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Bharat Traders Vs. Commercial Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 4679(W) of 1970
Judge
Reported in[1977]39STC206(Cal)
AppellantBharat Traders
RespondentCommercial Tax Officer and ors.
Appellant AdvocateSoumen Kumar Ghosh, Adv.
Respondent AdvocateSamarendra Nath Dutta, Adv.
Cases ReferredGuru Prosad Shaw v. Commissioner of Income
Excerpt:
- .....on behalf of the petitioner were rejected by the commercial tax officer and the hearing of the penalty proceeding was fixed on 9th september, 1970. the petitioner has questioned the validity and legality of the impugned notice and challenged the jurisdiction of respondent no. 1, the commercial tax officer, to initiate the penalty proceeding.3. respondents nos. 1 to 3 have opposed this rule and have filed an affidavit-in-opposition. the said respondents have also filed a supplementary affidavit. in the supplementary affidavit, it has been stated that a proceeding under section 14(1) of the act was started by the commercial tax officer on 19th may, 1970 and a notice under that section was issued to the petitioner on 20th may, 1970. by the said notice, the petitioner was asked to appear.....
Judgment:

Murari Mohan Dutt, J.

1. This Rule is directed against a notice dated 15th June, 1970, issued by the Commercial Tax Officer, Siliguri, under Section 20A of the Bengal Finance (Sales Tax) Act, 1941, hereinafter referred to as the Act. It has been alleged in the notice that in the returns for the first, second and third quarters of the Ratha Jatra years 2026-2027 S.Y., the taxable sales on account of sales of containers sold along with Schedule I goods have been concealed, leading to the under-statement of the taxable sales.

2. The petitioner is a registered dealer under the Act. The petitioner submitted returns of its turnover for the aforesaid period corresponding to 16th June, 1969, to 15th June, 1970. In these returns, the petitioner has shown the entire sale price of mustard oil sold in sealed containers for the relevant period in Clause (i) of the returns and claimed deduction of the entire sale price of mustard oil under Clause 3(i) of the returns. The copies of the returns have been annexed to the writ petition and marked collectively with the letter 'A'. Thereafter, the said notice under Section 20A of the Act was served upon the petitioner. Pursuant to the said notice, the petitioner's Advocate appeared before the Commercial Tax Officer and submitted that there was no sale of containers on account of sale of mustard oil in sealed containers and, as such, the petitioner was not under any statutory obligation to include the price of the containers in the taxable turnover, nor could there be any question of concealment or non-inclusion of the price of containers used for the purpose of selling mustard oil. The Commercial Tax Officer was, accordingly, requested not to proceed with the said notice. The said contentions made on behalf of the petitioner were rejected by the Commercial Tax Officer and the hearing of the penalty proceeding was fixed on 9th September, 1970. The petitioner has questioned the validity and legality of the impugned notice and challenged the jurisdiction of respondent No. 1, the Commercial Tax Officer, to initiate the penalty proceeding.

3. Respondents Nos. 1 to 3 have opposed this Rule and have filed an affidavit-in-opposition. The said respondents have also filed a supplementary affidavit. In the supplementary affidavit, it has been stated that a proceeding under Section 14(1) of the Act was started by the Commercial Tax Officer on 19th May, 1970 and a notice under that Section was issued to the petitioner on 20th May, 1970. By the said notice, the petitioner was asked to appear and to produce books of account relating to the period from 1st July, 1969, to 14th March, 1970, with a quantitative analysis of containers sold by the petitioner along with tax-free goods specified in Schedule I of the Act. The date of hearing was adjourned and ultimately on 8th June, 1970, one Mr. G.L. Bubna appeared before the Commercial Tax Officer, who passed the following orders :

Shri G.L. Bubna appeared. On examination of the books of account and documents it was found that the dealer sold the following containers along with Schedule I goods.

1st July, 1969, to 14th March, 1970.(i) Bapari mas khata ... 1,24,551 tins of M. Oil.(ii) Mai khata ... 1,947 tins of M. Oil.(iii) Khesari dal ... 307 bags.The value of tins (1,26,498) at Rs. 4, the rate fixed by the Siliguri Merchants' Association would be Rs. 5,05,992.00 and of bags (307) at Re. 1, the rate fixed by the Siliguri Merchants' Association, should be Rs. 307.00. Thus the dealer has understated his taxable sales in the return for the relevant period to the extent of Rs. 5,06,299.00 involving tax of Rs. 28,107.15.

For submitting the false returns proceedings under Section 20A are being started separately.

4. In the affidavit-in-reply filed by the petitioner it has been alleged that the said order dated 8th June, 1970, was not made in the presence of the said G.L. Bubna nor was the said order communicated to the petitioner.

