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TMI Blog1963 (5) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... re them on a different basis and did not pronounce one way or the other on the correctness of that decision. So far as I am concerned I see no distinguishing feature between the present cases and the case settled by the bench decision in Nathu Ram Nohar Chand's case(1). This matter is frequently arising and it will be proper that both these decisions are considered by a Full Bench and some firm rule is laid down for the guidance of the litigant public. So long as these decisions stand side by side there would be a good deal of confusion so far as the litigant public is concerned. I, therefore, direct that these petitions be laid before my Lord the Chief Justice for constituting a Full Bench, preferably of five Judges, to deal with these petitions at an early date. In pursuance of the above-said order of reference the case came on for hearing before the Full Bench: II. L. Sibal, G. C. Mittal and Satish Sibal, for the petitioners. Chetan Dass Dewan, Deputy Advocate-General, for the respondents. Bhagirath Dass and B. K. Jhingan, as Interveners. JUDGMENT MAHAJAN, J.-This order will dispose of Civil Writs Nos. 798 and 1042 of 1962. The principal question that requires determination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 798 of 1962. The petitioners are Messrs Rameshwar Lal Sarup Chand. The firm is a registered dealer within the meaning of the Central Sales Tax Act, 1956 (74 of 1956)-hereinafter referred to as the Central Act. The firm is engaged in the business of shawls and also works as commission agents of cloth. The present controversy relates to the assessment year 1957-58 and the liability to tax arises both under the Central Act and the Punjab Act. The firm did not file any quarterly returns and consequently did not deposit the sales tax as required by law. However, the Assessing Authority sent a notice in Form S. T. XIV -a form prescribed under the Punjab General Sales Tax Rules, 1949, hereinafter referred to as the rules-made under the Punjab Act. This notice was sent on the 21st July, 1958, calling upon the petitionerfirm to appear before the Assessing Authority and to produce accounts and documents specified in the notice itself. It was also stated in the notice that in case the petitioner did not comply with it, the Assessing Authority would proceed to assess the petitioner to the best of his judgment. The proceedings thus initiated were kept pending for quite a while before the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said abstract of the statement of accounts was no other document but a return of turnover of the dealer. This return contained all the information required by the department for purposes of assessment........the petitioner had been given about three dozen opportunities to show his accounts by the Assessing Authority, Amritsar, but he did not comply with the notice deliberately........the assessment order of the Assessing Authority is not barred by time as the proceedings in the case had been started as early as 26th June, 1958. Further, it is not a case of best judgment assessment under section 11(4) of the Punjab General Sales Tax Act, 1948, as the Assessing Authority has accepted the returned figures as disclosed by the dealer, and........in the absence of declarations in Form 'C', the Assessing Authority had no alternative but to assess the petitioner at the rate of Rs. 3-12 nP. per cent. This action of the Assessing Authority does not amount to non-acceptance of the returned turnover by the petitioner." It is also pleaded that this petition should be dismissed as the petitioner had not exhausted his remedies by way of appeal, etc., under the Act. Civil Writ No. 1042 of 1962. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary enquiries.......... In this case necessary enquiries were made which reveal that either the alleged purchasers did not exist or they did not make any purchases from this firm as they had no business dealings at all with the assessee. The declarations of the alleged purchasers are, therefore, forged ones and cannot be considered. The goods involved in these cases have been misappropriated with the obvious motive of evading the legitimate sales tax." The stand taken up by the State in its returns, so far as it is relevant for the purposes of this decision, is as follows: "..........in spite of opportunities given to the petitioner (in pursuance of the notice issued in Form S.T. XIV on the 21st June, 1961) he failed to give satisfactory evidence in support of his claim for the satisfaction of the Assessing Authority. The assessment of the petitioner was ultimately framed by the Assessing Authority under section 11(3) of the Punjab General Sales Tax Act, 1948. As the petitioner could not prove to the satisfaction of the Assessing Authority that sales to the extent of Rs. 7,39,495-11-3 were actually made to the alleged registered dealers, the Assessing Authority was right in in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation of three years provided in section 11(4), (5) and (6) must be imported into section 11(3) of the Punjab Act and assessment completed within three years; and (iii) that even if it be assumed for the sake of argument that section 11(4), (5) and (6) provide the period of three years only for taking some step towards an assessment, no such step was taken in the assessments under dispute within that period. Mr. Bhagirath Dass intervened on the ground that there were a number of petitions field by him wherein the same questions arise and therefore, he be afforded an opportunity to address us on the