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Deputy Commissioner (C.T.) Vs. G. Govindaraju Chettiar - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case Number T.C. Nos. 118 of 1971 and 37 of 1972
Judge
Reported in[1980]46STC341(Mad)
AppellantDeputy Commissioner (C.T.)
RespondentG. Govindaraju Chettiar
Appellant Advocate The Additional Government Pleader
Respondent Advocate R.S. Venkatachari, Adv. in T.C. No. 118 of 1971, V. Nataraj, Adv. for ;King and ; Partridge, Advs. in T.C. No. 37 of 1972
DispositionPetition allowed
Cases ReferredState of Tamil Nadu v. K. R. and P. Shanmugavel Nadar
Excerpt:
- sethuraman, j.1. this revision petition has been filed by the deputy commissioner (c. t.), coimbatore, against an order of the sales tax appellate tribunal, dated 3rd august, 1970. the assessee in this case is a dealer in cotton and cotton-seeds. for the year 1962-63 the books of account revealed a total turnover of rs. 14,96,163.26. out of the said amount the purchases of kapas and lint came to rs. 12,35,882.06 which included the closing stock of rs. 1,33,858.18 as on 31st march, 1963. cotton is taxable at the point of last purchase in the state. in making the assessment on 29th february, 1964, the joint commercial tax officer referred to certain records secured on inspection of the place of business of the assessee by the special deputy commercial tax officer which revealed suppression.....
Judgment:

Sethuraman, J.

1. This revision petition has been filed by the Deputy Commissioner (C. T.), Coimbatore, against an order of the Sales Tax Appellate Tribunal, dated 3rd August, 1970. The assessee in this case is a dealer in cotton and cotton-seeds. For the year 1962-63 the books of account revealed a total turnover of Rs. 14,96,163.26. Out of the said amount the purchases of kapas and lint came to Rs. 12,35,882.06 which included the closing stock of Rs. 1,33,858.18 as on 31st March, 1963. Cotton is taxable at the point of last purchase in the State. In making the assessment on 29th February, 1964, the Joint Commercial Tax Officer referred to certain records secured on inspection of the place of business of the assessee by the Special Deputy Commercial Tax Officer which revealed suppression of sales of cotton-seeds to the tune of Rs. 44,205.27. On the basis of this 'suppression', the Joint Commercial Tax Officer made an addition of Rs. 50,000 towards omission of sale of cotton-seeds, and assessed the assessee on a total and taxable turnover of Rs. 15,46,162.26 and Rs. 4,39,757.20 respectively. Though there is a specific reference to the sum of Rs. 1,33,858.18 as being closing stock, which was however taxed as if it was the last purchase, the assessee did not take objection to the inclusion of the said amount as part of the turnover, before the Appellate Assistant Commissioner before whom an appeal was filed. The dispute before him related only to the addition of the sum of Rs. 50,000 and also the penalty that was levied, in a sum of Rs. 1,326. The Appellate Assistant Commissioner by his order dated 27th June, 1967, held that there was overwhelming evidence against the assessee and that his plea that the entries found in the anamath accounts had been brought to regular books of account was of no value. He, therefore, confirmed the turnover as fixed and the penalty as levied. The assessee thereafter filed an appeal before the Sales Tax Appellate Tribunal. Before the Tribunal the assessee disputed two items of turnover assessed, viz., (i) the sum of Rs. 1,33,858.18 being the value of closing stock as on 31st March, 1963, and (ii) the estimated addition towards suppression of cotton-seeds, viz., Rs. 50,000. As regards the sum of Rs. 50,000 the point is not in dispute before us and, therefore, it is enough for us to mention that the Tribunal rejected the assessee's appeal regarding the said amount. However, as regards the sum of Rs. 1,33,858.18 the Tribunal pointed out that under Section 4 of the Tamil Nadu General Sales Tax Act read with the Second Schedule thereto a dealer was not liable to pay tax on purchases of cotton until the purchases acquired the quality of being the last purchase inside the State and for this purpose relied on a decision reported in State of Madras v. Narayanaswami Naidu [1967] 19 S.T.C. S.N. 12 (S.C.). The full report of this decision is available in State of Madras v. Narayanaswami Naidu [1968] 21 S.T.C. 1. This decision of the Supreme Court came to be rendered on 12th April, 1967. It may be seen that the order of the Appellate Assistant Commissioner was made on 27th June, 1967, and even the report in the short notes was apparently not then available. It may also be mentioned here that the assessee had filed an application in form A-4 claiming refund of tax on the purchase value of cotton brought to assessment under the Tamil Nadu General Sales Tax Act as the corresponding sale value of cotton was also subjected to tax under the Central Sales Tax Act. Consequent on this petition the Joint Commercial Tax Officer refixed the taxable turnover at Rs. 3,52,120.20 by his order dated 20th May, 1964, as against Rs. 4,39,757.20 already determined by order dated 29th February, 1964. This order could only have been made under Section 4-A read with Rule 23 of the Tamil Nadu General Sales Tax Rules. Any order under Section 4-A is also subject to an appeal to the Appellate Assistant Commissioner and thereafter to the Tribunal. It is not clear whether the assessee had any objection to the said order dated 20th May, 1964, and whether the assessee had preferred any appeal against the said order. It may also be noticed here that the assessee had applied for refund of tax on the closing stock of cotton on 22nd June, 1965, that is, while the appeal against the order dated 29th February, 1964, was pending before the Appellate Assistant Commissioner with an application for condonation of delay. From the order of the Sales Tax Appellate Tribunal it appears that no order had been passed on the said application for refund.

2. The question that arises for consideration in the present case is whether the Tribunal was justified in allowing the assessee to agitate the dispute regarding the sum of Rs. 1,33,858.18 being the value of cotton in closing stock as on 31st March, 1963. The contention urged on behalf of the revenue is that this sum could not have been disputed before the Sales Tax Appellate Tribunal as the matter had not been agitated before the Appellate Assistant Commissioner. The learned Additional Government Pleader referred to several decisions of this Court in this behalf. On behalf of the assessee the contention was that the disputed turnover of Rs. 1,33,858.18 could not be agitated before the Appellate Assistant Commissioner, as the relevant decision of the Supreme Court was available only subsequently and that having regard to the powers of the Sales Tax Appellate Tribunal as embodied in the statute, it was open to the assessee to raise the point for the first time before it.

3. There is no dispute about the fact that the assessee would be eligible for the relief claimed in respect of the turnover of Rs. 1,33,858.18 in view of the decision of the Supreme Court in State of Madras v. Narayanaswami Naidu [1968] 21 S.T.C. 1. The only objection of the petitioner before us is that the Tribunal had no power to go into the question of the disputed amount, as the matter had been raised only for the first time before the Tribunal. The contention is that unless the point is agitated before the Appellate Assistant Commissioner, the point could not have been the subject of dispute before the Appellate Tribunal.

