, cash memo, dated 13 th June, 1961, under item 4 and cash memo. dated 11th April, 1961, under item 5. While dealing with the last item, its observation is:

On the reverse of this memo. three other items are indicated to have been purchased and taking the value of these three items, the total amount of the bill is calculated to be Rs. 169.65. The items are sugar, bag, sunlight soap, sutuli which are not covered in the memo.

In this connexion its observation is as follows:

The above instances clearly prove the habit of suppressing the purchases continuously by the appellant through various irregular ways.

Thereafter it dealt with cash purchases of the assessee and opined that 'the assessee must have suppressed a lot. The credit bills in support of the credit purchases which were recovered from the business place are not even all.... I do not find most of the other bills in the bunch. Apparently the appellant has not preserved all the credit bills.

Regarding the credit transaction of the assessee with one Sri Harilal Ram, the transaction covered a period from 1st January, 1959, to 30th September, 1963. In this context, its observation is:

The selling dealer has given a wrong statement as I find copy of credit memo. dated 22nd April, 1959. So the figures given by the dealer cannot be relied upon.

In bunch 3 and slip No. 22, it found a transaction of purchase of goods from one Shyamsundar Patra of Sarankul and towards arrears the assessee paid Rs. 70 as per direction of the selling dealer. But in the bunch of invoices recovered, no such invoice during 1961 from Shyam sundar Patra was found.

Thereafter it refers to bunch 2, slip 20 and bunch 3, slip 20, the first valuing Rs. 36-10-1 and the second Rs. 373-13-3, which do not indicate from whom they have been purchased. Referring to these specific items, it observed thus :

The detail examination of the slips and the pocket notebook shows in various places the purchase transactions of the appellant and it will be voluminous to mention all these details. From what has been said above it is clear that the appellant has enough purchases in cash and in other names and as per had chits in support of which he has not even cared to keep bills in his own name.

14. Regarding the dealing of the assessee in readymade garments, it has referred to slip 43 in bunch 3 and slip 38 dated 26th October, 1963. Slip 27 and slip 29, wherein items like frocks, hawani and small pants, sewing-charges and genji have been mentioned. So it concludes that the denial of the assessee dealing in readymade garments was false.

15. About the transaction of rice and paddy, the assessee only says that he had dealt in kotha paddy. The first appellate authority referred to slip 25 in bunch 2 and it had laid its hand upon a slip where the assessee had written to have got a profit of Rs. 9-1-0 on account of saradhadeiput paddy. From this it concludes that the assessee was getting profit from this business. It referred to slip 24 regarding the transaction of paddy and a letter (slip 23) wherein the assessee was to get Rs. 38-2-0 on account of paddy. Thereafter it referred to the pocket notebook where four cartloads of paddy were given to Ananda Prusti and so it concludes that the assessee must be regularly dealing in paddy in course of his business.

16. Regarding the assertion of the assessee that he had no business of oil-cakes, it says that in the assessee's statement he had stated to have kept oil-cakes on behalf of Ananda Naik and was getting some commission. Besides, the pocket notebook indicated certain dues on account of oil-cakes from one Bhagaban Choudhury. On the date of inspection 30 bags of oil-cakes were found and when asked, the assessee stated that they belonged to Ananda Naik of Manpur for whom he purchased the oil-cakes. Slip 32 of bunch 2 shows purchase of 57 bags of oil-cakes for which the assessee paid the money. So it concluded that the search of the various slips also indicated his dealings in oil-cakes and the assessee's various pleas cannot be accepted.

17. Regarding the business in gold and silver in 1959-60, contained in slip 33 of bunch 2, the assessee's plea was that it was in connexion with his nephew's marriage sometime in 1958-59. The first appellate authority did not accept it and said that the slip clearly indicated that the assessee had business in it. Besides, it referred to the local enquiry which confirmed the same.

18. Regarding the assessee's plea that he was dealing in cloth occasionally, the finding of the first appellate authority is that slips 1, 29 and 30 in bunch 2 would shothe extensiveness of the assessee's dealings in cloth of various types. Thereafter a reference is made to slip 32 of bunch 4 indicating the arrears outstanding to the credit of the assessee from customers as on 1st June, 1959 and the total amount of such credit works out to Rs. 1,150.

19. Summarising the evidence, the first appellate authority says thus :

The detail analysis as given above clearly conveys that the appellant has dealings in various items of goods and as such the business was there long since. A dealer having a daily sale beloRs. 30 or Rs. 40 cannot stock various miscellaneous items in his business place. The appellant has dealings in paddy, readymade garments, cloth of all types, oil-cakes, motichur, vegetables like potato and onion, etc. and so on. He has kept no accounts and has tried to suppress purchases in various ways. Taking these into consideration and the various enquiries made by both the enquiring officer as well as the assessing officer, I am rather inclined to think that the estimate of daily sales made by the learned assessing officer is a bit liberal. The appellant has told all falsehood about his dealings which I have discussed in the previous paragraph.

20. The Tribunal has not applied its mind to these various instances referred to in the judgment of the first appellate authority based on the materials on record. Therefore, the observation of the Tribunal that there is nothing to shothe liability for, a period of 12 months prior to 31st March, 1963, exceeding Rs. 10,000 is an error on record. There is nothing in the Tribunal's order about the finding of the first appellate authority regarding the assessee's business in oil-cakes, readymade garments and cloths of all types. There is no discussion about these slips or the credit sales of the assessee. The Tribunal says:

It is not proved that he was taking any profit out of it (purchase of kotha paddy) for his personal gain, which is contrary to evidence as discussed above.

21. The order of the first appellate authority is quite elaborate dealing with slips, cash memos. and a notebook recovered from the business premises of the assessee. Even while dealing with these, it has observed that it had only given some instances which are illustrative but not exhaustive. The conclusion of the Tribunal has been reached ignoring many essential matters. It cannot be regarded as a finding of fact binding on this court. Such a finding of fact based on exclusion of material evidence is a question of laarising out of the appellate order.

22. We would sum up our conclusions thus :

(a) For initiation of proceeding under Section 12(5) of the Act, notice is not mandatory ;

(b) If 'reasonable opportunity of being heard' is offered to the assessee during the proceeding, the same is not vitiated ;

(c) Notice in form VI under Rule 22 is only a method of giving 'reasonable opportunity'. Omission to issue notice or error in such notice would invalidate the proceeding only if prejudice is established and not otherwise ;

(d) By mistakes committed in the notice no prejudice was caused in the facts and circumstances of this case as has been indicated in the body of the judgment ; and

(e) The judgment of the Tribunal is not in accordance with laas it suffers from infirmity in not dealing with material facts relevant to the question referred to us. That means, the Tribunal would have to deal with all the materials and record a finding whether the assessee is liable to be assessed for the relevant quarters.

23. On the aforesaid analysis, we would accept the references. The question is answered in the negative. In the circumstances, parties would bear their own costs.

G.K. Misra, C.J.

24. I agree.


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