matter. We allowed him the opportunity. He started by saying that he in a large measure adopted the arguments of Mr. Sibal, learned counsel for the petitioners, but he went on to justify his concession made in Jiwan Singh and Sons v. The Excise & Taxation Officer (Assessing Authority), Jullundur District (1). At page 564, in paragraph 5, of the report, the learned Judge proceeds"It is, however, conceded by Mr. Bhagirath Dass, and, in our opinion, rightly, that if the proceedings to assess to the best of the assessing authority's judgment began within three years, as contemplated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to provide for the levy of a general tax on the sale or purchase of goods in Punjab. Section 5 is the charging section. Section 7 provides for registration of dealers. Section 10 provides for payment of tax and returns and is in these terms: "10. (1) Tax payable under this Act shall be paid in the manner hereinafter provided at such intervals as may be prescribed. (2) The Commissioner may, in such circumstances and subject to such conditions as may be prescribed, accept from any dealer, in lieu of the amount of the general tax payable during any period, a lump sum by way of composition determined in the prescribed manner. (3) Such dealers as may be required so to do by the assessing authority by notice served in the prescribed manner and every registered dealer shall furnish such returns by such dates and to such authority as may be prescribed: Provided that, if any dealer establishes to the satisfaction of the assessing authority that his average taxable turnover does not exceed ten per centum of his average gross turnover, the returns to be furnished by such dealer under this sub-section shall be annual returns. (4) Before any registered dealer furnishes the returns required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow section 11 stands at present. The only departure made from the 1952 amendment is that in sub-sections(1) and (3), the word "assess" has been retained while in sub-section (4), (5) and (6) it has been substituted by the phrase "proceed to assess". Section 11 as amended by Act No. 4 of 1955 has undergone no change so far as the first six sub-sections are concerned. The relevant part of section 11 is in these terms: "11. (1) If the Assessing Authority is satisfied without requiring the presence of registered dealer or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, he shall assess the amount of tax due from the dealer on the basis of such returns. (2) If the Assessing Authority is not satisfied without requiring the presence of registered dealer who furnished the returns or production of evidence that the returns furnished in respect of any period are correct and complete, he shall serve on such dealer a notice in the prescribed manner requiring him, on a date and at a place specified therein either to attend in person or to produce or to cause to be produced any evidence on which such dealer may rely in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax payable on the turnover which has been underassessed or has escaped assessment. (2) * * * *" Section 27 is the rule-making section. The rules which are relevant for our purposes are rules 17 to 20 and 24, and are in these terms: "17. During the first three years after the commencement of the Act, every registered dealer, whose taxable turnover, in the opinion of the appropriate Assessing Authority, is not likely to exceed 10 per cent. of his gross turnover, shall furnish a return in Form S.T. VIII annually within thirty days from the expiry of each year. 18.. After the expiry of three years from the commencement of the Act, every registered dealer, whose taxable turnover does not exceed 10 per cent. of his gross turnover calculated over the latest three years may, after intimation in writing to the appropriate Assessing Authority furnish returns in Form S.T. VIII or S.T. VIII-A or S.T. XXIII, as the case may be, annually within 30 days from the expiry of each year. 19.. When the taxable turnover of any registered dealer referred to in rule 18 exceeds in any year 10 per cent. of the average gross turnover calculated in the manner provided in the said rule, the appropriate As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h any objection, which you may wish to prefer and any evidence you may wish to adduce in support thereof and to show cause on that date and at that time why in addition to the tax to be assessed on you a penalty not exceeding one and a half times the amount should not be imposed upon you under section 11(6) of the said Act. In the event of your failure to comply with this notice, I shall proceed to assess under section 11 of the Punjab General Sales Tax Act, 1948, to the best of my judgment without further reference to you. Signature.................................. Assessing Authority, ....................................District. (Seal of the Assessing Authority) Dated....................................... (Failure without sufficient cause to submit a return as required by sub-section (2) and (3) of section 10 or submission of a false return renders a dealer liable to prosecution under section 23 of the Act). (Particulars of accounts and documents required)." The scheme of sections 10 and 11 of the Punjab Act seems to be this. A registered dealer is obliged to file the return and that return has to be accompanied by a Treasury or Bank receipt showing that the amount of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the period mentioned. What then is that period? The words are 'such period'. The period referred therefore is the period mentioned earlier in the sub-section, and that is the period in respect of which returns had been furnished by the dealer. This is also made clear by sub-section (1) of section 11. That deals with a case where the returns are accepted. Both sub-sections (1) and (4) deal with returns for the same period. Now section 10(3) provides that 'every registered dealer shall furnish such returns by such dates and to such authority as may be prescribed'. 