4. There is a direct decision in favour of the view contended for by the learned Additional Government Pleader in Easun Engineering Co. Ltd. v. Government of Madras [1974] 33 S.T.C. 350. In that case the assessee was assessed under the Central Sales Tax Act on a turnover of Rs. 2.75 crores approximately. The assessee filed an appeal before the Appellate Assistant Commissioner in respect of a turnover of Rs. 2,38,472. The Appellate Assistant Commissioner accepted the assessee's claim regarding the turnover of Rs. 2,38,472 and deleted the amount from the assessment. It appears that the assessee had orally raised a dispute regarding another turnover of Rs. 30,00,000 and odd in view of a decision of the Supreme Court in Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473. The Appellate Assistant Commissioner had not dealt with this point. However, the matter was raised before the Tribunal. There was a preliminary objection by the revenue stating that the appeal in so far as it related to the said sum of Rs. 30,00,000 and odd was not maintainable, as the turnover had not been disputed before the Appellate Assistant Commissioner. The Tribunal upheld the said objection by the revenue and dismissed the appeal as not maintainable. It is this order of the Tribunal that was challenged by two separate and independent proceedings. One was by a writ petition and the writ petition came up for admission on 2nd April, 1970, before a Bench of this Court and the decision is reported in Easun Engineering Co. Ltd. v. Joint Commercial Tax Officer [1970] 26 S.T.C. 486. This Court held that the Tribunal had jurisdiction to decide that the appeal was not maintainable in the eye of the law and that it had exercised the jurisdiction which it had. As there was no error apparent on the face of the record, the writ petition was dismissed. The assessee had filed also a tax revision petition against the order of the Tribunal and this case is reported in Easun Engineering Co. Ltd. v. Government of Madras [1974] 33 S.T.C. 350. After referring to the facts, which have already been mentioned above, this Court pointed out as follows :

On the facts, the Tribunal is right in saying that the assessee challenged the assessment in relation to the said sum of Rs. 30,00,000 and odd for the first time only in January, 1967, by filing an appeal before it. If really the assessee was aggrieved against the assessment in respect of that turnover it should have included that turnover also in his appeal before the appellate authority, or should have taken the permission of the Appellate Assistant Commissioner to expand the appeal by including the disputed turnover of Rs. 30,00,000 and odd. But no such step was taken. We are, therefore, of the view that the Tribunal was right in rejecting the appeal as not maintainable.

5. The same question again came up before this Court in State of Madras v. Spencer and Company Limited [1974] 34 S.T.C. 249. That was a case in which the assessee was running two catering establishments and submitting returns adopting 50 per cent of the total receipts as sales taxable under the Act. In arriving at the amount, the assessee had deducted certain sums relating to air-conditioning and telephone charges. The deduction of the air-conditioning and telephone charges was disallowed by the assessing authority and the Appellate Assistant Commissioner. On further appeal to the Tribunal, the assessee in addition to the claim for exemption in respect of the said amounts for air-conditioning and telephone charges, also claimed that the entire turnover relating to the catering establishments was not liable to sales tax. In other words, the assessee claimed a total exemption in respect of the entire turnover for the first time before the Tribunal. The Tribunal upheld the claim of the assessee and on revision it was held by this Court that as the assessee had not claimed before the assessing authority or the Appellate Assistant Commissioner exemption on the entire turnover but had restricted its claim only to the deduction of the charges for air-conditioning and telephone charges, the Tribunal was not justified in granting the relief on the entire turnover and that the turnover which had to be deducted, had to be restricted only to the air-conditioning and telephone charges. After referring to the earlier decisions, this Court held as follows:

In the present case also, the assessees did not dispute the taxability of 50 per cent of the receipts under apartment and board as representing sales of articles of food and drinks either before the assessing authority or before the first appellate authority. In fact, they voluntarily included in the taxable turnover 50 per cent of the total receipts as representing sales of articles of food and drinks. The only dispute before the assessing authority and the Appellate Assistant Commissioner was relating to the claim towards air-conditioning and telephone charges which were also stated to have been included in the bill charged to the guests. They having not agitated or questioned the inclusion of 50 per cent of the turnover as representing sales of food and drinks, they cannot now state that either the assessing authority or the appellate authority had failed to consider any question much less wrongly decided the taxability of that turnover.

6. The same view has been taken in a later decision to which one of us was a party, and which is reported in State of Tamil Nadu v. K. R. and P. Shanmugavel Nadar (1976) C.T.R. (Mad.) 536. There also it was held that if a turnover had not been disputed before the Appellate Assistant Commissioner, but was disputed for the first time before the Tribunal, it is as if an appeal is preferred to the Tribunal directly from the assessment order in so far as that turnover is concerned and that it is not permitted by law.

7. Thus, consistently, this Court has been taking the view that the assessee could not agitate the objection which had not been raised before the Appellate Assistant Commissioner. Consequently, it followed that in the present case the assessee could not have raised the objection regarding the sum of Rs. 1,33,858.18 before the Appellate Tribunal. The Tribunal is, therefore, wrong in dealing with this turnover. The Andhra Pradesh High Court in a Full Bench in State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill [1977] 39 S.T.C. 57 has also taken the same view.

8. Our attention was drawn by the learned Additional Government Pleader to the decision in Central Camera Co. (P.) Ltd. v. Government of Madras [1971] 27 S.T.C. 112. That case arose on slightly different facts. In that case the assessee had given up its objection regarding a portion of the turnover relating to inter-State sales before the Appellate Assistant Commissioner. However, in the appeal before the Appellate Tribunal, the Tribunal held that the assessee could not, in the second appeal, reagitate or resurrect a claim given up by him before the Appellate Assistant Commissioner. It is on these facts that the court has held that the appeal before the Tribunal was not competent. This decision does not apply here, as this is not a case of abandonment of a claim and its revival later.

9. Another decision to which our attention was drawn is the one reported in R. M. Nitya Thevar v. State of Madras [1969] 24 S.T.C. 520. In that case the assessee took up a claim for exemption for the first time before the Tribunal. The Tribunal considered that it had no jurisdiction to allow the question of exemption to be raised. When the matter came up before this Court on revision it was held that it was unnecessary to decide the question of jurisdiction and that the case was capable of disposal from another point of view, viz., that the assessee not having urged that the particular turnover was entitled to exemption before the assessing authority, the question was no longer open for decision by the Tribunal. There is no discussion in the said decision of the principle involved. But it is in line with the decisions to which reference has been made above.

10. The learned counsel for the respondent drew our attention to several decisions in which it had been held that the power of the court of appeal is in the nature of rehearing and that in moulding the relief to be granted in a case on appeal, the court of appeal was entitled to take into account even facts and events which had come into existence after the decree appealed against had been passed. The submission was that the decision in State of Madras v. Narayanaswami Naidu [1968] 21 S.T.C. 1 had been rendered subsequent to the assessment and that the said decision of the Supreme Court was not available at the time when the appeal was heard and disposed of, that the decision of the Supreme Court is binding on all authorities and courts, and that in view of the fact that the said decision would cover the turnover now in dispute, the assessee would be justified in agitating the matter before the Tribunal. It is not possible to accept this submission. The competence of an appeal is different from the power of the court to mould the relief. In the present case the appeal itself would be incompetent in view of the decisions mentioned already. Even though the court may have power to mould the relief, taking into account the subsequent events, still so long as the appeal itself is not maintainable, the power to mould the relief cannot be exercised. It is not, therefore, necessary to refer to those decisions any further.

11. The learned counsel for the assessee drew our attention to another decision of the Supreme Court in Commissioner of Income-tax v. Mahalakshmi Textile Mills Limited : [1967]66ITR710(SC) . In that case, which arose under the Indian Income-tax Act of 1922, the assessee carrying on the business of a spinning mill had incurred Rs. 93,215 in introducing what is called 'Casablanca conversion system' replacing certain roller stands, etc., which were functioning or in use previously.

12. The assessee had claimed 'development rebate' with reference to the said sum of Rs. 93,215 before the Income-tax Officer and the Appellate Assistant Commissioner without success. When the matter came on appeal before the Tribunal, the assessee claimed that the whole of the amount spent on the machinery was liable to be allowed as deduction and the Tribunal accepted this claim before it. The legality of this allowance came up for consideration before this Court and the Tribunal's order was held to be correct by this Court. When the matter reached the Supreme Court, the Supreme Court affirmed the decision of this Court and held as follows:

Under Sub-section (4) of Section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal 'as it thinks fit'. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief, The right of the assessee to relief is not restricted to the plea raised by him.

