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Commissioner of Sales Tax, Delhi and Another Vs. R.S. Atma Ram Suri and Son - Court Judgment

LegalCrystal Citation
Subject Sales Tax
CourtDelhi High Court
Decided On
Case NumberL.P.A. No. 45 of 1973
Judge
Reported in20(1981)DLT61b; [1981]48STC387(Delhi)
Acts Bengal Finance (Sales Tax) Act, 1941 - Sections 11A and 20(3); Central Sales Tax Act - Sections 5(2); Income Tax Act, 1922 - Sections 34 and 34(1); Bengal Finance (Sales Tax) Rules - Rule 71
AppellantCommissioner of Sales Tax, Delhi and Another
RespondentR.S. Atma Ram Suri and Son
Cases ReferredSales Tax Commissioner v. Harbans Motor Stores
Excerpt:
.....- assessment - sections 11a and 20 (3) of bengal finance (sales tax) act, 1941, section 5 (2) of central sales tax act, sections 34 and 34 (1) of income tax act, 1922 and rule 71 of bengal finance (sales tax) rules - assessed -respondent claimed deductions from turnover of sales on account of these being outside state - whether tax paid under local act or central act - sales tax officer held that transaction took place outside state and tax livable under central act - appellate authority held that rates not taxable under central act - notice clearly states that chargeability of turnover based on material on record before assessing authority - commissioner's view about decision of assessing authority that turnover liable to tax under central act was erroneous and needs correction - to..........who held that these transactions were not covered by central sales tax act and they were local sales. he, thereforee, allowed the appeal by his order of 16th august, 1962, and quashed the assessment under the central act. 4. the commissioner of sales tax by his notice of 4th october, 1962, informed the assessed that it was proposed to revise the assessment order for 1957-58. the gist of order proposed to be passed was mentioned as follows : 'in the appellate order no. 813 of 1959-60 dated 11th august, 1962, for the year 1957-58 passed by shri u. p. sinha, assistant commissioner, sales tax, he has allowed the appeal saying that the tax on interim consignee sales amounting to rs. 14,78,323 should have been levied under the local act and not under the central sales tax act as was.....
Judgment:

Sachar, J.

1. This is an appeal against the order of the learned single Judge by which he quashed the notice dated 4th October, 1962, and the resulting order of revision dated 8th March, 1963, passed under section 20(3) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter to be called the Act), as applicable to Delhi.

2. The assessment year in question is 1957-58 and the order by the assessing authority was passed on 4th November, 1959. During the course of the assessment the assessed-respondent claimed certain deductions from the turnover of sales to the Army Departments on account of these being outside the State. This plea was accepted by the Sales Tax Officer, and the assessed was allowed deductions for this amount under section 5(2)(a)(v) of the local Act. The result was that an additional demand of Rs. 30,014.39 was created by the officer by his order of 4th November, 1959, under the Central Sales Tax Act. As the rate was the same the dealer specifically stated that it will not matter whether the transactions were included under the local Act or the Central Sales Tax Act (the liability being the same on him).

3. But notwithstanding this stand, after obtaining deduction under the local Act the assessed filed an appeal before the Assistant Commissioner against the order passed under the Central Sales Tax Act contending for the contrary stand. He succeeded before the Assistant Commissioner who held that these transactions were not covered by Central Sales Tax Act and they were local sales. He, thereforee, allowed the appeal by his order of 16th August, 1962, and quashed the assessment under the Central Act.

4. The Commissioner of Sales Tax by his notice of 4th October, 1962, informed the assessed that it was proposed to revise the assessment order for 1957-58. The gist of order proposed to be passed was mentioned as follows :

'In the appellate order No. 813 of 1959-60 dated 11th August, 1962, for the year 1957-58 passed by Shri U. P. Sinha, Assistant Commissioner, Sales Tax, he has allowed the appeal saying that the tax on interim consignee sales amounting to Rs. 14,78,323 should have been levied under the local Act and not under the Central Sales Tax Act as was done by the notified authority in para 5 of his Central assessment order dated 4th November, 1959. The said sales of Rs. 14,78,323 shall, thereforee, have to be taxed now under the local Act.