'Prescribed' means prescribed by rules framed under the Act. Under rule 20 of these rules, a registered dealer like the petitioner had to furnish returns quarterly. The rules define 'return period' as 'the period for which returns are prescribed to be furnished by a dealer'. It would therefore appear that when sub-section (4) of section 11 talks of 'returns in respect of a period', that refers in the case of the petitioner to the quarters in respect of which he submitted the returns. We then come to this that the three years within which the authority could proceed to make the best judgment assessment had to be counted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which the petitioner filed his returns ended on 31st March, 1956. So the Assessing Authority could not proceed to make a best judgment assessment in respect of this quarter after March 31, 1959. In the case of the earlier quarters, of course, the three years had expired even prior to this date. It is not in dispute that the assessing officer had not proceeded to make any assessment on the petitioner at the date of any of the notices. In the present case, therefore, the notices given on August 18, 1959, that best judgment assessments would be made in respect of the quarters constituting the financial years 1955 and 1956, the last of which expired on March 31, 1956, were futile. No such assessments could be made in respect of any of these quarters after March 31, 1959." In the case before the Supreme Court, two notices were within three years and the third notice was beyond three years and their Lordships held that the third notice being beyond three years, the Assessing Authority had no jurisdiction to make the assessment. If the phrase "proceed to assess" bears the meaning which the learned counsel for the State contends for, namely, that only a step towards assessment has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le opportunity of being heard, proceed in such manner as may be prescribed to assess to the best of his judgment the amount of tax due from the dealer in respect of such period and all subsequent periods; and the Commissioner may direct that the dealer shall pay by way of penalty in addition to the amount of tax so assessed a sum not exceeding one and a half times that amount. "11A. (1) If in consequence of any information which has come into his possession, the Commissioner is satisfied that any turnover of a dealer during any period has been under-assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made therefrom, the Commissioner may, at any time within three calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he considers necessary, proceed in such manner as may be prescribed to re-assess or assess, as the case may be, the tax payable on any such turnover; and the Commissioner may direct that the dealer shall pay, by way of penalty in addition to the amount of tax so assessed, a sum not exceeding that amount." It will be apparent from both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I see no reason why the use of the phrase "proceed to assess" would connote something else. The same steps have to be taken by the Assessing Authority under sub-section (3), or to put it more artistically, the same mental process has to be undergone in the case of proceedings under sub-section (3) of section 11 which the Assessing Authority has to undergo in the case of proceedings under sub-section (4) or (5) or (6) of section 11, and, therefore, there being no additional factor coming into play in sub-sections (4), (5) and (6) of section 11, how can, from the mere use of the words "proceed to" which are prefixed to "assess", it be said that the expression "proceed to assess" would have a totally different meaning from the word "assess" as used in sub-sections(1) and (3) of section 11. The view I have taken was also taken by Mehar Singh and P. D. Sharma, JJ., in Nathu Ram's case [1963] 14 S.T.C. 311; 1962 Ct. L.J. (Punj.) This brings me to the consideration of the decision of Dua and Pandit, JJ., in Avtar Singh's case(1963) 65 Punj. L.R. 422. The learned Judges besides merely setting out the respective contentions of the counsel for the parties and indirectly pointing out that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited v. State of Mysore[1963] 14 S.T.C. 188. Ujjam Bai's case (3) is a full Court judgment of the Supreme Court and it has been laid down that "where action is taken under an ultra vires statute, or where the statute is intra vires but the action taken is without jurisdiction or where the action taken is procedurally ultra vires, the existence of an alternative remedy is no bar to the exercise of power under Article 32", or to add under Article 226 of the Constitution. To the same effect is the decision in The State Trading Corporation of India Limited's case(4). It cannot be disputed that the bar of limitation is a bar affecting jurisdiction, for no authority has jurisdiction to proceed with the matter if the bar of limitation intervenes. If any authority is needed for this proposition, reference may be made to the decision of the Privy Council in Joy Chand Lal Babu v. Kamalaksha ChaudhuryA.I.R. 1949 P.C. 239. To the same effect is the decision of the Supreme Court in Keshardeo Chamria v. Radha Kissen Chamria