13. It was submitted that the powers of the Sales Tax Appellate Tribunal under Section 36 are of the same amplitude as in the corresponding provision of the Indian Income-tax Act, 1922, discussed in the said case, and that consequently the Tribunal should be held to be competent to accept the claim of the assessee in the present case. It is not possible to agree with the submission. This decision had, in fact, been referred to in State of Tamil Nadu v. K. R. and P. Shanmugavel Nadar (1976) C.T.R. (Mad.) 536 and had been distinguished. From the facts set out above in the case of Mahalakshmi Textiles : [1967]66ITR710(SC) , it will be clear that the deduction which was ultimately allowed by the Tribunal related to the same item of machinery which was before the Income-tax Officer and the Appellate Assistant Commissioner. Only another facet of argument in respect of the same machinery had been taken up before the Tribunal and that is why the Supreme Court points out that the right of the assessee to the relief is not restricted to the plea raised or contention urged by him before the lower authorities. As it is not a case of a wholly new point being taken before the Tribunal, the said decision has no application to the present one.

14. To sum up, in my view, the assessee would not be justified in raising any dispute for the first time before the Sales Tax Appellate Tribunal without raising such a dispute before the Appellate Assistant Commissioner. Though the powers of the Sales Tax Appellate Tribunal may be wide, still those powers could only be exercised in an appeal which is competent. As the appeal on this point could not be raised before the Sales Tax Appellate Tribunal, the appeal on this point would not be competent, and the Tribunal could not have dealt with the said point in its order. The Tribunal is, therefore, in error in deleting the sum of Rs. 1,33,858.18 from the taxable turnover.

15. It is indeed unfortunate that the levy of tax on the turnover in question, which is not taxable according to the decision of the Supreme Court in State of Madras v. Narayanaswami Naidu : [1967]3SCR622 has, in this view, to stand. It cannot be helped. It would, of course, be open to the Government to refund the tax in case it is possible to do so in disposing of the application for refund. I prepared the judgment in April, 1977. I have now had an opportunity of looking into the judgment prepared by my learned brother. He has to come to a different conclusion based primarily on a consideration of decisions rendered in U. K. which have been looked by him after reserving the judgment. In my view, the matter is covered by a series of decisions of this Court which I consider are binding on us.

16. The revision petition is accordingly allowed. There will be no order as to costs.

T. C. No. 37 of 1972.

17. This is a revision petition filed by the State of Tamil Nadu against the order of the Sales Tax Appellate Tribunal dated 22nd March, 1971. The assessees, M/s. Madurai Mills Company Limited, are dealers in cotton and cotton yarn. For 1959-60 the assessee reported a total and taxable turnover of Rs. 7,88,62,516.22. The Deputy Commercial Tax Officer determined the taxable turnover at Rs. 7,87,77,857.26. The assessee appealed to the Appellate Assistant Commissioner and disputed before him that a sum of Rs. 5,32,910.05 ought to have been assessed' at a concessional rate of 1 per cent instead of 7 per cent. The assessee did not meet with success and, therefore, appealed to the Sales Tax Appellate Tribunal. The Tribunal dismissed the appeal and thereafter the assessee filed a tax revision case in this Court. The question before this Court related to the sum of Rs. 5,32,910.05. This Court in its decision reported in Madura Mills Company Limited v. Government of Madras [1970] 25 S.T.C. 407 upheld the assessee's claim in principle. The matter was, however, remitted to the Tribunal for being disposed of in accordance with law. When the matter came before the Tribunal the assessee filed an application raising an additional ground for reducing the assessable turnover by another sum of Rs. 2,96,629.60. This sum related to sales of miscellaneous goods like old and disused machinery parts, scrap, etc. According to the assessee these goods had not been sold in the course of the business. Before the Tribunal the revenue took up objection to the admissibility of the claim for the first time in the second appeal before the Tribunal. Several decisions were relied on in this connection before the Tribunal. The Tribunal, after discussing the case, held that the assessee could raise the dispute for the first time before it and decided the point in favour of the assessee. It is this order which is challenged before us.

18. The only question that arises for consideration in this revision petition is whether the assessee could raise any point for the first time before the Appellate Tribunal without raising it before the Appellate Assistant Commissioner. From what has been stated above, it would be clear that as a result of the order of remand by this Court, the appeal came back before the Tribunal for decision afresh. It would, therefore, be a case in which an assessee was seeking to raise a point for the first time in a pending appeal. The present case would, therefore, be identical with the one that we have just now considered in T. C. No. 118 of 1971. The arguments in this case are similar to what we have already considered in T. C. No. 118 of 1971. For the reasons mentioned therein, I am of the view that the Sales Tax Appellate Tribunal acted erroneously in so far as it allowed the assessee to agitate the point for the first time before it without raising the point before the Appellate Assistant Commissioner.

19. The tax revision is accordingly allowed. There will be no order as to costs.

T. C. No. 118 of 1971.

Balasubrahmanyan, J.

20. I have had the opportunity of reading the judgment of my learned brother, Sethuraman, J. With respect, I do not agree with it.

21. The question before us in this case is, whether the Sales Tax Appellate Tribunal had jurisdiction to entertain an objection to assessed turnover which the assessee did not put forward at an earlier stage before the Appellate Assistant Commissioner while appealing from the assessment.

22. The question arises under the Tamil Nadu General Sales Tax Act, 1959. The scheme of the Act, if one examines it as a whole, is conditioned by its having to do with a fiscal measure. The charge to tax, broadly speaking, is a cumulative charge on the annual turnover of dealers carrying on business in buying or selling goods of every kind. Certain transactions and certain goods, however, are tax-exempt. Some goods are charged only at a single point of sale or purchase. There are certain special rates for taxing specified categories of goods. But these exceptional provisions apart, the tax, by and large, is a general cumulative sales tax on annual turnover. This charge is brought home to every dealer who is liable thereto by an elaborate assessment procedure. The process normally starts with a declaration or return of assessable turnover which the dealer has to furnish on his own to the assessing authority. As a necessary adjunct to this obligation is the taxpayer's duty to record and maintain correct accounts and lay them open for official inspection. The assessment procedure at every stage is so fashioned by the Act and the Rules as to ensure, to the extent possible, that the taxable turnover gets correctly determined. The procedure, in its very nature, is, therefore, quasi-judicial. The assessing authority has power to call for evidence, inspect accounts, examine witnesses and exercise other general powers of inquiry. The assessee is given an opportunity to support his return. He is also given the facility of availing himself of the services of professional people. The final assessment of taxable turnover is made by the assessing authority by an order in writing. The tax demand is to be made on the basis of the assessment. If the assessee does not pay, there are coercive measures open to the authorities for recovery of tax arrears. Meanwhile, the assessee can exercise the right of objecting to the assessment by way of appeal. Under the Act, the initial appeal against an assessment is to an authority called the Appellate Assistant Commissioner. The Act defines his powers and the kind of orders he can pass while disposing of the appeal. Depending on the results of this appeal, an assessee can file a further appeal to an appellate body called the Sales Tax Appellate Tribunal. Their powers, in appeal, are also well-defined by the Act. The relevant section, for instance, mentions in what different ways the Tribunal can give a disposal to the appeal before them. Their appellate orders, subject to review in some cases, are final. But on pure questions of law, they may be challenged in revision before this Court. Elsewhere in the Act, there are provisions to counteract suppression, evasion and avoidance. The Act also provides for an effective surveillance of the assessments by a network of revisional authorities. Thus, the assessing authorities can reopen assessments and bring to charge escaped turnover. The Deputy Commissioner and the Board of Revenue can call for the assessment records and revise them. The Board's orders in revision are subject to appeal to this Court.

23. We thus witness in the statutory scheme an elaborate machinery whose wheels, big and small, are all bent towards achieving just one single objective, to wit, the levy and collection of sales tax. It is reasonable to assume that the ascertainment of such a thing as a dealer's turnover is by no means a difficult feat of the intellect or beyond the capability of any one ordinarily endowed in that department. And for trained officials the task must be much easier. And yet we find the statute making provision for a multiplicity of correctives. What does this convey It only shows the legislature's obsessive concern that no man should get taxed for a pie more or a pie less than is his due. English writers sometimes refer to this fiscal process as an act of 'adjusting' taxpayer's liability. Thus, when an assessing authority determines the turnover and makes the assessment, he may be said to adjust the dealer's liability in accordance with the statutory charge. When, likewise, the turnover is redetermined in appeal, the appellate authority, in quite the same way, is engaged in adjusting or readjusting the subject's liability.