It is, thereforee, proposed to revise under section 20(3) of the Act, the local assessment order dated 4th November, 1959, for the year 1957-68 by excluding the above-mentioned figures from the deductions under section 5(2)(a)(v) and to tax them according to law and facts of the case.'

5. Thereafter the Commissioner proceeded with the revision and by his order of 8th March, 1963, revised the local assessment order dated 4th November, 1969, passed by the Sales Tax Officer and held that the transactions amounting to Rs. 14,78,323 which had been held by the Assistant Commissioner to be local sales will be included in the taxable turnover and subjected to tax under the local Act. It is thereafter that the respondent came to this Court by way of a writ petition.

6. Section 11A of the Act provides that if in consequence of definite information which has come into his possession the Commissioner is satisfied that the turnover of the business of a dealer has escaped assessment or has been under assessed in any year the Commissioner may at any time within a period of 3 years following the close of the year for which the turnover is proposed to be assessed or reassessed send notice to the dealer and after hearing him may proceed to assess or reassess, as the case may be. Under rule 71 the power of assessment or reassessment lies with the appropriate assessing authority. As section 11A required notice to be issued within a period of 3 years following the close of the year for which the turnover is proposed to be assessed or reassessed it is apparent if section 11A applied, as the assessment year was 1957-58 (ending 31st March, 1958), and as the notice by the Commissioner was issued on 4th October, 1962, a period of 3 years had already run out. But as notice was issued under section 20(3), the argument was also raised that though no limitation is mentioned therein still the period of limitation has to be read into it. The learned single Judge has held that though no time-limit was provided in the Act for exercising the revisional power under section 20(3), this power could only be exercised within 4 years after the end of the assessment year. As in the present case the end of the assessment year is 31st March, 1958. and as notice was issued after March, 1962, the revisional order has been held to be beyond time. In this regard, the learned Judge relied on a single Bench judgment of this Court in Union of India v. Gurbaksh Singh [1974] 33 S.T.C. 91; 7 D.S.T.C. 162 wherein the view was taken that limitation period is also to be read when exercising power under section 20(3) of the Act. This view of the learned single Judge is no longer good law in view of the Supreme Court decision in this very case reported in S. B. Gurbaksh Singh v. Union of India [1976] 37 S.T.C. 425 wherein it has been held that no time-limit has been prescribed for exercise of revisional power although the exercise may have to be done within a reasonable time. In the present case the notice was issued on 4th October, 1962, and cannot obviously be said to be beyond a reasonable time. As there is no limitation provided under section 20(3) of the local Act for exercise of suo motu revisional power the learned Judge's finding that the revisional order was bad because of the bar of limitation cannot be accepted and this finding has to be set aside. But that, however, is not the end of the matter because Mr. Chawla, the learned counsel appearing for the assessed, has raised an alternative argument which was also indicated before the learned single Judge. The contention is that though there may not be any time-limit for exercise of suo motu revisional power yet the exercise of this power has to be read subject to restriction and the scheme of the Act. He relied on the observations made in State of Kerala v. K. M. Cheria Abdulla & Co. : [1965]1SCR601 at 1591.) that it would not invest the revising authority with power to launch upon enquiries at large so as either to trench upon the powers which are expressly reserved by the Act or by the Rules to other authorities or to ignore the limitation inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by rule 17 in the assessing officer and is to be exercised subject to certain limitations, and the revising authority will not be competent to make an enquiry for reassessing a taxpayer. The above observations were referred to with approval in Gurbaksh Singh's case ([1976] 37 S.T.C. 425 at 429 (S.C.).) at page 429 and it was held that the revisional authority should not trench upon the powers expressly reserved by the Act or the Rules to other authorities and cannot ignore the limits inherent in exercise of those powers. Section 11A is one such power which deals with assessment and reassessment of tax in case of an escaped assessment or under-assessment. Exercise of that power is subject to the limitation provided therein.