A.I.R. 1953 S.C. 23., wherein the observations of the Privy Council in Joy Chand Lal Babu's case(1) were adopted by their Lordships of the Supreme Court. Before the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11 of the Punjab Act has to be imported into sub-section (3) of the same section. It would be pedantic for me to give my reasons for the view that the period of limitation should be imported into section 11(3) particularly when this very matter has been fully and ably discussed in Bisesar House's case[1958] 9 S.T.C. 654., where interpreting a similar provision in the Berar Act it was held that all assessments under section 11, excepting the one under section 11(1), should be completed within three years. The learned Chief Justice has given very cogent and weighty reasons in support of his decision and I am in respectful agreement with the same. The decision of the learned Chief Justice also finds support from the Supreme Court decision in Commissioner of Income-tax v. Narsee Nagsee & Co.[1960] 40 I.T.R. 307. Therefore, I am of the view that the assessment under section 11(3) of the Act must be completed within three years from the last date on which the return could be filed under the Punjab Act. In view of what has been stated above, the contention of Mr. Bhagirath Dass that he made a right concession in Jiwan Singh's case[1960] 11 S.T.C. 540. that the assessment need not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion." This clearly brings out the distinction between the two provisions. Under section 34, the limitation is provided for the issue of the notice and not for the final assessment, whereas under section 11(4), (5) and (6) the limitation is provided for the final assessment and the issuance of a notice or an opportunity to show cause are merely conditions precedent for assessment under these provisions. At this stage, it will be proper to discuss the alternative argument of Mr. Sibal, who contends that even if it be assumed for the sake of argument that the period of limitation under sub-sections (4), (5) and (6) of section 11 is provided for taking a step towards assessment there is no indication on the record whatever that any step within the period of limitation was taken by the department. It is common ground that the issuance of a notice calling upon the dealer to produce accounts or to be present for hearing or to satisfy the Assessing Authority as to the correctness of the return are no steps towards assessment. This concession is made in view of the Supreme Court decision in Madan Lal Arora's case [1961] 12 S.T.C. 387. Therefore, we have to see what actually the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being applied instead of the other would be no ground to hold that it is a best judgment assessment. According to the learned counsel the assessment is being made according to the procedure laid down in sub-sections (2) and (3) of section 11. I am, however, unable to agree with this contention. No return as required by sub-section (1) was filed within the prescribed time. There is no question of an extension of time for filing the return under rule 72 of the Rules framed under this Act. No application for extension of time was made and there is no order granting the extension. Even if it is accepted for the sake of argument that the time for making the extension was enlarged after notice under section 11(2) of the Punjab Act the assessment can only be made under sub-section (3) of section 11. As I have already held, the period of limitation provided in sub-section (4), (5) and (6) of section 11 is equally applicable to sub-section (3) of section 11; and the order of assessment being beyond three years must be quashed on the ground that it is without jurisdiction for the same reasons as have been recorded while dealing with the period of limitation for an assessment made beyond th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections (1) to (6) of section 11 of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the Act). The returns are filed by the dealers under section 10 of the Act. According to sub-section (1) of section 11, if the Assessing Authority is satisfied with the returns filed by the registered dealer and comes to the conclusion that it is not necessary to send for him or to direct him to produce any evidence in support of the returns, then the Assessing Authority would assess the amount of tax due from the dealer on the basis of those returns. This sub-section does not prescribe any limitation within which the Assessing Authority has to make this assessment. If, on the other hand, the Assessing Authority is not satisfied with the returns filed by the registered dealer, then he would serve a notice on the dealer in the prescribed manner, asking him either to attend in person or to produce or cause to be produced any evidence on which he might rely in support of the returns on a specified date and place. Now, rules have been framed under this Act, which are called the Punjab General Sales Tax Rules, 1949. Rule 33 of these Rules mentions that the notice under section 11 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Business Profits Tax Act, 1947. If in a case, where the assessment order has been passed within three years under sub-section (3), undoubtedly further action can be taken under section 11-A. On the other hand, if no order has yet been made under this sub-section, then the Assessing Authority need not resort to the provisions of section 11-A, because the "definite information which had come into his possession" and which he wanted to utilise under section 11-A, can conveniently be made use of by him while making the assessment under