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Oceanic Industries (India) Private Ltd. Vs. Commercial Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberC.R. No. 1210 (W) of 1970
Reported in[1974]34STC546(Cal)
AppellantOceanic Industries (India) Private Ltd.
RespondentCommercial Tax Officer and ors.
Appellant AdvocateBhaskar Gupta and ;Mritunjay Palit, Advs.
Respondent AdvocateR.L. Sinha and ;Manik Chandra Banerjee, Advs.
DispositionApplication dismissed
Cases ReferredChampalal Binani v. Commissioner of Income
- .....set out a statement of taxable sales and assessment figures as follows:year sales tax taxable sales sales tax taxable sales sales w. b. w. b. central central total1963-64 23.75 498.61 2,047.06 20,470.58 28,220.791964-65 133.41 2,381.19 2,133.13 21,331.34 20,067.161965-66 3,952.50 ex parte 19,045.65 (actual) 1966-67 245.00 4,480.75 1,051.30 10,519.25 16,000 004. the petitioner contended that there was no material before the c. t. o. to arrive at the figure assessed and the prayer for adjournment should have been granted in the circumstances.5. the petitioner filed an appeal on 3rd august, 1908, with the commissioner of commercial taxes praying for reconsideration of the order after giving the petitioner an opportunity to support his return of income. by letter dated 4th november,.....

Salil Kumar Datta, J.

1. The petitioner in this rule, an existing private company incorporated under the Companies Act, 1956, is a registered dealer since 1963 under the Bengal Finance (Sales Tax) Act, 1941, and also under the Central Sales Tax Act, 1956. The petitioner carries on business of manufacture and sale of chalk, pencils, ink, leather preservatives, plastic covers, etc. The petitioner at the time of making the application was assessed since 1963-64 till 1966-67, exclusive of the assessment year 1965-66 and taxes due had been duly paid. In respect of the assessment year 1965-66, the returns were also duly filed and by notice dated 16th April, 1968, the Commercial Tax Officer, Bhowanipore Charge (hereinafter referred to as the C. T. O.), called upon the petitioner to appear with relevant records on 18th July, 1968, failing which, it was stated, the assessment would be made ex parte. The petitioner by its letter of 15th July, 1968, asked for an adjournment of hearing on the ground that the relevant account books were spoilt by heavy monsoon and they were to be reconstructed. The said letter was received on 15th July, 1968, but the C. T. O., however, wrongfully and mala fide refused to grant the adjournment and made a 'best judgment' assessment on the day fixed. It was stated in the order:

Having regard to the nature of business I estimate the dealer's gross turnover at Rs. 50,000. I further estimate inter-State turnover at Rs. 30,000. Hence the taxable sale of the dealer is assessed at Rs. 20,000.

2. Allowing a deduction, the taxable turnover under the Bengal Act was determined at Rs. 19,050 and the tax thereon was assessed at Rs. 952.50. Under the Central Sales Tax Act, the taxable turnover was determined at Rs. 30,000 and tax payable was assessed at Rs. 3,000. Forms VII and 4 respectively under the two Acts were directed to be issued accordingly. The petitioner received on 1st August, 1968, two notices of assessment under the two Acts. The petitioner contends that the said assessment was made arbitrarily without reference to evidence on record and against the principle of justice, as assessments of prior and subsequent years were not taken into consideration.

3. The petitioner set out a statement of taxable sales and assessment figures as follows:

Year Sales tax Taxable sales Sales tax Taxable sales Sales

W. B. W. B. Central Central Total

1963-64 23.75 498.61 2,047.06 20,470.58 28,220.79

1964-65 133.41 2,381.19 2,133.13 21,331.34 20,067.16

1965-66 3,952.50 Ex parte 19,045.65


1966-67 245.00 4,480.75 1,051.30 10,519.25 16,000 00

4. The petitioner contended that there was no material before the C. T. O. to arrive at the figure assessed and the prayer for adjournment should have been granted in the circumstances.

5. The petitioner filed an appeal on 3rd August, 1908, with the Commissioner of Commercial Taxes praying for reconsideration of the order after giving the petitioner an opportunity to support his return of income. By letter dated 4th November, 1968, the Commissioner informed that if the petitioner felt aggrieved with the order, the remedy lay before the appropriate Assistant Commissioner in appeal. The petitioner on 30th December, 1968, submitted to the Commissioner that as the appeal had already become time-barred, order for the admission of the appeal might be passed. In reply, the Commissioner informed the petitioner by letter dated 24th January, 1969, that admissibility of a time-barred appeal could be decided by the appellate authority only.

6. In the meantime the Certificate Officer, 24-Parganas, on 21st March, 1969, started two certificate cases in respect of the said two demands and notices thereof were received by the petitioner on 6th May, 1969. The petitioner denied his liability challenging the assessment as being illegal, arbitrary and also mala fide and violative of the principles of natural justice in that no adjournment of hearing was granted in the circumstances pleaded by the petitioner. Further, the estimate of taxable figures was unreasonable and based on no evidence but purely on surmise. The Certificate Officer by his further letter dated 11th June, 1969, however, threatened legal action against the petitioner. The petitioner in these circumstances served a demand for justice and thereafter moved this court under Article 226(1) of the Constitution on 25th February, 1970, praying for issue of a writ in the nature of mandamus commanding the respondents to cancel or rescind the orders of assessment dated 18th July, 1968, and also for a writ in the nature of certiorari quashing the two certificates, referred to above. On this application, a rate nisi was issued in terms of the prayer and an ad interim injunction was granted restraining the respondent from taking further action provided the petitioner deposited with the Registrar, A. S., a sum of Rs. 2,000 and it is said that the said amount had been so deposited.