7. These decisions thus emphasise that if the power of revision is being exercised in a case in which resort could be had to section 11A of the Act the exercise of power would be bad because of the inherent limitation which must be read in the power of revision. Now the power of revision is clearly distinct and separate power from the power to assess after calling for a return in case of under assessment or escaped assessment : vide State of Orissa v. Debaki Debi : [1964]5SCR253 .

8. Mr. Chawla's contention is that the circumstances of the case being within section 11A of the Act, and as power under that provision cannot be exercised because of the bar of limitation, the Commissioner is resorting to the device of purporting to exercise power of suo motu revision to avoid the bar of limitation. Such a contention is disputed by the counsel for the appellant-department. The question to be decided is whether the power exercised by the Commissioner could have been exercised under section 11A, that is to say, is section 11A of the Act applicable to the present case. If so, exercise of revisional power is forbidden. But if not, then the Commissioner's order passed in revision is valid land must be upheld.

9. Now, it will be seen that there was no omission or concealment of the turnover at the time when the original assessment took place. The position really was that as the rate was the same, the assessed made a statement before the assessing authority which is reproduced in the revisional order that it makes no difference whether the tax is paid under the local Act or the Central Sales Tax Act. As a matter of fact, the revisional order notices that the assessed had shown the impugned sales as taxable under both the Acts. The Sales Tax Officer took the view that this transaction was outside the State and tax livable under the Central Act and gave deductions under the local Act. However, the assessed seemed, for reasons best known to him, to have gone back on his earlier stand and challenged the liability of tax under the Central Act. This plea succeeded in appeal and it was held that sales tax was chargeable under the local Act and not the Central Act. So, an anomalous problem emerged. The assessing authority held rates to be taxable under the Central Act - so no tax was paid under the local Act. The appellate authority held rates not taxable under Central Act - the result that the assessed gets relief both under the local and Central Acts - a situation not even contemplated by the assessed. Without doubt the transactions had to be liable for tax either under the local or Central Act. A situation was obviously created in which the intervention of the Commissioner was inevitable and that is why the notice for revision under section 20(3) was given by the Commissioner. It is apparent that the present case is not a case where any turnover had escaped assessment or had been under-assessed and any subsequent information after the assessment had come in possession of the Commissioner and that was the basis of the revisional order. Here were two orders which came to the notice of the Commissioner, one passed by the assessing authority by which the transaction in question had been treated as liable to tax under the Central Act. The Appellate Assistant Commissioner, however, took a contrary view that the transaction in question was not liable to pay tax under the Central Act, but under the local Act. The Commissioner as superior authority had the discretion to decide whatever, to revise the order of the assessing authority which had given the deductions under section 5(2)(a)(v) of the local Act, on the ground that the liability for tax fell under the Central Sales Tax Act or to revise the order of the Assistant Commissioner who had held that the transaction was liable to tax under the local Act. The Commissioner, it is clear, agreed with the view of the Appellate Assistant Commissioner that the transaction in question was rightly held to be not liable to tax under the Central Sales Tax Act and thereforee no question of revising the order arose. He, thereforee, proposed to revise the order of the assessing authority which had held that the transaction in question was liable to tax under the Central Act. This was then not a case which would fall under section 11A of the Act not being a case of either any escaped assessment or under-assessment, It was rather a case where the assessing authority had considered the transactions taxable under the Central Act, which view was held to be erroneous by the Commissioner. Mr. Chawla referred to Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, Bihar and Orissa : [1959]35ITR1(SC) . In our view that authority is of no assistance to him. It is no doubt true that it was held in that case that the information under section 34(1)(b) of the Income-tax Act, 1922 [which was broadly couched in the same language as section 11(a) of the local Act], would include knowledge even on a state of law and that it would be open to the Income-tax Officer to proceed under the said section, if the information about the true and correct state of law came to his notice after