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Gopal Oil Mills Vs. the Assessing Authority and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtPunjab and Haryana High Court
Decided On
Case Number Civil Writ Petition No. 2007 of 1983
Judge
Reported in[1984]57STC314(P& H)
AppellantGopal Oil Mills
RespondentThe Assessing Authority and ors.
Appellant Advocate B.K. Jhingan, Adv.
Respondent Advocate R.P. Bhatia, Adv. for the Adv.-General
DispositionPetition allowed
Cases ReferredRam Kishan Kapoor & Co. v. State of Haryana
Excerpt:
.....questions of law to this court said to arise from the order of the tribunal but failed. the assessing authority, on the other hand, on remand framed an assessment against the petitioner and levied sales tax as also purchase tax, and also imposed penalty on the basis of the purchase tax assessed by it, as according to it, there was a failure to file the purchase tax return and deposit tax thereon. notice for framing best judgment assessment against it was required to be issued by the assessing authority within 5 years after the expiry of the period culminating on 31st march, 1969. the said provision specifically postulates that proceedings to assess the petitioner to the best of the judgment of the assessing authority can only be taken after the dealer has been given a reasonable..........sales tax act, 1948 (for short 'the act'), was attracted since the petitioner was a registered dealer. notice for framing best judgment assessment against it was required to be issued by the assessing authority within 5 years after the expiry of the period culminating on 31st march, 1969. the said provision specifically postulates that proceedings to assess the petitioner to the best of the judgment of the assessing authority can only be taken after the dealer has been given a reasonable opportunity of being heard and as held by the supreme court in madan lal afota v. excise and taxation officer, amritsar : [1962]1scr823 that a notice need clearly specify that the authority needed to proceed against the dealer to the best of his judgment consciously.5. concededly, the petitioner was.....
Judgment:

M.M. Punchhi, J.

1. It would be unnecessary to detail out elaborate facts pertaining to this petition. These can well be noticed in my decision in C. W. P. No. 2901 of 1982 (Gopal Oil Mills v. Assistant Excise and Taxation Commissioner, Ludhiana [1984] 57 STC 308) decided on 15th March, 1984, which pertains to the petitioner herein. Since the decision therein would in some respects govern the fate of the present case, skeletally only some facts need be noticed.

2. For the assessment year 1968-69, the petitioner filed sales tax return and paid tax thereon. However, the petitioner did not file any purchase tax return. During the course of proceedings for assessment, a few memorandums were sent to the petitioner in these words :

Your case for the year 1968-69 was fixed for assessment before the undersigned on 26th August, 1970. None appeared on the said date. Now you are directed to produce your account books on 1st September, 1970, at 9 A.M. at Ludhiana. In case of failure, case will be decided ex parte on merits. No adjournment application will be entertained.

Sd/-...

Assessing Authority, Ludhiana.

3. Thereafter on 14th September, 1976, an assessment was framed by the Assessing Authority vide order, annexure P-l, on a taxable turnover which included sales tax and purchase tax payable. The petitioner went up in appeal before the Deputy Excise and Taxation Commissioner who set aside the order of assessment and remanded the case to the Assessing Authority to re-determine the tax liability of the petitioner as also the penalty, if any, to be imposed on it. That order is annexure P-3,. Thereafter, the petitioner approached the Sales Tax Tribunal in the appeal but unsuccessfully. It even approached the Tribunal for referring questions of law to this Court said to arise from the order of the Tribunal but failed. The Assessing Authority, on the other hand, on remand framed an assessment against the petitioner and levied sales tax as also purchase tax, and also imposed penalty on the basis of the purchase tax assessed by it, as according to it, there was a failure to file the purchase tax return and deposit tax thereon. Though the petitioner has concededly gone in appeal against that order, it has all the same approached this Court to challenge the view of the Sales Tax Tribunal affirming that of the Deputy Excise and Taxation Commissioner the foundation of which was the order of the assessment.

4. As said before, no purchase tax return was filed by the petitioner. Straightaway, Sub-section (5) of Section 11 of the Punjab General Sales Tax Act, 1948 (for short 'the Act'), was attracted since the petitioner was a registered dealer. Notice for framing best judgment assessment against it was required to be issued by the Assessing Authority within 5 years after the expiry of the period culminating on 31st March, 1969. The said provision specifically postulates that proceedings to assess the petitioner to the best of the judgment of the Assessing Authority can only be taken after the dealer has been given a reasonable opportunity of being heard and as held by the Supreme Court in Madan Lal Afota v. Excise and Taxation Officer, Amritsar : [1962]1SCR823 that a notice need clearly specify that the authority needed to proceed against the dealer to the best of his judgment consciously.

5. Concededly, the petitioner was not served with statutory notice in form S.T. XIV. A bare reading of the said form discloses that it bears options. Option (a) covers a dealer under Section 11(5) and is in these terms:

(a) You, a dealer registered under Certificate No....of...District, have not furnished return for the year/quarter/ month ending the...day of...19... .