7. On service of the rule, the respondents appeared and contested the rule and an affidavit-in-opposition was affirmed on 29th March, 1973, by Dilip Roy Chakraborty, an officer in the Office of the Certificate Officer, 24-Parganas, on his behalf denying the allegations and contentions made in the petition.

8. Mr. Bhaskar Gupta, the learned Advocate appearing for the petitioner, raised various contentions in support of the rule. He submitted that the impugned assessment was arbitrary, whimsical and based on no materials. Even in 'best judgment' assessment, the authority is required to make a fair estimate with reference to previous returns and attendant circumstances. Provisions of Section 11(1) of the Bengal Finance (Sales Tax) Act, 1941, are similar to those of Section 144 of the Income-tax Act, 1961, or Section 23(4) of the Income-tax Act, 1922, and accordingly, the law established by judicial decisions in respect of the said Sections of the Income-tax Act should also govern the best judgment assessment under the Sales Tax Act. Mr. Gupta submitted that it has been consistently and uniformly held that although the assessment proceeding under this section is not a judicial proceeding in the strict sense, the Income-tax Officer must be guided by judicial considerations and by rules of justice, equity and good conscience. It has also been laid down that the assessment must be on some relevant material and it must not be an arbitrary assessment depending on the whims of the authority. Further the authority must also give reasons which form the basis of his assessment and must disclose the mental process leading to such assessment. It was further contended that the finding must be based on legal evidence as otherwise it would be a perverse decision.

9. The principles to be observed in cases of 'best judgment assessment' tinder the Income tax Acts are well-settled. As has been observed in State of Orissa v. B.P. Singh Deo [1970] 70 I.T.R. 690 (S.C.):

The power to levy assessment on the basis of best judgment is not an arbitrary power; it is an assessment on the basis of best judgment. In other words that assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the concerned authorities.

10. In Central Bank of India Ltd. v. Prakash Chand Jain A.I.R. 1969 S.C. 983, referred to by Mr. Gupta, it was observed that the finding of the enquiry officer would be perverse warranting interference by the Tribunal if it is not based on legal evidence. The position, it is contended, is the same in the case before us.

11. In Commissioner of Income-tax, Central and United Provinces v. Laxminarain Badridas [1937] 5 I.T.R. 170 (P.C.), the Privy Council in considering Section 23(4) of the Income-tax Act, 1922, has laid down the law in the following classic language:

The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work.

12. The proposition of law laid down above is well-settled and has not been disputed by Mr. R.L. Sinha, the learned Advocate appearing for the respondents. The provisions of the Bengal Finance (Sales Tax) Act, 1941, are almost in similar terms with those of the Income-tax Acts and accordingly the principles laid down by the judicial decisions of the high authorities in respect of best judgment assessments under the Income-tax Acts apply with full force and effect in respect of such assessments under the sales tax law in West Bengal. It will, however, appear that the provisions in the Income-tax Act, requiring the Income-tax Officer to take into account all relevant materials he has gathered before making the assessment is not to be found in the Bengal Finance (Sales Tax) Act, 1941. None the less, such requirement is implicit in the section as 'best judgment' assessment must necessarily have reference to relevant material as a foundation. There is another additional provision under Section 11(1) of the Sales Tax Act which provides that even in making best judgment assessment the Commercial Tax Officer has to give a dealer a reasonable opportunity of being heard, a provision, which is obviously mandatory embodying principle of natural justice and not to be found in the Income-tax Act. Even so it has been held in cases under the Income-tax Acts an opportunity of being heard should be given to the assessee when making a best judgment assessment. It is also implicit that the authority concerned should give his reasons for arriving at a particular figure for enabling the assessee to appreciate the mental process leading to the assessment, and such order being subject to appeal need also be a speaking order.

13. We have seen the reasons for the ex parte assessment quoted above, the relevant factor being only 'the nature of business' and it thus appears that the reasons are Vague and understandable. The C. T. O. did not take into consideration the assessment for previous years and the impugned assessment is highly disproportionate to the earlier assessments without any cogent reason or any material relevant for the purpose. Further even in making the assessment, an opportunity should have been given to the dealer of being heard as required under the law. Accordingly, it appears that the assessment is arbitrary and without basis and is also erroneous for non-observance of a mandatory provision of law.