24. The real function of a tax appeal as just another step or process in the adjustment of taxpayer's liability is often obfuscated, curiously enough, by the circumstance that those who hear tax appeals function quasi-judicially. Several things contribute to this confusion. The very form of the appeal memorandum, the impleading of the assessing authority as a respondent in the appeal, the formality that marks the appeal hearing, the appearance of professional people and the style of their arguments, the standing and training of those who preside over the proceedings-all these are apt to create the illusion that a tax appeal is an adversary proceeding before an arbitral tribunal calling for their decision in a regular Us between rival litigants to be arrived at by a process of adjudication. This, however, is by no means the statutory conception of a tax appeal. In conditions which are not far different from ours the learned Judges in the United Kingdom have had occasion to point out that there is no Us in a tax proceeding, there are no two parties in tax appeals and there is no adjudication in the real judicial sense.

25. Rex v. Special Commissioners of Income Tax (Ex parte Elmhirst) (1933) 20 T.C. 381 is a case in point. The matter arose before the court for the issue of a writ of prohibition to prohibit the Commissioners for the Special Purposes of Income Tax from proceeding with their hearing of an appeal against a particular additional assessment made against a taxpayer. Having filed the appeal, but half way through the hearing, the taxpayer applied for leave to withdraw his appeal. The Special Commissioners, however, refused the application, and expressed their determination to proceed with the appeal. On his motion before the court, a rule nisi for prohibition was issued in the first instance. Discharging the rule later, Lord Hewart, C.J., laid down what the nature of an appeal was in tax matters. He observed :

In my opinion, the argument of the learned Attorney-General is absolutely correct, and the argument upon the other side is manifestly based, as he said, upon a misapprehension that an appeal under the Income Tax Act, 1918, is the same in substance as an appeal where two private persons are engaged in litigation. It is of course totally different.

26. The Lord Chief Justice relied on an earlier decision of the Court of Appeal in Inland Revenue Commissioners v. Sneath (1928) 17 T.C. 149. In that case, Greer, L. J., described the true position of a tax appeal in the following terms:

I think, the estimating authorities, even when an appeal is made to them, are not acting as judges deciding litigation between the subject and the Crown. They are merely in the position of valuers whose proceedings are regulated by statute to enable them to make an estimate of the income of the taxpayer for the particular year in question.

27. In the same case, Romer, L. J., observed:

But the proceedings on the appeal are still merely directed towards ascertaining the income upon which the taxpayer is to be charged with sur-tax for the particular year of assessment, and the Special Commissioners may, if they think fit, increase the assessment made by them in the first instance. The appeal is merely another step taken by the Commissioners, at the instance of the taxpayer, in the course of the discharge by them of their administrative duty of collecting the sur-tax.

28. The case of Rex v. Special Commissioners of Income Tax (Ex parte Elmhirst) (1933) 20 T.C. 381 went before the Court of Appeal. There, Lord Wright, M. R., observed as under:

I may note here at once that in making the assessment and in dealing with the appeals the Commissioners are exercising their statutory authority and their statutory duty which they are bound to carry out, not as judges deciding an issue between two particular parties : their obligation is wider than that. It is to exercise their judgment of such material as comes before them, and, as we shall see later, to obtain any material which they think is necessary and which they think they ought to have, and on that to make the assessment or the estimate which the law requires them to make. They are not deciding the case inter paries; they are assessing or estimating the amount which in the interests of the country at large the taxpayer ought to have to deal with as the basis on which he is to be taxed.

29. Romer, L. J., and Greene, L. J., agreed with the views expressed by the learned Master of the Rolls.

30. Differences might well be spelt out in matters of detail on a comparative study of the English enactments and our statutory provisions relating to tax appeals. But it is reasonable to accept the observations of English Judges, not as a mere exercise in the interpretation of the Income Tax Acts then in force in the United Kingdom, but as a broad principle of fiscal jurisprudence.

31. The relevant sections in the Tamil Nadu General Sales Tax Act, 1959, providing for appeals do not militate against the application of the principle gleaned from the English authorities. Appeals under the Act are provided in two sections-section 31 and Section 36. Both these sections are enacted in two distinct parts. One part enacts who, and in what circumstances, can prefer an appeal. The other part enacts what is the scope of the orders which the appellate authority can pass while disposing of the appeal.

32. Section 31(1), for instance, provides that any person objecting to an assessment order under Section 12 may appeal to the Appellate Assistant Commissioner. Section 31(3) says that in disposing of an appeal, the Appellate Assistant Commissioner may, if the appeal is against the order of assessment, confirm, reduce, enhance or annul the assessment, set aside the assessment and direct the authority to make a fresh enquiry, or pass such other order as he may think fit.

33. Section 36(1) provides for a further appeal to the Sales Tax Appellate Tribunal. The section says that any person objecting to an order passed by the Appellate Assistant Commissioner under Sub-section (3) of Section 31 may appeal against such an order to the Appellate Tribunal. Section 36(3) lays down that in the case of an order of assessment, the Tribunal, in disposing of an appeal, may confirm, reduce, enhance or annul the assessment, set aside the assessment and direct the assessing authority to make a fresh assessment, or pass such other orders as it thinks fit.

34. The wording of the two sections which I have summarised above bear out my earlier analysis that they are in two distinct parts, one concerned with the maintainability of the appeal and the other concerned with the jurisdiction of the appellate authority. As for the first provision, it is quite clear that an assessee can maintain an appeal only against what is, to him, an objectionable order. If, for instance, he wishes to prefer an appeal to the Appellate Assistant Commissioner under Section 31(1), he can do so only if he is in a position to object to the order of assessment either in whole or in part. There is no question of his filing an appeal from an assessment to which he has no objection. He cannot, in other words, prefer an appeal for the mere fun of it. Likewise, he cannot maintain an appeal before the Tribunal under Section 36(1) from an order of the Appellate Assistant Commissioner which, to him, is wholly unobjectionable. These results fairly flow from the words of the sections, 'any person objecting to an order, etc.'.

35. Equally precise are the words used by the legislature while defining the ambit of the jurisdiction of the Appellate Assistant Commissioner and the Tribunal. We are familiar with such mundane endings in appellate orders as 'appeal dismissed', 'appeal allowed' and 'appeal allowed in part'. But Section 31(3) and Section 36(3) achieve greater clarity in defining jurisdiction by the simple expedient of enumerating, one by one, the several different kinds of orders which the appellate authority is at liberty to pass while disposing of the appeal. For instance, the Appellate Assistant Commissioner can dispose of an appeal in the case of an order of assessment in one of several different ways, as set out in Section 31(3)(a)(i), (ii) and (iii). He may confirm the assessment. He may reduce the assessment. He may enhance the assessment. He may annul the assessment. He may set aside the assessment and direct the assessing S-46-45 authority to make a fresh assessment, He may make any other order which he may think fit. Likewise, under Section 36(3)(a)(i), (ii) and (iii), the Tribunal while disposing of an appeal, in the case of an order of assessment may either confirm the assessment, or reduce the assessment, or enhance the assessment, or annul the assessment, or set aside the assessment and direct the assessing authority to make a fresh assessment, or make such other order as may be thought fit.

36. These words of enumeration, in effect, render the appellate jurisdiction plenary in character in the case of assessments, thus illustrating the familiar adage that an appeal is but a retrial or a rehearing. What is more, the different ways of its exercise, as laid down in the two sections, are wholly un-correlated to the nature and extent of the assessee's particular objection in his appeal memorandum. For instance, an assessee may object in the appeal to a small part of the assessed turnover, and not to the whole of it. But the jurisdiction of the Appellate Assistant Commissioner or the Tribunal is not on that account confined to passing an order either reducing or confirming the assessment, any more than their jurisdiction can be said to be limited either to confirming the assessment in entirety or annulling the assessment in entirety where the assessee objects to the whole of the assessment. In other words, be the appellant's objection ever so little, the Tribunal can yet cover the whole assessment order and even overreach it as when they may seek to exercise their powers of enhancement.

