1. This petition preferred by the Government, under Section 12-B of the Madras General Sales Tax Act, arose out of proceedings taken under the Act, to assess the turnover of the respondent for the year, 1950-51. The assessee did not file any return of his turnover for 1950-51 within the time prescribed. After other proceeding's had been taken by the assessing authorities, he voluntarily, submitted a return of his turnover on 20th February, 1954. That return, supported by the entries in his account books, was accepted by the assessing authorities, and on 11th March, 1954 the respondent was assessed to tax on a turnover of Rs. 18,651-13-9. That assessment was confirmed by the Commercial Tax Officer on appeal. But on further appeal by the assessee the tribunal held that the assessment fell within the scope of Rule 17(i) of the Madras General Sales Tax Rules, and that the assessment made on nth March, 1954, was barred by the period of limitation prescribed by the rule. The view of the Tribunal was that the turnover of the assessee had escaped assessment and that the period of two years prescribed by the rule before it was amended applied to the respondent. It was the correctness of that decision that the Government challenged.
2. Apparently the Tribunal overlooked the main feature of the case, that the assessee filed a return of his turnover, though he filed it only on 20th February, 1954, That return was accepted as correct, and he was assessed to tax on the basis of that return.
3. As the learned Government Pleader pointed out, there was nothing in the Act or in the rules framed thereunder prescribing the period within which assessment proceedings once validly started should be completed. The contention of the Government Pleader was that, where there was a return filed by the assessee himself, there was nothing in the Act or in the rules to limit the period within which the assessment should be completed. Such an assessment would be an original assessment and not an assessment, which would fall within the scope of Rule 17(i) of the Sales Tax Rules.
4. The material provisions of the Act and the Rules which have a bearing on the present question we shall now set out. Section 9 of the Madras General Sales Tax Act runs thus:
9. (1) Every dealer whose turnover is ten thousand rupees or more in a year shall submit such return or returns relating to his turnover in such manner, and within such periods as may be prescribed.
(2) (a) If the assessing authority is satisfied that any return submitted under Sub-section (1) is correct and complete, he shall assess the dealer on the basis thereof.
(2) (b) If no return is submitted by the dealer under Sub-section (1) before the date prescribed or specified in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall assess the dealer to the best of his judgment.
5. 'Prescribed' is defined by Section 2(f) of the Act to mean 'prescribed by the rules: made under the Act'. Under Section 19 the State Government is empowered to make rules to carry out the purposes of the Act, and among these particularly set out in this section is the provision in Section 19(2)(f), which reads,
such rules may provide for the assessment to tax under this Act of any turnover which has escaped assessment, and the period within which such assessment may be made, not exceeding three years.
Turning to the rules, Rule 6 of the Turnover and Assessment Rules, enjoins on dealers the duty of submitting returns. It runs,
every dealer commencing business after the first day of October, 1939, whose estimated net turnover for the first twelve months of his business is not less than Rs. 10,000 shall within thirty days of commencing his business submit to the assessing authority the area in which his principal place of business is situated a return in Form A-1 showing his estimated gross and net turnover for the first twelve months of his business.
(2) Every dealer commencing business who has not submitted a return under Sub-rule (1), but whose net turnover reaches Rs. 10,000 in any year for the first time shall within thirty days of the day on which his net turnover reaches Rs. 10,000 submit to the assessing authority of the area in Which his principal place of business is situated a return in Form A-1.
6. If the assessing authority, after making such scrutiny of the accounts of the dealer and such enquiry as such authority may consider necessary, is satisfied that the return submitted under Rule 6 is correct and complete, he shall fix provisionally on the basis of the return the annual tax or taxes payable at the rate or rates specified in Section 3 or 5 or notified under Section 6(1).
7. Rule 11 of the same set of rules provides,
11. (1) Every dealer liable to submit a return under Rule 6, except those who have elected to be assessed by the method described in Rule 13, shall, on or before the 1st day of May in every year submit to the assessing authority of the area in which his principal place of business is situated a return in Form A showing the actual gross and net turnover for the preceding year and the amounts by way of tax or taxes actually collected during that year:
Every dealer not liable to submit a return under Rule 6, who has a net turnover of not less than Rs. 10,000 in any year, shall unless he has elected to be assessed by the method described in Rule 13 submit to the assessing authority of the area in which his principal place of business is situated a return in Form A showing the actual gross and net turnover for that year and the amount by way of tax or taxes actually collected during the year on or before the 1st day of May of the succeeding year and thereafter for every year on or before the 1st day of May immediately following such year.
Provided that every dealer who discontinues his business during the course of a year in which he has been provisionally assessed under Rule 7 or 8 shall submit to the assessing authority concerned a return in Form A for the period up to and inclusive of the date of discontinuance of business in the manner prescribed in this sub-rule, within thirty days from the date of such discontinuance.
(2) On the receipt of a return in Form A the assessing authority shall, if he is satisfied after such scrutiny of the accounts and such enquiry as he considers necessary that the return is correct and complete, finally assess on the basis of the return the tax or taxes payable under Sections 3, 5 or 8-B(2) or under the notification or notifications issued under Section 6(1) for the preceding year or for the year to which the return relates as the case may be.