5. Mr. Soumen Kumar Ghosh, the learned Advocate appearing on behalf of the petitioner, has strenuously urged that the impugned penalty notice has been issued not in the course of the proceeding by him and that the only proceeding in the course of which a penalty notice can be issued under Section 20A is the assessment proceeding. According to him, an assessment proceeding cannot be initiated without serving a notice under Section 11 of the Act and, as no such notice has been served, respondent No. 1 acted without jurisdiction in initiating the penalty proceeding. Further, it is contended that even if the assessment proceeding has been started under Section 11, no notice of penalty can be issued prior to the completion of the assessment. In order to consider the said contentions of Mr. Ghosh, it is necessary to refer to the provisions of Section 14(1) and Section 20A(1) of the Act, which are as follows :

14. (1) The Commissioner may, subject to such conditions as may be prescribed, require any dealer-

(a) to produce before him any accounts, registers, or documents,

(b) to furnish any information, relating to the stock of goods of, or purchases, sales or deliveries of goods by, the dealer or relating to any other matter, as may be deemed necessary for the purposes of this Act.

20A. (1) If the Commissioner in the course of any proceedings under this Act is satisfied that any dealer-

(a) has concealed any sales or any particulars thereof, or

(b) has furnished incorrect statement of his turnover or incorrect particulars of his sales in the return submitted under Sub-section (2) of Section 10 or otherwise,

with intent to reduce the amount of the tax payable by him under this Act, the Commissioner may, after giving such dealer a reasonable opportunity of being heard, by an order in writing, direct that he shall, in addition to any tax or penalty already levied and payable by him under this Act, pay by way of penalty a sum not exceeding one and a half times the amount of the tax, if any, which would have been avoided by him if such concealed sales or particulars thereof were not taken into account, or such incorrect statement of turnover or particulars of sales were accepted as correct, in assessing the tax payable by him under this Act.

6. The question, therefore, is whether the words 'any proceedings' in Section 20A refer only to the assessment proceeding under Section 11. It is contended by Mr. Samarendra Nath Dutta, the learned Advocate appearing on behalf of respondents Nos. 1 to 3, that the word 'any' is significant and the words 'any proceedings' cannot be construed as referring only to the assessment proceeding. He submits that a proceeding under Section 14(1) is also a proceeding within the meaning of the words 'any proceedings'. It has been pointed out by him that under Section 11 if the Commissioner is not satisfied that the returns furnished are correct and complete, in that case, the Commissioner will proceed to assess to the best of his judgment, the amount of tax due from the dealer. He submits that for the purpose of his satisfaction, the Commissioner has to look into the returns as they are filed from time to time. According to him, the assessment proceeding starts as soon as the Commissioner looks into the returns for the purpose of ascertaining the correctness thereof, even before he serves a notice under Section 11. In the instant case, the Commercial Tax Officer, who discharges the duty of the Commissioner under Section 11 by virtue of Section 3(1) of the Act, having started a proceeding under Section 14(1) must have looked into the returns before the notice under Section 14(1) was served upon the petitioner and that, as such, the assessment proceeding should be deemed to have been started under Section 11. It is argued by him that it is not necessary to serve a notice under Section 11 before the penalty proceeding is started, or to issue the penalty notice after the completion of the assessment, as contended on behalf of the petitioner.

7. A penalty proceeding can only be started under Section 20A if the Commissioner is satisfied that (a) any dealer has concealed any sales or any particulars thereof, or (b) has furnished incorrect statement of his turnover or incorrect particulars of his sales in the return submitted under Sub-section (2) of Section 10 or otherwise. On the grounds as specified in Clauses (a) and (b) above, a penalty proceeding can be started. The relevant facts as mentioned in Clauses (a) and (b) can only be ascertained from the returns filed by the dealer and other materials including the documents and books of account. A direction for the production by the dealer of any accounts, registers or documents, or for furnishing any information, relating to the stock of goods of, or purchases, sales or deliveries of goods, by the dealer or relating to any other matter, may be necessary for the purpose of the Commissioner's satisfaction within the meaning of Section 11. After the documents are produced or the information is furnished by the delaer, the Commissioner will then consider whether the returns furnished are correct and complete. If he is not satisfied, in that case, he will issue a notice under Section 11 for the purpose of giving the dealer an opportunity of being heard for making a best judgment assessment of the amount of tax due from the dealer. In my opinion, as the power under Section 14(1) may be exercised for the purpose of assessment under Section 11, it is only a step in aid of a proceeding for assessment under Section 11. I am unable to accept the contention of Mr. Dutta that a proceeding within the meaning of the words 'any proceedings' is initiated when a notice under Section 14(1) is served upon the dealer. At the same time, I am not impressed with the contention made on behalf of the petitioner that Section 20A refers only to an assessment proceeding. Mr. Dutta has rightly contended that the word 'any' in the words 'any proceedings' in Section 20A is significant. To accept the contention made on behalf of the petitioner that the said words refer only to an assessment proceeding is to altogether ignore the word 'any', the presence of which before the word 'proceedings', in my opinion, clearly indicates more than one proceeding. An appeal, a revision and a review under Section 20 of the Act are undoubtedly proceedings under the Act. If the words 'any proceedings' are construed as contended on behalf of the petitioner, then the proceedings by way of an appeal, revision and review will be outside the purview of the said words, although they are proceedings under the Act. For these reasons, the said contention of the petitioner is rejected.