37. In the face of these statutory provisions governing the ambit of the appellate jurisdiction, any discussion about the 'subject-matter' of appeals must be irrelevant and artificial. For, whatever be the relief claimed in the appeal memorandum, the appellate jurisdiction would encompass the whole assessment. It may be that under Section 31(1) and Section 36(1) an assessee can only appeal from an order which is capable of being objected to by him. But the scope of his objection by no means circumscribes the ambit of the appellate jurisdiction which he invokes. The two things are different, and cannot be mixed up. One relates to the competency of the appeal; the other relates to the scope of the appellate authority's interference. To find out whether an appeal against an assessment is competent or maintainable, all one has to do is to ask, under Section 31(1) or 36(1), as the case may be, as to whether the assessee's appeal raises an objection and whether his objection is real or not. If the memorandum of appeal passes this test, then, the appeal is entertainable. And, once the appeal is thus properly received on file, the appellate authority thereby legitimately assumes jurisdiction to deal with the entire assessment in all manner of ways, irrespective of the nature and extent of the objection the presence of which alone, to start with, has rendered the appeal to be taken on file. It would, indeed, be a travesty of the appellate jurisdiction to equate its ambit to the scope of the objection put forward in the appeal.

38. The order of assessment which was brought before the appellate authorities in the present case was an order of assessment made for the year 1962-63 on a dealer in cotton and cotton-seeds. His taxable turnover in both the goods aggregated to Rs. 4,39,767.20, as determined by the assessing authority. The turnover included, among other things, two amounts: (i) Rs. 50,000 being an estimated sales turnover in cotton-seeds, and (ii) Rs. 1,33,858.18 representing part of the purchase turnover in cotton, figuring as closing stock.

39. The assessee appealed to the Appellate Assistant Commissioner objecting to the inclusion in the assessment of Rs. 50,000. That was all there was to his appeal. He asked for no other relief. The Assistant Commissioner, however, dismissed the appeal. Thereupon, the assessee appealed to the Tribunal, objecting again to the inclusion of Rs. 50,000. Utilising the opportunity, he also questioned before the Tribunal the assessment made on the other amount, Rs. 1,33,858.18 representing cotton purchases. The Tribunal entertained the appeal, and while disposing of the appeal, deleted Rs. 1,33,858.18, but not the sum of Rs. 50,000 from the assessed turnover.

40. In this revision before this Court brought by the Deputy Commissioner it is contended that the Tribunal exceeded the limits of its appellate jurisdiction in entertaining and granting relief to the assessee as respects Rs. 1,33,858.18. The argument was also put in another way, to the effect that it was not open to the assessee to object to Rs. 1,33,858.18 for the first time in the appeal before the Tribunal, when he did not do so at an earlier stage when he appealed to the Appellate Assistant Commissioner against the assessment.

41. It seems to me that whichever way the argument is urged, it has to be rejected. That the assessee's objection to the cotton purchase turnover of Rs. 1,33,858.18 was not raised before the Appellate Assistant Commissioner does not mean that it is not an objection at all. It only means that it was put forward for the first time before the Tribunal. I do not see any bar, express or implied, in Section 36(1) to an objection of this kind providing the basis for an appeal by the assessee to the Tribunal. It was suggested, picturesquely in argument, that to allow the assessee to raise an objection for the first time before the Tribunal would convert a statutory second appeal into a virtual first appeal. In the first place, this is not a matter that affects the assessing authorities, of all people, for it involves a sacrifice only to the assessee. Secondly, the assessee can by no means be said to 'leap-frog' the first appeal before the Appellate Assistant Commissioner when actually he had passed through that stage first, and then only approached the Tribunal. Thirdly, there is hardly any sense or principle in shutting out a man from objecting to an error in his assessment for the first time before the Tribunal, when it is conceded that he can do so for a second time.

42. Even otherwise, it must be admitted in this case that so far, at any rate, as the sum of Rs. 50,000 was concerned, the objection which the assessee raised in his appeal memorandum was not a brand-new objection, but one which was a repetition of what he had put forward once before in the appeal to the Appellate Assistant Commissioner. It is not suggested that the Tribunal could not have entertained the assessee's appeal on the basis of this objection, at any rate, on any view of the competency of an appeal under Section 36(1) of the Act. Once this position is accepted, as it must be, on the face of the proceedings on record, the rest of the discussion must be legitimately concerned, not with the question of maintainability of the assessee's objection to the inclusion of Rs. 1,33,858.18 for the first time before the Tribunal, but with the manner of exercise of the Tribunal's appellate jurisdiction in the matter of disposal of the assessee's appeal. On this aspect, Section 36(3)(a)(i) leaves no room for any doubt whatever. The section, indubitably, invests the Tribunal with jurisdiction to pass any order reducing the assessment, including a reduction that would cover an objection not raised by the assessee in the appeal before the Appellate Assistant Commissioner.

43. Both on principle and on the words of the statute, therefore, I can find no error whatever in the Tribunal's dealing with the subject of Rs. 1,33,858.18 while considering and disposing of the assessee's appeal.

44. I am supported in my conclusion by a decision of the Supreme Court in Commissioner of Income-tax v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) That case arose under the Indian Income-tax Act, 1922. The assessees before the Supreme Court were running a mill for manufacture of cotton yarn. They fitted in their plant, during the relevant period, some improved designs of machine parts going by the name of 'Casablanca conversion system', replacing a few outdated parts. The expenditure in bringing about this replacement was Rs. 93,215. Treating it as an outlay on capital account, the assessee asked for development rebate, which, under the Income-tax Act, was a permissible capital allowance in the computation of assessable profits, at a certain percentage of the cost. The Income-tax Officer refused to grant the development rebate. The Appellate Assistant Commissioner, on appeal, also did the same. On further appeal before the Income-tax Appellate Tribunal, the assessees shifted their ground and claimed that the entire amount of Rs. 93,215 must be allowed to be deducted as current repairs, which is a permissible allowance under the Act as an expenditure under revenue account. The Tribunal entertained this variation of the claim, and allowed the entire sum as a deduction. The question which the income-tax authorities raised before the courts, on reference, was whether the Tribunal had jurisdiction to decide the appeal in the way they did. There was also a narrower question argued in the reference as to what the subject-matter of the assessee's appeal could properly be said to be before the Tribunal. Both this Court and the Supreme Court answered the questions against the revenue. On the broader aspect of the Tribunal's jurisdiction, the Supreme Court laid down the legal position in the following terms :

Under Sub-section (4) of Section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal 'as it thinks fit'. There is nothing in the Income-tax Act, which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal.

45. This enunciation of the ambit of an appeal before the Tribunal and the width of their jurisdiction would seem to echo the principle that in a tax appeal what is removed for consideration by the appellate authority is the whole of the assessment for the purpose of readjustment of the taxpayer's liability to the State.

46. The learned Additional Government Pleader, however, submitted that the observations of the Supreme Court were made while construing a different statute. He said that in the instant case, which arises under the Tamil Nadu General Sales Tax Act, 1959, this Court is bound by authorities nearer home. He cited three Bench rulings of this Court which, he said, have rendered the point no longer res Integra.

47. Having regard to the nature of the argument based on the doctrine of stare decisis, it becomes necessary to examine the three cases cited in argument. They are reported in Easun Engineering Co. Ltd. v. Government of Madras [1974] 33 S.T.C. 350, State of Madras v. Spencer and Co. Ltd. [1974] 34 S.T.C. 249 and State of Tamil Nadu v. K. R. and P. Shanmugavel Nadar (1976) C.T.R. 536. For convenience of discussion, I shall refer to them, shortly, as the Easun case [1974] 33 S.T.C. 350, the Spencer case [1974] 34 S.T.C. 249 and the Nadar case (1976) C.T.R. 536, respectively.