(3) If no return is submitted or if 'the return submitted appears to the assessing authority to be incorrect or incomplete, the assessing authority may, after following the procedure prescribed in Rules 8 and 9, finally assess the tax according to the best of his judgment.
The rule framed in pursuance of the power to deal with turnover which has escaped assessment under Section 19(2)(f) is Rule 17(1) of the Madras General Sales Tax Rules, 1939, which the Tribunal has held applicable to the present case, and it is in these terms.
17. (1) If for any reason the whole or any part of the turnover of business of a dealer or licensee has escaped assessment to the tax in any year or if the licence fee has escaped levy in any year, the assessing authority or licensing authority as the case may, be subject to the provisions in Sub-rule 1-A may, at any time within two years next succeeding that to which the tax or licence fee relates, determine to the best of his judgment the turnover which has escaped assessment and assess the tax payable on such turnover or levy the licence fee, after issuing a notice to the dealer or licensee and after making such enquiry as he considers necessary.
8. The respondent's was not a case which came within the scope of Rule 6(1) of the Turnover and Assessment Rules, for he had not been assessed to tax under the Act on the turnover of any year prior to 1950-51, the asessment for which year is now in dispute. His case fell within the scope of Rule 6(2) and also of Rule 11(2). As regards Rule 6(2) itself, it is not clear at what precise point of time, during 1950-51 his turnover exceeded Rs. 10,000, but it may not be necessary to call for further information on the point or to decide it. In any event the obligation cast upon the respondent by Rules 6(2) and 11 of the Turnover and Assessment Rules should have arisen at least by the 1st of May, 1951.
9. The position of the assessee as a dealer under Section 9, therefore, was that he should have submitted a return of his net turnover at least before the 1st of May, 1951. Admittedly he did not file such a return, and he filed it only on 20th February, 1954. The question is, whether by reason of the submision of this return on 20th February, 1954 proceedings could validly be taken to assess him under the Act.
10. If the assessee had filed this return within the period prescribed by Rule 6(2), or Rule 11, the assessment in question would have been one under Section 9(2)(a) and as no limitation of time is set within which the assessment should be completed the assessment, whenever made, would be valid. In the present case a return was submitted by the assessee, but beyond the period prescribed by Rule 6 or Rule 11. In so submitting that return, the assessee would have contravened the provisions of Section 9(1). Further the powers vested in the assessing authority under Section 9(2)(b) would have been attracted and would have empowered that authority to make the assessment to the best of his judgment. That, however, was not done in the present case. On the other hand, what the assessee did was to submit his return, though beyond the period prescribed by Section 9(1). That was certainly a valid return in the sense that there was no legal bar to its acceptance by the assessing authority in the exercise of his discretion, though it was filed beyond the period prescribed by rule under Section 9(1); and as we have stated before, as no period of limitation is prescribed by the Act for completing an assessment on a return validly filed, the only question that could arise is, whether it was a case of an escaped turnover which attracted the rule of limitation prescribed by Rule 17(1) of the Madras General Sales Tax Rules. The meaning of the expression 'turnover escapes assessment' has been the subject of express decision by the Full Bench of this Court in The State of Madras v. Louis Dreyfus & Co. Since reported in : (1956)2MLJ327 The Court there pointed out that
turnover escapes when it is not noticed by the Officer because it is not before him by reason of any inadvertance, omission or deliberate concealment on the part of the Officer, and that this would be the natural and normal meaning of the expression 'turnover which has escaped' in Rule 17(1).
Inadvertance, omission or deliberate concealment on the part of the assessee, or want of care on the part of the Officer may be with reference to a return filed by the assessee in which case Rule 17(1) would be attracted. In the present case the return voluntarily submitted by the assessee was accepted, and Rule 17(1) in terms could not apply. That the assessee filed the return late did not bar its acceptance by the assessing authority. If in the exercise of his discretion he refused to condone the delay in the submission of the return, the assessee could claim no legal right that his delayed return should be accepted, even if he could prove it was a correct return. If however, the delay in the submission of the return was condoned, either expressly or even impliedly, the assessing authority had the jurisdiction to accept it as the basis of assessment after verifying the correctness of the return. That would be a case of art original assessment and not an assessment of an escaped turnover within the meaning of Rule 17(1). If Rule 17(1) did not apply, obviously the period of limitation prescribed by that rule would not apply either.
11. The position where no return is submitted at all would be different. Failure to submit a return would be a violation of the statutory obligation imposed on the dealer. That, in our opinion, would fall within one or more of the categories of inadvertance omission or deliberate concealment' to which we have referred above. A return voluntarily submitted beyond the prescribed date would be a valid return only if the delay in the submission is condoned by the assessing authority. If the delay is not condoned, it would be a case of a return non est in law. In either case, if there is to be an assessment, it can be only under Rule 17(1); the turnover in such a case would be one which had escaped assessment within the meaning of that rule.
12. The Tribunal, in our opinion, was wrong in holding that the assessment in question fell within the scope of Rule 17(1). The order of the Tribunal is set aside and the order of the Commercial Tax Officer has to be restored. The petition is allowed with costs. Counsel's fee Rs. 100.