You are hereby directed to attend in person or by an agent at (place) ...on (date)...at (time)... and there to produce or cause there to be produced, at the said time and place the accounts and documents specified below for the purpose of such assessment, together with any objection which you may wish to prefer and any evidence you may wish to adduce in support thereof and to show cause on that date and at that time why in addition to the tax to be assessed on you, a penalty not exceeding one and a half times the amount should not be imposed upon you under Section 11(6) of the said Act.

In the event of your failure to comply with this notice, I shall proceed to assess under Section 11 of the Punjab General Sales Tax Act, 1948, to the best of my judgment without further reference to you.

Sd/-...

Assessing Authority.

6. It is plain from the language of form S. T. XIV aforesaid extracted, for the limited purpose of Section 11(6) that there has to be a violation on behalf of the assessee to comply with the notice and thereafter the Assessing Authority can proceed to frame best judgment assessment. It is patent from the memorandum sent to the petitioner that it was required to produce account books failing which it was to be proceeded against ex parte. Concededly, in none of the memorandums it was ever stated that the Assessing Authority shall be proceeding to the best of its judgment on the failure of the assessee to comply with the terms of the memorandum. As is well-known, a best judgment assessment is an assessment of the Assessing Authority and of none other, without the least aid or persuasion from the assessee. What the law requires is that some conscious act must be taken before the expiry of the period of 5 years which would indicate that the Assessing Authority has proceeded within that time to assess the dealer to the best of his judgment. But here, as it seems to me, the memorandum reflected nothing of that sort and this can be no substitute to the notice prescribed in form S.T. XIV. And that too as to which of the options mentioned therein had been exercised by the Assessing Authority as otherwise the notice would be vague when options are kept open. See in this connection Commissioner of Income-tax, Amritsar-II v. Smt. Saraswati Bai . In that case this Court took the view that a notice issued for the purpose of initiating reassessment proceedings under Section 148 of the Income-tax Act was not a mere procedural requirement but the notice had to be valid too, and if it was vague and ambiguous, it would be no notice in the eye of law, resulting in the entire proceedings taken by the Income-tax Officer to be void for want of jurisdiction. Thus, in this situation, I am of the considered view that in the absence of a specific notice under Section 11(5) in the terms of the prescribed form S.T. XIV having been issued, it cannot be said that the proceedings under Section 11(5) stood validly initiated or that the best judgment assessment had been validly framed by the Assessing Authority, more so when the assessment had been framed on 14th September, 1976, beyond the period of 5 years. This view I have taken in the case of the petitioner [Gopal Oil Mills v. Assistant Excise and Taxation Commissioner, Ludhiana [1984] 57 STC 308 (C.W.P. No. 2901 of 1982)] decided on 15th March, 1984, and what could not be done by the Assessing Authority could not be permitted to be done in appeal by the Deputy Excise and Taxation Commissioner. The same principle applies to the Income-tax Tribunal. Thus the view of all the authorities under the Act in framing best judgment assessment against the petitioner appears to me without jurisdiction and thus the orders, so far as they relate to framing of such assessment with regard to purchase tax are concerned, are hereby quashed in relation to the impugned orders.

7. So far as the question of penalty is concerned that too, to my mind, is a by-product of best judgment assessment for it is otherwise difficult to ascertain it both qualitatively as also quantitatively. A plain reading of Sub-section (6) of Section 10 shows that the Assessing Authority may direct that the dealer shall pay by way of penalty in addition to the amount so imposed a sum not exceeding 1J times but not less than 10 per cent of the amount as tax to which the dealer is assessed or is liable to be assessed. In the case of failure to file the return, the entire tax is assessable. So the question of exclusion of any amount does not arise. Penalty has then to be computed on the basis of the tax evaded. Unless that is first . computed the question of computation of penalty towards the maximum or minimum does not arise. As the assessment against the petitioner has been quashed, there is nothing to proceed against it in the absence of quantification of purchase tax. The learned counsel for the petitioner also challenged levy of penalty on the ground that it was being demanded of him as late as on 1st February, 1983, i.e., after the lapse of nearly 14 years from the assessment year. There is some authority for the proposition that proceedings for penalty should be initiated within a reasonable time. Rather, I would say, so far as this Court is concerned, the view is consistent. See in this connection Ram Kishan Kapoor & Co. v. State of Haryana [1983] 53 STC 148. Initiation of penalty proceedings that late too appears to me unreasonable in the circumstances of the case. Thus from either angle, the order of imposition of penalty too cannot be sustained.

8. For the view taken, this petition is allowed, the impugned orders so far as they relate to imposition of purchase tax are quashed as also the order levying penalty. However, in the circumstances of the case, there shall be no order as to costs.


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