48. In the Easun case [1974] 33 S.T.C. 350, the assessee appealed to the Appellate Assistant Commissioner objecting to the inclusion of Rs. 2,38,472 in their assessed turnover. This was the only amount they objected to in the appeal. The Appellate Assistant Commissioner upheld their objection and allowed the appeal in toto. But the assessee preferred a further appeal to the Tribunal. In the context of what went before, the question was whether this further appeal was competent. This Court held it was not. The gist of their reasoning was that the Appellate Assistant Commissioner's order which allowed the assessee's appeal in whole left no scope whatever for a further appeal to the Tribunal.

49. In the Spencer case [1974] 34 S.T.C. 249 also the assessment went through the two stages of appeal. But in the first stage, the Appellate Assistant Commissioner dismissed the assessees' appeal in entirety. The assessees then carried the matter in further appeal. Before the Tribunal the question was not whether the assessees were aggrieved persons and whether the appeal was competent. The technicality was a different one. It arose because the objection sought to be raised by the assessees before the Tribunal related to the entire turnover, whereas they had objected only to a part of it before the Appellate Assistant Commissioner. The Tribunal eschewed this technicality and granted the larger relief prayed for by the assessees. This Court, in revision, expressed the view that the Tribunal had no power to grant this larger relief and set aside the entire turnover, but they had to confine themselves, strictly, to the amount to which alone the assessees had earlier objected in their appeal before the Appellate Assistant Commissioner.

50. In the Nadar case (1976) C.T.R. 536, the problem was more or less the same as in the Spencer case [1974] 34 S.T.C. 249. One of the disputes raised by the assessee in his appeal before the Tribunal was as to some turnover which had not figured in the appeal before the Appellate Assistant Commissioner. The jurisdiction of the Tribunal to entertain and decide this issue was canvassed in a revision before a Bench of this Court of which my learned brother, Sethuraman, J., was a member. They heard argument on this question, but dealt with it as concluded by the two earlier Bench decisions of this Court in the Easun case [1974] 33 S.T.C. 350 and the Spencer case [1974] 34 S.T.C. 249. While reviewing these authorities it may be observed, first, that excepting in the Easun case [1974] 33 S.T.C. 350, there is little or no discussion of the relevant statutory provisions bearing on the subject of appeals. Even in the Easun case [1974] 33 S.T.C. 350 the Bench considered the question only on the aspect of Section 36(1). They did not advert to Section 36(3) relating to the amplitude of the Tribunal's jurisdiction.

51. This may, perhaps, be explained by the peculiar circumstance that in that case the assessees had succeeded before the Appellate Assistant Commissioner in such a way that left nothing for them to object in a further appeal before the Tribunal, rendering superfluous any further discussion as to the ambit of the Tribunal's jurisdiction. In the two later decisions, the facts were different, for in these cases the assessees concerned were, in a real sense, aggrieved by the adverse orders of the Appellate Assistant Commissioner. And yet the Easun decision [1974] 33 S.T.C. 350 was followed in the Spencer case [1974] 34 S.T.C. 249, without noticing the distinction. In the Nadar case (1976) C.T.R. 536, the distinction was pointed out, but the Bench said that it did not make for any difference in the conclusion. Again, in the two earlier cases, the question of the Tribunal's appellate powers was not examined in the light of the authority of the Supreme Court in Commissioner of Income-tax, Madras v. Mahalakshmi Textile Mills Limited : [1967]66ITR710(SC) . Indeed, the case did not figure at all in the discussion. In the Nadar case (1976) C.T.R. 536, however, the Supreme Court's observations were cited in argument. But the Bench was inclined to distinguish and isolate the authority of that decision as one of limited validity, appertaining, strictly, to the position of the Income-tax Appellate Tribunal.

52. In this stage of the authorities, it is difficult for me to accept the learned Additional Government Pleader's submission that the triune of Bench decisions of this Court relied on by him have effectively foreclosed further discussion of the subject. It seems to me, with respect, that the real function of a tax appeal has not been examined in any of the three cases. The distinction which the statute marks between the competency of the appeal, on the one hand, and the amplitude of the appellate power, on the other, has not figured in the earlier discussions. Above all, the law laid down by the Supreme Court in the Mahalakshmi Textile Mills case : [1967]66ITR710(SC) has not been considered for application in all its aspects.

53. In the Spencer case [1974] 34 S.T.C. 249, for instance, this Court quoted, apparently with approval, the observation from an earlier unreported case to the effect that 'the test for finding out the powers of the Tribunal is to correlate the subject-matter of the appeal before the Tribunal to that of the Appellate Assistant Commissioner'. With great respect, this view overlooks the provisions of Sections 31(3) and 36(3) of the Tamil Nadu General Sales Tax Act. Indeed, all the earlier decisions of this Court have proceeded to deal with the question of jurisdiction de hors these provisions in the statute and without finding out what they have to say on the subject.

54. Besides, even while distinguishing the Supreme Court's decision [1967] 66 I.T.R. 710 (S.C.), on the score that the Income-tax Act was not in pari materia, the conclusion in the Nadar case (1976) C.T.R. 536 was not based on a comparative discussion of the relevant provisions. A bare perusal of, say, Section 31 of the Indian Income-tax Act, 1922, would have shown that the Appellate Assistant Commissioner disposing of an appeal against an income-tax assessment has precisely the same powers as his counterpart functioning under the Tamil Nadu General Sales Tax Act, 1959. Both have jurisdiction to confirm, reduce, enhance or annul the assessment, or set aside the assessment and direct the assessing authority to make a fresh assessment or pass such other orders as they think fit. The Income-tax Appellate Tribunal's powers are not elaborately dealt with in the same manner in that statute, but this absence of elaboration is more than made up by the all inclusive provision that the Tribunal is empowered to pass such orders on the appeal 'as it thinks fit'. Materially, if not word for word, the Income-tax Act and the Sales Tax Act contain identical provisions regarding appeals before the Appellate Assistant Commissioner and the Appellate Tribunal. It seems to me, therefore, an error to say that they are not in pan materia.

55. In the Nadar case (1976) C.T.R. 536, the Supreme Court's decision was almost regarded as a decision turning on the particular facts of the case, raising the limited question as to what was the subject-matter of the appeal before the Tribunal. One part of the Supreme Court's reasoning, no doubt, lends credence to this view, for, they observed : 'Whether the allowance was admissible under one head or the other of Sub-section (2) of Section 10, the subject-matter for the appeal remained the same.' Having regard to the nature of the controversy in that case, this passage might even be regarded as furnishing the ratio decidendi in that case. But the binding nature of the law laid down by the Supreme Court is not limited to the actual decision in any given case, but applies to the court's dicta as well, and even to their obiter. Earlier in this judgment I had quoted another passage from the decision in the Mahalakshmi Textile Mills case : [1967]66ITR710(SC) . There we find the Supreme Court laying down in the clearest possible terms that the Appellate Tribunal's powers are extensive and are not limited to a determination of the questions raised before the departmental authorities. They go to the full extent of saying that 'all questions of law and fact which relate to the assessment of the assessee' may be raised before the Tribunal.

56. This position, so firmly laid down by the Supreme Court as a matter of construction of the almost identical provisions of the Income-tax Act, calls for unqualified application in the instant case. As I have earlier shown, the same position is reached by reference to the examples of tax appeals under the British fiscal system.

57. Even if the matter were to be decided as one of principle, apart from any reference to the statutes, there is, in my view, a stronger case for reviewing the function of tax appeals as one of fiscal readjustment or revaluation of the taxpayer's liability rather than as an adjudication of a Us by a superior body bound by strict rules of adversary procedure. It would, in my view, be quite an error to see in tax tribunals the very image of civil courts. There may be resemblances between them, but the function of a tax tribunal is not adjudication, but assessment.

