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K.K. Sankaran Nair Vs. State of Kerala - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberT.R.C. Nos. 21, 22 and 23 of 1972
Judge
Reported in[1974]33STC32(Ker)
AppellantK.K. Sankaran Nair
RespondentState of Kerala
Appellant Advocate V. Bhaskaran Nambiar,;C.R. Natarajan;and M.K. Anandakrishnan, Advs.
Respondent AdvocateGovernment Pleader
DispositionPetittion dismissed
Cases ReferredLucknow v. Bachu Lal Kapoor
Excerpt:
- - -(1) where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable, or any deduction has been wrongly made therefrom, the assessing authority may, at any time within four years from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such turnover after issuing a notice on the dealer and after making such enquiry as it may consider necessary: (2) in..........exclusively based on the wording of section 19. that section is in these terms:19. assessment of escaped turnover. -- (1) where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable, or any deduction has been wrongly made therefrom, the assessing authority may, at any time within four years from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such.....
Judgment:

Govindan Nair, Ag. C.J.

1. These relate to the assessment to sales tax on the revision petitioner in proceedings under Section 19(1) of the Kerala General Sales Tax Act, 1963, for the three years 1962-63, 1963-64 and 1964-65. They raise a common question. We propose to deal with these cases by a common judgment.

2. Though as many as eight questions of law, said to arise from the order of the Tribunal, have been formulated in these tax revision cases, counsel for the revision petitioner has urged before us only two questions. His first submission was that the proceeding under Section 19(1) was not justified. This contention was exclusively based on the wording of Section 19. That section is in these terms:

19. Assessment of escaped turnover. -- (1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable, or any deduction has been wrongly made therefrom, the assessing authority may, at any time within four years from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such turnover after issuing a notice on the dealer and after making such enquiry as it may consider necessary:

Provided that before making an assessment under this sub-section the dealer shall be given a reasonable opportunity of being heard.

(2) In making an assessment under Sub-section (1), the assessing authority may, if it is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer, direct the dealer to pay, in addition to the tax assessed under Sub-section (1), a penalty not exceeding one and a half times the tax so assessed:

Provided that no penalty under this sub-section shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition.

(3) The powers under Sub-section (1) may be exercised by the assessing authority even though the original order of assessment, if any, passed in the matter, has been the subject-matter of an appeal or revision.

(4) In computing the period of limitation for the purposes of this section, the time during which the proceedings for assessment remained stayed under the orders of a civil court or other competent authority shall be excluded.

Referring to the latter part of the section counsel urged that the tax to be imposed is on the turnover which had escaped assessment and that referring to the definition of the word 'tax' it was contended that the turnover had not escaped assessment and, therefore, Section 19 was inapplicable. To understand this contention a few facts have to be stated.

3. There were two dealers, both registered; the assessee, the revision petitioner; and a firm M/s. Bharath Timbers. The turnovers now sought to be assessed in the hands of the revision petitioner for the three years were admittedly assessed to tax in the hands of the firm M/s. Bharath Timbers for the three years. The Sales Tax Officer received information that the business in timber called Bharath Timbers was actually owned and conducted by the revision petitioner alone and that M/s. C.K. Soman and K. Radhakrishna Babu, the alleged partners of the firm were mere name lenders. It appears to have been found that C.K. Soman was only a paid employee of the revision petitioner while Radhakrishna Babu, nephew of the revision petitioner, was a student. Evidence was obtained in regard to this and the Sales Tax Officer concluded that the firm really did not exist and that the business said to have been conducted by the firm is the business of the revision petitioner. On this aspect the Appellate Assistant Commissioner entered the following finding:

I therefore hold that it was the appellant who was actually conducting this business called Bharath Timbers at Varkala during all these years.

4. The matter was not pressed before the Tribunal. The Tribunal observed:

But in view of the Voluminous and clinching evidence gathered by the assessing authority including the several books of account and lot of correspondence seized at the time of inspection which would clearly go to show that the appellant was the sole proprietor of the timber business in question, the learned counsel for the appellant did not advance any argument to controvert the finding.

5. We have therefore to take it for the purpose of these tax revision cases that the business said to have been conducted by the 'Bharath Timbers' was really the business of the revision petitioner and that the turnovers pertaining to the case for the three years were really the turnovers of the revision petitioner. The question is whether because there have been assessments made against the Bharath Timbers for the three years the Sales Tax Officer is precluded from proceeding under Section 19(1) of the Act. We do not think so. What the section deals with is the turnover of a dealer which had escaped assessment. The relevant portion of the section reads:

Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax.