the assessment had been made. In that case the Income-tax Officer in pursuance of the direction by the Appellate Tribunal exempted from income-tax the interest on arrears of rent payable in respect of agricultural land in view of the decision of the Patna High Court. Subsequent to the assessment that decision of the Patna High Court was set aside by the Privy Council and it was held that the interest on arrears of rent payable in respect of agriculture is not agricultural income and, thereforee, is liable to be taxed under the Income-tax Act. It was in these circumstances that the Income-tax Officer issued notice under section 34 of the Income-tax Act. The Supreme Court held that the word 'information' would include information as to the true and correct state of law and so would cover information as to relevant judicial decisions, and if in consequence of this information the Income-tax Officer has reason to believe that the income has been assessed at too low a rate it would be open to him to issue notice to him under section 34(1)(b) of the Act. A detailed review of the law on the subject was made in Kalyanji Mavji and Co. v. Commissioner of Income-tax : [1976]102ITR287(SC) and a number of propositions were laid down in that case. Though no doubt it was reiterated that the word 'information' in section 34 would include information as to the correct state of law, at the same time it was emphasised that the information must be derived from an external source of any kind, though the said information may be obtained even from the record of the original assessment or investigation on the material on record or the facts disclosed thereby or from other enquiry or research into facts of law, but where the Income-tax Officer gets no subsequent information but merely proceeds to reopen the original assessment without any facts or without any enquiry which form the part of the assessment, section 34(1)(b) of the Act would not be applicable. Applying that case to the present case can it be said that the assessing authority could have issued notice under section 11A of the Act so as to reopen the assessment made by him in which he had given the deduction and treated the transaction as liable to tax under the Central Act. The answer is no. If he was to do so his action would be open to challenge on the ground that he was merely revising his own earlier order which he was not competent to do so. Mr. Chawla bad urged that the decision of the Appellate Assistant Commissioner was information on a point of law and thereforee section 11A of the local Act would be applicable. We cannot agree. When the courts have held that the subsequent information would include a decision on a question of law it naturally includes a decision by a competent superior authority from the one which had taken the decision earlier. The Commissioner who is an authority also to issue notice under section 11A of the Act cannot obviously be said to be receiving subsequent 'information' in the sense of coming to know as to what is the correct law. It is patent that a decision given by the Appellate Assistant Commissioner who is a subordinate authority cannot be given that status vis-a-vis the Commissioner. As a matter of fact under law it was open to the Commissioner to revise the order of the Appellate Assistant Commissioner if he was of the opinion that the decision of Appellate Assistant Commissioner was wrong and that the transaction was liable to tax under the Central Act. The fact was that the Commissioner agreed with the Appellate Assistant Commissioner that the transaction in question was liable to tax under the local Act, he inevitably felt the necessity of revising the order of the assessing authority which had taken the view that the transactions in question were liable to tax under the Central Act. The only power permissible to seek to nullify the order of the assessing authority was under section 20(3) of the local Act. In this connection reference may also be made to the Division Bench of this Court in Sales Tax Commissioner v. Harbans Motor Stores [1976] 37 S.T.C. 67 where it was held, 'where information regarding certain turnover, which was not charged to tax, was already in the records and the assessing authority and the Commissioner knew about it, and there being no subsequent external information, applicability of section 11A of the Act does not arise to reassess the dealer on that turnover'. In the present case the notice clearly states that chargeability of the turnover is based on the material already on the record which was before the assessing authority. The only thing that has happened is that the Commissioner is of the view that the decision of the assessing authority that the turnover was liable to tax under the Central Act is erroneous and needs correction. To such a situation, provisions of section 20(3) of the local Act alone would be applicable. In that view of the matter, we would allow the appeal and set aside the order of the learned single Judge and dismiss the writ petition. There will be no order as to costs.

10. Appeal allowed.

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