58. For the reasons aforesaid, I hold that the Tribunal was quite competent to hear and determine the assessee's objection to the inclusion of Rs. 1,33,858.18 in the assessable turnover while hearing and disposing of the appeal relating to his assessment for 1962-63. With respect, I disagree with my learned brother's conclusion to the contrary.

59. I must say I am glad to be able to confirm the Tribunal's decision on this point of jurisdiction. For, as my learned brother has pointed out, the retention of the amount in the assessee's assessment is wholly indefensible on the merits. The amount ought never to have found its way in the assessment at all. The learned Additional Government Pleader did not contest this position considering that it is covered by a decision of this Court in State of Madras v. Narayana-swami Naidu [1965] 16 S.T.C. 29.

60. With a decision which is unassailable on merits, the assessee would be quite unfortunate if he should now find that the body which granted him the relief had not the requisite power to do so. But if the law were that, the result could hardly be helped, although it would be monstrous, in any case, to let the State retain a tax which it had no right to levy in the first place. But my construction of Section 36 mercifully avoids the contradictions of such a situation. I like to imagine that it provides another excellent reason for its acceptance in addition to those that I have earlier elaborated.

61. For the reasons stated above, I dismiss this tax case, but, in the circumstances, without costs.

T. C. No. 37 of 1972.

62. In disposing of this tax case, my learned brother has adopted his judgment in T. C. No. 118 of 1971, and on that basis, he has allowed this case in the petitioner's favour. With respect, I do not agree with this conclusion, having regard to considerations which had persuaded me to take a different view in T. C. No. 118 of 1971. I would accordingly dismiss this tax case, and affirm the decision of the Tribunal, but I do so without costs.

Order of Reference

The order of the Court was pronounced by

Sethuraman, J.

63. As we have differed in our conclusion regarding the assessability of the sum of Rs. 5,32,910.05, we formulate the following question of law for decision by a learned Judge of this Court in accordance with the directions of His Lordship the Chief Justice:

Whether the assessee was justified in raising a dispute regarding the assessability of the sum of Rs. 5,32,910.05 for the first time before the Sales Tax Appellate Tribunal without raising the same before the Appellate Assistant Commissioner.

64. In pursuance of the abovesaid order the case came on for hearing before Ramaprasada Rao, C.J., and the learned Judge delivered the following judgment on 24th April, 1979.

T. Ramaprasada Rao, C.J.

65. These two tax cases have come up before me on a difference of opinion between V. Sethuraman, J., and V. Balasubrahmanyan, J., and as such the papers are placed before me for my opinion as a third Judge, on the question:

Whether the assessee could raise a dispute regarding the taxability of the sum of Rs. 1,33,858.18 for the first time in the appeal before the Sales Tax Appellate Tribunal without raising such a dispute before the Appellate Assistant Commissioner.

66. The facts, in the above cases, though elaborately stated by the learned Judges in their respective judgments, for the purpose of continuity, I would like to refer to such facts briefly.

The facts in T. C. No. 118 of 1971 are as follows :

The assessee is a dealer in cotton and cotton-seeds. For the assessment year 1962-63, the Joint Commercial Tax Officer, Pollachi Town, originally determined the turnover at Rs. 15,46,162.26 and the taxable turnover at Rs. 4,39,757.20. In the assessment, the assessing officer added a further sum of Rs. 50,000 to the book turnover of Rs. 1,68,262.02 in respect of cotton-seeds on the ground that there was suppression of such sales of cotton-seeds. He also levied a penalty of Rs. 1,326 on the ground that there was such a suppression of sales of cottonseeds. In the ultimate analysis, the taxable turnover determined by the Joint Commercial Tax Officer which was Rs. 4,39,757.20 included the estimation of suppression fixed at Rs. 50,000 and Rs. 1,33,858.18, being the closing stock of cotton. The assessee appealed against the said order. For reasons not at all known, the assessee did not object to the inclusion of Rs. 1,33,858.18 in the taxable turnover as the closing stock of cotton, but the appeal before the Appellate Assistant Commissioner was in relation to the addition of Rs. 50,000 and the levy of penalty of Rs. 1,326. It appears that State of Madras v. T. Narayanaswami Naidu [1968] 21 S.T.C. 1 decided by the Supreme Court in or about April, 1967, was not made available to the Appellate Assistant Commissioner, who decided the appeal at or about that time. No doubt, it is true and in fact, it is conceded before me that as per the ratio in State of Madras v. T. Narayanaswami Naidu [1968] 21 S.T.C. 1, the assessee would not be liable to tax on the turnover of the closing stock of cotton which was included in the assessable turnover by the assessing officer. The Appellate Assistant Commissioner, who was called upon to consider the propriety of the addition of Rs. 50,000 in respect of the suppression of sales of cotton-seeds and also on the levy of penalty, dismissed the appeal on 27th June, 1967. A further appeal was preferred to the Sales Tax Appellate Tribunal on 25th August, 1967. Apparently, the decision in State of Madras v. T. Narayanaswami Naidu [1968] 21 S.T.C. 1 was by then reported or came to the knowledge of the assessee. He, therefore, questioned the appellate authority's order on three grounds:

(1) He disputed the addition of Rs. 50,000, (2) he questioned the levy of penalty of Rs. 1,326 and (3) he also raised an objection regarding the inclusion of Rs. 1,33,858.18 as taxable turnover as it related to his closing stock of cotton and which according to the decision in State of Madras v. T. Narayanaswami Naidu [1968] 21 S.T.C. 1 was not so includable. The Appellate Tribunal upheld the addition of Rs. 50,000 and reduced the penalty to a sum of Rs. 1,230 and also gave relief to the assessee on the third ground, namely, that the closing stock of cotton to the tune of Rs. 1,33,858.18 cannot be brought into the net of taxation in view of the Supreme Court decision as above. Tax Case No. 118 of 1971 is by the department represented by the Deputy Commissioner (C. T.), Coimbatore Division, questioning the right of the Sales Tax Appellate Tribunal to consider a ground which was not even urged before the appellate authority.

67. In T. C. No. 37 of 1972, which is also by the department represented by the Deputy Commissioner (C. T.), Madurai Division, the relevant facts are as follows:

The assessee-respondents are dealers in cotton and cotton yarn. For the assessment year 1959-60, the Deputy Commercial Tax Officer, Madurai, determined the turnover originally at Rs. 7,96,61,509.04 and the taxable turnover at Rs. 7,87,77,857.26. Out of the taxable turnover so determined, a sum of Rs. 5,32,910.05 were so included because they were not covered by C forms ; a sum of Rs. 2,96,629.60 were so included because they represented sales of miscellaneous goods like machinery, parts and waste-paper. The assessing officer levied tax at the rate of 7 per cent on the turnover not covered by the C forms. The assessing officer ultimately allowed an exemption only on a turnover of Rs. 85,235.52 being sales of miscellaneous goods out of the proposed taxable turnover of Rs. 2,96,629.60. On the above terms, the assessing officer completed the assessment. The dealer went on appeal before the Appellate Assistant Commissioner. The only dispute which he raised before the Appellate Assistant Commissioner was on the turnover of Rs. 5,32,910.05 which was subjected to a higher rate of tax for want of C forms. A further appeal was filed against the order of the Appellate Assistant Commissioner before the Sales Tax Appellate Tribunal. Here again the dispute was relating to the exemption of a higher rate of tax over a sum of Rs. 5,29,652.57 because of lack of C forms. When it originally came up to this Court on a further revision case, T. C. No. 51 of 1966, the subject-matter was remanded for fresh disposal by the Tribunal on the question which arose before them. When the matter went back to the Tribunal, the assessee for the first time sought to raise an additional ground after securing an order from the Tribunal to excuse the delay in taking up such an objection and that additional ground taken up in C. T. M. P. No. 7 of 1971 filed on 30th January, 1971, before the Appellate Tribunal related to the inclusion of the turnover of Rs. 2,96,629.60 which in turn was referable to sales of miscellaneous goods like machinery, parts and waste-paper. The Appellate Tribunal on remand considered the additional ground which was raised for the first time before them relating to the sales of miscellaneous articles and deleted a sum of Rs. 2,11,374.08 from the taxable turnover. In relation to the main subject-matter in the appeal, they reduced the rate of tax to 1 per cent on a turnover of Rs. 5,29,416.05 and upheld the rate of 7 per cent on Rs. 236.52. The department represented by the Deputy Commissioner, Madurai Division, has filed the present T. C. No. 37 of 1972 questioning the right of the Tribunal to accept a new ground and grant leave over a subject-matter which was not raised before the Appellate Assistant Commissioner.