sub-section (3). There is, thus, no need of importing the limitation of three years for completing the assessment under sub-section (3), which the Legislature in its own wisdom perhaps did not think it proper to incorporate in the statute. Then we come to sub-section (4), in which it is laid down that if a registered dealer, who had furnished the returns in respect of a period and to whom a notice under sub-section (2) of this section has been issued, fails to comply with the terms of that notice, then "the Assessing Authority shall within three years after the expiry of such period proceed to assess to the best of his judgment the amount of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to him. Two were admittedly within time and the third one was beyond limitation. In this notice it was stated that on failure to produce the documents and other evidence mentioned, the case would be decided on best judgment assessment basis. The petitioner had not complied with any of the notices, but had presented a petition under Article 32 of the Constitution in this Supreme Court challenging the right of the authorities to make a best judgment assessment on the ground that on the day of the last mentioned notice, the Sales Tax Authorities had no right to proceed to make any best judgment assessment, as the three years within which only such an assessment could be made had expired before then. The case was, undoubtedly, covered by the provisions of sub-section (4) of section 11 of the Act and if the Assessing Authority did not proceed to assess to the best of his judgment, within three years, as prescribed in this sub-section, then no assessment could be made afterwards. In this case, it was conceded that the Assessing Authority had not, as a matter of fact, proceeded to make any assessment on the petitioner at the date of any of the notices. The last notice, in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within three years, then the Assessing Authority could not proceed to assess to the best of his judgment under the provisions of sub-section (4) of section 11, since, he must do so, after the registered dealer had failed to comply with the terms of the notice issued under sub-section (2) and that too within three years after the expiry of the period for which it was proposed to make the assessment. By laying down that the notice under sub-section (2) of that Act must be issued within three years, it cannot be said that the learned Judges had held that the assessment under sub-section (3) should be completed within three years. Similarly, in the Supreme Court decision in Commissioner of Income-tax, Bombay City v. Narsee Nagsee and Co. [1960] 40 I.T.R. 307., all that was decided was that although section 11 of the business Profits Tax Act, 1947, did not prescribe any period within which the notice had to be issued, yet the period of four years prescribed for an escaped assessment under section 14 of that Act must be read into section 11 and that no notice could, therefore, be issued beyond a period of four years. Consequently, no assessment could be made on the basis of a notice whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein limited the rest of the proceedings is not further limited as to time." It is noteworthy that the words used in section 34 of the Indian Income-tax Act were "proceed to assess". An objection was afterwards taken that when the initiation of the proceedings had taken place within the period prescribed in that section, the Income-tax authorities could pass the final order of assessment at any time later on. In order to meet this objection, amendment was made in that Act and limitation was fixed for finalising the proceedings by the Income-tax authorities within a particular period, though only in a certain type of cases. If the Legislature finds that a similar amendment is needed in the Punjab Sales Tax Act, 1948, it can suitably amend this Act. Under these circumstances, the intention of the Legislature by making this amendment was that the Assessing Authority was bound to initiate the assessment proceedings within three years, as mentioned above. This limitation, however, did not apply to the final order of assessment, which could be made at any time later on, depending on the circumstances of each case, as stated above. The next point arises as to when the Assessing Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears or not, the Assessing Authority would, in law, be deemed to have proceeded to assess to the best of his judgment. Sub-section (6) deals with a case, in which the information has been received by the Assessing Authority that a dealer was liable to pay the tax under the Act, but had failed to apply for registration. In that case the Assessing Authority would proceed to assess to the best of his judgment within three years after the expiry of the period mentioned in this sub-section after giving him a reasonable opportunity of being heard. In a case, where it is found that he had wilfully failed to apply for registration, then in addition to the amount so assessed, a penalty, as provided in this sub-section, could also be imposed. Let us now apply the principles of law enunciated above to the cases before us. In Civil Writ No. 798 of 1962 (Rameshwar Lal Sarup Chand v. The Assessing Authority, Amritsar), the petitioner was a registered dealer and he had not filed any quarterly returns as prescribed by law. These returns related to the period 1st April, 1957, to 31st March, 1958. Notice in Form S. T. XIV had been given to him on 21st July, 1958, asking him to appear before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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