8. In the instant case, admittedly, at the time the penalty notice was issued, no notice under Section 11 was served upon the petitioner. The contention of the respondents that even before the service of a notice under Section lla proceeding for assessment is started when the Commissioner considers the returns for the purpose of his satisfaction as to the correctness or otherwise of the same, is difficult to accept. Such a proceeding behind the back of the dealer is not contemplated by the provisions of Section 11, for it is opposed to Rules of natural justice.

9. Mr. Ghosh has placed strong reliance on the following observations of the Supreme Court in Commissioner of Income-tax v. S.V. Angidi Chettiar, [1962] 44 I.T.R. 739 (S.C.):

Counsel contended that, in any event, penalty for the assessment year 1949-50 could not be imposed upon the assessee-firm because there was no evidence that the Income-tax Officer was satisfied in the course of any assessment proceedings under the Income-tax Act that the firm had concealed the particulars of its income or had deliberately furnished inaccurate particulars of the income. The power to impose penalty under Section 28 depends upon the satisfaction of the Income-tax Officer in the course of proceedings under the Act; it cannot be exercised if he is not satisfied about the existence of conditions specified in Clauses (a), (b) or (c) before the proceedings are concluded. The proceeding to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceeding under the Act and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction.

10. On the basis of the said observations, it is contended on behalf of the petitioner that even a notice under Section 20A cannot be issued before the completion of the assessment proceedings. The observation of the Supreme Court that 'the proceeding to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer' prima facie lends support to the said contention of the petitioner. It appears from the facts of the Supreme Court decision [1962] 44 I.T.R. 739 (S.C.), that the order for payment of penalty was made in the course of assessment proceedings and not after the conclusion of the same. The Supreme Court has also laid down in the aforesaid decision that satisfaction before the conclusion of the proceeding under the Act and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction. This observation suggests that as soon as the condition for the exercise of the jurisdiction is fulfilled, the penalty proceeding can be started. It may be started before the completion of the same. This decision of the Supreme Court has been referred to in a later decision of the Supreme Court in D.M. Manasvi v. Commissioner of Income-tax, Gujarat [1972] 86 I.T.R. 557 (S.C.). In that case, it was argued on behalf of the assessee that as the penalty notices were issued subsequent to the making of the assessment orders there was no satisfaction of the Income-tax Officer during the assessment proceedings that the assessee had concealed the particulars of his income or had furnished incorrect particulars of such income. In repelling the said contention, the Supreme Court observed as follows :

What is contemplated by Clause (1) of Section 271 is that the Income-tax Officer or the Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that Sub-section. It is not, however, essential that notice to the person proceeded against should have also been issued during the course of the assessment proceedings. Satisfaction in the very nature of things precedes the issue of notice and it would not be correct to equate the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner with the actual issue of notice. The issue of notice is a consequence of the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner and it would, in our opinion, be sufficient compliance with the provisions of the statute if the Income-tax Officer or the Appellate Assistant Commissioner is satisfied about the matters referred to in Clauses (a) to (c) of Sub-section (1) of Section 271 during the course of proceedings under the Act even though notice to the person proceeded against in pursuance of that satisfaction is issued subsequently.

11. After making the said observations the Supreme Court referred to the observation made in its earlier decision in Commissioner of Income-tax v. S.V. Angidi Chettiar [1962] 44 I.T.R. 739(S.C.), referred to above. From the observations of the Supreme Court made in the subsequent decision, referred to above, it follows that a penalty proceeding can be started both before and after the completion of the assessment proceedings but the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner must be made during the course of such a proceeding. In an earlier Bench decision of this Court in Guru Prosad Shaw v. Commissioner of Income-tax, Bengal [1944] 12 I.T.R. 233, it has been held that there is nothing in Section 28 of the Income-tax Act, 1922, from which it can be said that the notice under Sub-section (3) must be given before the completion of the assessment. From the decisions referred to above, I am of the view that under Section 20A a notice for a penalty proceeding can be issued in the course of an assessment proceeding and before the completion thereof, if the Commercial Tax Officer is satisfied about the requirements of Clause (a) or Clause (b) of Sub-section (1) of Section 20A of the Act.

12. As the impugned notice was issued not in the course of any proceedings under the Act including an assessment proceeding, the notice must be held to be illegal. It may be that the Commercial Tax Officer was satisfied after examining the books of account and other documents produced by the dealer under Section 14(1) of the Act, that the petitioner furnished incorrect statement of his turnover or incorrect particulars of his sales in the returns submitted by him, but that satisfaction was not reached in the course of any proceedings under the Act and that, accordingly, the impugned notice issued on the basis of such satisfaction must be held to be invalid.

13. For the reasons aforesaid, the impugned notice, which is annexure D to the writ petition, must be quashed. Accordingly, I direct that a writ in the nature of certiorari issue quashing the impugned notice. Further, I direct that a writ in the nature of mandamus also issue directing the respondents not to give effect to the same. It may be made clear that the respondents will be at liberty to issue a fresh penalty notice in accordance with law. The Rule is made absolute, but there will be no order as to costs.


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