68. At the outset I have to state that the assessee in T. C. No. 118 of 1971 would be eligible for the relief on the closing stock of cotton td the tune of Rs. 1,33,858.18 in view of the decision of the Supreme Court in State of Madras v. T. Narayanaswami Naidu [1968] 21 S.T.C. 1. The only legal objection raised by the State in these proceedings is that the Tribunal had no power to go into the question in relation to the disputed turnover, as the objection and the request for relief was made only for the first time before the Tribunal. Similarly, in T. C. No. 37 of 1972, but for this legal objection, the relief granted by the Tribunal has to be sustained. After seeing the ratio in State of Madras v. T. Narayanaswami Naidu [1968] 21 S.T.C. 1, Sethuraman, J., took the view relying upon the consistent view of this Court that the Appellate Tribunal cannot entertain a new ground for the first time, if it was not raised before the Appellate Assistant Commissioner. V. Balasubrahmanyan, J., took a different view, on general principles by quoting English authorities as to what is the scope of an appellate authority, who exercises quasi-judicial powers.

69. V. Balasubrahmanyan, J., concedes that there are various decisions of our Court which are directly on the point and which would not enable the Tribunal to entertain a new ground for the first time before it in relation to the assessed turnover, but followed the principles laid down by the English courts in tax cases, wherein it is said that the appeals are merely directed towards ascertaining the income upon which the taxpayer is to be charged and as the obligation of such appellate taxing authorities is to do their obligation which is wide enough to include a right to probe into material and even obtain material which they think they ought to and make the assessment or the estimate which the law requires them to make. A$ I said already this general principle weighed with V. Balasubrahmanyan, J., when he agreed with the Tribunal in having accepted the objection though it was raised for the first time before it and did not want to interfere with the order of the Appellate Tribunal. He no doubt refers to the doctrine of stare decisis but would say that the cases cited by the learned Government Pleader and which were decided by Division Benches of this Court are not apposite for consideration and according to V. Balasubrahmanyan, J.,

the triune of Bench decisions of this Court relied on by the Government Pleader cannot be said to have foreclosed further discussion of the subject',

and he would also say that it seemed to him with respect that the real function of a tax appeal has not been examined in the cases cited. I am unable to agree with V. Balasubrahmanyan, J.

70. As Lord Eldon said:

It is better the law should be certain than that every Judge should speculate upon improvements in it.

71. As the principle of stare decisis is based on expediency and public policy and as above all a single Judge is bound by a decision of a Division Bench and as expediency again compels Division Benches to follow the ratio of other Division Benches of the same court, I feel that the decision of V. Balasubrahmanyan, J., cannot be accepted by me on that ground alone.

72. V. Sethuraman, J., on the other hand, did adhere to the salutary rule of stare decisis and disagreed with the Appellate Tribunal and allowed the tax cases. He relied on the decisions in Easun Engineering Co. Ltd. v. Government of Madras [1974] 33 S.T.C. 350, State of Madras v. Spencer and Company Ltd. [1974] 34 S.T.C. 249, State of Tamil Nadu v. K. R. and P. Shanmugavel Nadar (1976) C.T.R. 536 and State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill [1977] 39 S.T.C. 57, which was decided by a Full Bench of the Andhra Pradesh High Court.

73. In fact, it is unnecessary for me to recite the opinions expressed in the various decisions of our High Court in the above Division Bench cases. In the view that I hold that it was not open to the assessee to moot a ground not taken up before the Appellate Assistant Commissioner nor was such an appeal maintainable before the Tribunal on a point which was not the subject-matter of the appeal before the first appellate authority. Finally, Sethuraman, J., referred to the decision in State of Tamil Nadu v. K. R. and P. Shanmugavel Nadar (1976) C.T.R. 536 and concluded by saying that if a turnover had not been disputed before the Appellate Assistant Commissioner but was disputed for the first time before the Tribunal, it is as if an appeal is preferred to the Tribunal directly from the assessment order in so far as that disputed turnover is concerned, and such a thing is not permitted by law. He was not prepared to accept the extreme contention of the Government Pleader that the assessee abandoned his claim as was done in the decision in Central Camera Co. (P.) Ltd. v. Government of Madras [1971] 27 S.T.C. 112. He also relied on a decision of our Court in R. M. Nitya Thevar v. State of Madras [1969] 24 S.T.C. 520. The ultimate conclusion was on a line with the decisions already referred to. I am not inclined to go into, as V. Balasubrahmanyan, J., did, over the general powers of an Appellate Tribunal vested with quasi-judicial powers, as the subject-matter in controversy is clearly governed by decided cases of our Court and other courts.

74. Referring to the decision in State of Madras v. T. Narayanaswami Naidu [1968] 21 S.T.C. 1, which if applied, as was done by the Tribunal, the assessee would be entitled to the relief, V. Sethuraman, J., observed thus :

Even though the court may have power to mould the relief, taking into account the subsequent events, still so long as the appeal itself is not maintainable, the power to mould the relief cannot be exercised.

75. I agree with this dictum. Maintainability of an appeal is one thing and moulding the relief in an appeal in accordance with the supervening circumstances is another. I agree with Sethuraman, J., that as the disputed turnover was not objected to before the first appellate authority it cannot be agitated once over in an incompetent appeal before the Tribunal. Again Sethuraman, J., rightly distinguished the case in Commissioner of Income-tax v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) , which arose under the Indian Income-tax Act, 1922. The Supreme Court in that case while considering the scope of Sub-section (4) of Section 33 of the Indian Income-tax Act referred to its language which says that the Appellate Tribunal is competent to pass such orders on the appeal as it thinks fit. The Supreme Court was emphatic that all questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal and grant relief to him on another ground if it is justified. I am unable to agree that this decision would in any way help the assessee for the powers of the Sales Tax Appellate Tribunal are not of the same amplitude as that conferred on the Appellate Tribunal functioning under the Indian Income-tax Act. Rightly, therefore, Sethuraman, J., while referring to this Supreme Court decision, once again made reference to the decision in State of Tamil Nadu v. K. R. and P. Shanmugavel Nadar (1976) C.T.R. 536, wherein the above Supreme Court decision was distinguished. No such direct authority has however arisen in the Supreme Court under the Tamil Nadu Sales Tax Act.

76. I agree with the judgment of Sethuraman, J., and differ from the decision rendered by V. Balasubrahmanyan, J., and allow the tax cases accordingly. There will be however no order as to costs.

77. On the expression of opinion by the Chief Justice, as a third Judge, the case came for final disposal and the Court delivered the following judgment:

The judgment of the Court was delivered by

Sethuraman, J.

78. As there was a difference of opinion on the question as to whether the assessee can raise for the first time an objection to the assess-ability of a particular turnover before the Sales Tax Appellate Tribunal without raising the same before the Appellate Assistant Commissioner, the matter was referred in accordance with the provisions of Section 98 of the Code of Civil Procedure and the learned Chief Justice has agreed with the view taken by one of us, viz., that the assessee was not justified in raising such a dispute before the Sales Tax Appellate Tribunal for the first time without raising it before the Appellate Assistant Commissioner.. In the light of the majority judgment, the petitions are allowed. There will be no order as to costs.


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