14. The above conclusion will not necessarily result in issuance of the writs prayed for by the petitioner. Mr. Sinha has contended with great force relying on the authorities that the court should not grant the discretionary relief to the petitioner in the attending circumstances. Further, the petitioner had an alternative remedy under the statute which by his negligence and inaction was not availed of by the petitioner and the assessments which had long become final by lapse of time should not be reopened. Mr. Gupta, on the other hand, referred to the authorities in support of his contention that the alternative remedy is no bar for appropriate relief by constitutional writs. Further in the facts of the case, the relief should be granted to the petitioner, particularly when the order is arbitrary and in direct contravention of the provisions of law.

15. The Bengal Finance (Sales Tax) Act, 1941, provides an elaborate and adequate remedy providing for appeal against, and revision and also review of, any order of assessment under the Act. Such appeal, revision or review will have to be filed within sixty days from the receipt of notice of demand in respect thereof or such further period as may be allowed by the prescribed authority. Rule 74 provides that an appeal against the order of the Commercial Tax Officer will be to the Assistant Commissioner and the memo of appeal, under Rule 76, must be accompanied by a certified copy of the order complained of. Rule 77 provides that for non-compliance of some other provisions of Rule 76, inter alia,--deposit of the admitted tax--the appeal will be summarily rejected while in respect of other provisions thereof, it may be so rejected after giving an opportunity to the appellant to comply with the same. Under Rule 80(1), the provisions of Rules 76 and 77 will apply mutatis mutandis to every application for revision or review.

16. In the case before us, the petitioner received the notices of demand on 1st August, 1968, but instead of filing a memorandum of appeal or petition of revision, the petitioner wrote a simple letter to the Commissioner of Commercial Taxes on 3rd August, 1968, praying that the Commissioner would be pleased in the circumstances stated to transfer the files to some other officer or if the Commissioner was 'satisfied that this officer had done everything in the bona fide and honest exercise of his functions, the matter may be closed under advise to us (the petitioners)'. This representation is neither a memorandum of appeal nor a petition of revision. The Commissioner wrote back on 4th November, 1968, saying that if the petitioner felt aggrieved he could seek appropriate relief before the appropriate Assistant Commissioner in appeal. After about eight weeks on 30th December, 1968, the petitioner wrote to the Commissioner again stating that orders for admission of the appeal which was not yet filed, might be passed condoning the delay. To this the Commissioner replied on 24th January, 1969, saying that it was for the appellate authority to pass the appropriate order. Since then nothing was done till on receipt of notices of the certificates dated 31st March, 1969, the petitioner by its letter of 17th May, 1969, denied its liability. In reply to the further notices of demand dated 11th June, 1969, the petitioner through its lawyer issued on 6th September, 1969, a notice under Section 80 of the Code of Civil Procedure and thereafter moved this court under articles 226(1) on 25th February, 1970, and obtained the present rule.

17. The Supreme Court in Champalal Binani v. Commissioner of Income-tax, West Bengal, and Ors. [1970] 70 I.T.R. 692 (S.C.), observed:.the Income-tax Act provides a complete and self-contained machinery for obtaining relief against improper action taken by the departmental authorities, and normally the party feeling himself aggrieved by such action cannot be permitted to refuse to have recourse to that machinery and to approach the High Court directly against the action. The assessee had an adequate remedy under the Income-tax Act which he could have availed of. He, however, did not move the Income-tax Appellate Tribunal which was competent to decide all questions of fact and law....A writ of certiorari is discretionary; It is not issued merely because it is lawful to do so. Where the party feeling aggrieved by an order of an authority under the Income-tax Act has an adequate alternative remedy which he may resort to against the improper action of the authority and he does not avail himself of that remedy the High Court will require a strong case to be made out for entertaining a petition for a writ. Where the aggrieved party has an alternative remedy, the High Court would be slow to entertain a petition challenging an order of the taxing authority which is ex facie with jurisdiction. A petition for a writ of certiorari may lie to the High Court, where the order is on the face of it erroneous or raises question of jurisdiction or of infringement of fundamental right of the petitioner. The present case was one in which the jurisdiction of the High Court could not be invoked.

18. On a parity of reasoning, the above observations apply to the assessments made under the sales tax law we have under consideration. The Bengal Finance (Sales Tax) Act, 1941, provides a complete and self-contained machinery for appropriate relief against any improper or wrongful action taken by the departmental authority. Normally such remedy should be availed of when the higher tribunal is competent to decide all questions of fact and law and no question of jurisdiction is involved. If such remedy is not availed of there must be proper, sufficient and strong reasons for invoking the jurisdiction of the High Court challenging the order of the taxing authority which is ex facie with jurisdiction.

19. In the present case, there is no dispute that the impugned order, though erroneous on the face of it in the light of the judicial pronouncements noted above, was with jurisdiction. Accordingly, unless a strong case is made out, the High Court should net entertain an application for setting aside an order which could be done by having recourse to the provisions of the Act itself.

20. We have noted that the petitioner's case for not having recourse to the provisions of the Act is a sad tale of negligence and inaction. Accordingly, even though the order appears to be unsupportable, no question of jurisdiction is involved in the exercise of the power of the taxing authority in making the impugned assessment. Accordingly, I am of the opinion that the petitioner has miserably failed to make out a strong or even any case for interference by this court in constitutional writ jurisdiction.

21. The application accordingly fails and the rule is discharged without any order as to costs. All interim orders are vacated.

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