The words are 'turnover of business of a dealer'. The revision petitioner was a dealer. On the findings entered by the Tribunal it is his turnover that had escaped assessment. So Section 19(1) of the Act is attracted. The same view has been taken by the Madhya Pradesh High Court in the decision in Daluram Pannalal Modi v. Assistant Commissioner of Sales Tax, Indore, and Ors. [1962] 13 S.T C 759. This decision of the Madhya Pradesh High Court has been approved by the Supreme Court in Daluram Pannalal Modi v. Assistant Commissioner of Sales Tax, Indore, and Ors.[1963] 14 S.T.C. 675 (S.C.). On the facts found in these cases we have to take it that the Bharath Timbers did not exist because they had no business and they had no turnover. So the principle of these decisions must apply.

6. The same is the position under the Indian Income-tax Act, 1961. We may usefully refer to the Commentaries of Kanga and Palkhivala, Sixth Edition of the Income-tax Act at page 779:

Income is said to have escaped assessment within the meaning of this section when it has not been charged in the hands of the assessee in the proper assessment year; it is immaterial that the income was charged or included in some other assessment, or that the failure to charge the income was entirely due to oversight or inadvertence on the part of the income-tax authorities, or that the income consists of dividend deemed to be distributed by a fiction of law.

7. We need not refer to the decisions in support of these comments because the propositions stated in the statement are not controverted. The only submission made by counsel for the revision petitioner is that there is no justification for applying the principles of the decisions under the Income-tax Act, 1961, for deciding the scope of Section 19 of the Act. But we find no material difference in the wording of Section 147 of the Income-tax Act, 1961, which is the section corresponding to Section 19 enabling the assessment of escaped income. The principles of the decision of the Income-tax Act, we think, therefore, must apply. We are unable to accept the contention of counsel for the revision petitioner that the assessments made on the revision petitioner for the three years of the escaped turnover is not permissible under Section 19(1) of the Act.

8. Counsel for the revision petitioner then contended that this view of ours would result in double taxation, the same turnover being taxed in the hands of the revision petitioner and the firm. Counsel pointed out the last sentence in paragraph 1 of the Tribunal's order and contended that the first instalment of tax imposed on the firm, Bharath Timbers, was paid by the revision petitioner himself. He suggested that more payments would have been made by the revision petitioner subsequently. His submission was, that having collected these amounts in relation to the same turnover and that from the revision petitioner himself, to ask him to pay the tax on the entire turnover now taxed once again would be unjust. Counsel for the revenue fairly brought to our notice the observations of Subba Rao, J., in the decision of the Supreme Court in Income-tax Officer, A Ward, Lucknow v. Bachu Lal Kapoor [1966] 60 I.T.R. 74 at p. 80 (S.C.), and said that the revenue would certainly be willing to make what he called all adjustments. If any amount of the tax imposed on the firm had been paid by the revision petitioner he said the revenue will adjust such payments towards the tax now imposed on the revision petitioner. If, on the other hand, payments towards such tax had been made by any other person, he said such amounts will be refunded to that person. Because of these assurances it is unnecessary to give any further directions, but we make it clear that we expect such adjustments would be made before revenue recovery proceedings are taken against the petitioner. We may extract a passage from the judgment of the Supreme Court:

It was then forcibly brought to our notice that the said view would be subversive of the doctrine of 'double taxation'. It was said that as the orders of assessment on the individual members of the said family had become final, if the Income-tax Officer was permitted to assess the Hindu undivided family for the same assessment year, tax would be imposed on the same income twice over. It is true that the Act does not envisage taxation of the same income twice over on one passage of money in the form of one sort of income'. It is equally true that Section 14(1) of the Act expressly debars the imposition of tax on any part of the income of a Hindu undivided family received by its members. The fact that there is no provision in the Act dealing with a converse position does not affect the question, for the existence of such a converse position is legally impossible under the Act. So long as the Hindu undivided family exists, the individuals thereof cannot separately be assessed in respect of its income. None the less, if, under some mistake, such income was assessed to tax in the hands of the individual members, which should not have been done, when a proper assessment was made on the Hindu undivided family in respect of that income, the revenue had to make appropriate adjustments; otherwise, the assessment made in respect of that income on the Hindu undivided family would be contrary to the provisions of the Act, particularly Section 14(1) of the Act. We, therefore, hold that if the assessment proceedings initiated under Section 34 of the Act culminates in the assessment of the Hindu undivided family, appropriate adjustments have to be made by the Income-tax Officer in respect of the tax realised by the revenue in respect of that part of the income of the family assessed on the individuals of the said family. To do so is not to reopen the final orders of assessment, but in reality to arrive at the correct figure of tax payable by the Hindu undivided family.

9. We have omitted to refer to the numerous decisions cited before us by counsel for the revenue; not because they are not relevant but we think what has been referred to by us are enough to dispose of these cases. We dismiss these tax revision cases subject to what is stated above. There will be no order as to costs.


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