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TMI Blog1976 (2) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... 529.67 and the taxable turnover at Rs. 3,40,327.14. This assessment order is dated 29th August, 1963. In July, 1964, there was a surprise inspection of the residence of one K. Pitchaimuthu, which resulted in the discovery of 29 slips of which 8 were held to refer to the appellants. Sometime later on, another surprise inspection of two individuals by name R. Perumal and Palaniandi Chettiar under whom the said Pitchaimuthu was working as accountant resulted in 27 more slips being recovered, out of which 25 were said to relate to the appellants. On the basis of these recovery of slips, the assessing officer issued a notice under section 16 of the Tamil Nadu General Sales Tax Act, 1959, requiring them to show cause why certain turnovers for each of these years should not be determined as having escaped assessment. After following the prescribed procedure, by an order dated 15th December, 1964, the assessing authority by best of judgment determined the escaped turnover at Rs. 26,68,229.92 for the assessment year 1961-62 and Rs. 41,34,821 for the assessment year 1962-63. The assessees preferred two writ petitions against this order on the ground that section 16 of the Tamil Nadu General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, levy or collection was not in accordance with law and such tax or penalty assessed, reassessed, levied or collected or purporting to have been assessed, reassessed, levied or collected shall, for all purposes, be deemed to be and always to have been validly assessed, reassessed, levied or collected, and accordingly- (a) all acts, proceedings or things done or taken by the State Government or by any officer of the State Government or by any other authority in connection with the assessment, reassessment, levy or collection of such tax or penalty shall, for all purposes, be deemed to be, and to have always been, done or taken in accordance with law, (b) no suit or other proceeding shall be maintained or continued in any court against the State Government or any person or authority whatsoever for the refund of any tax or penalty so paid, and (c) no court shall enforce any decree or order directing the refund of any tax or penalty so paid." It may be mentioned that the assessees when they filed writ petitions challenging the order under section 16 also preferred regular appeals See P.S. Subramaniam Chettiar & Sons v. Joint Commercial Tax Officer III, Dindigul [1966] 18 S.T.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated, was substituted by the amending Act with retrospective effect from 1st April, 1959. Therefore, in cases where the assessment order was made on a best of judgment basis under section 16, as it originally stood, though the assessing authority had no jurisdiction to make that order and, therefore, the order was without jurisdiction, by reason of the retrospective operation, that order became a valid order and shall be deemed to have been validly made in exercise of the amended provision. This is a necessary corollary of giving retrospective effect to the provision. In Venkatachalam v. Bombay Dyeing and Mfg. Co. Ltd.[1958] 34 I.T.R. 143 (S.C.)., the Supreme Court considered the effect of retrospective operation. In that case, the Income-tax Officer in the original order of assessment of a company for the assessment year 1952-53 gave credit for a particular amount being the interest at 2 per cent on the tax paid in advance under section 18A(5) of the Income-tax Act. Later on, section 13 of the Indian Income-tax (Amendment) Act, 1953, which was passed subsequently, inserted a proviso to section 18A(5) that an assessee was entitled to interest not on the whole tax paid in advance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order and, in case where by a writ of certiorari, the order has been quashed and removed from the record, the validating provision could not be applied. The matter is not res integra. Number of cases have considered similar arguments. Discussing about the validating statutes in general, the Supreme Court in Shri P.C. Mills v. Broach MunicipalityA.I.R. 1970 S.C. 192 at 195., made the following oft-quoted observations: "When a legislature sets out to validate a tax declared by a court to be illegally collected under ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that -the decision of the court shall not bind, for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction has to be understood in a special sense. Only if the legislature authorises the levy of taxes on buildings and lands, it could be levied on capital value as well. After this decision, the Gujarat Municipalities Act was amended with retrospective operation providing for "taxes" to be levied on lands and buildings based on annual letting value or the capital value or a percentage of the capital value. Relying on this provision, the Supreme Court held that the assessments made on the basis of the capital value under the original provision shall be deemed to have been made under the amended provision, which was given retrospective operation, and the validating provision also saved all the assessments so made under the original provision. This decision was followed in Ahmedabad Corporation v. New S.S. & Wvg. Co. A.I.R. 1970 S.C. 1292. In Sadasib Prakash Brahmchari, Trustee of Mahiparakash Muth v. State of OrissaA.I.R. 1956 S.C. 432., the Supreme Court upheld the validity of a scheme, which was held to be void by courts, on the basis of an amendment, which was given retrospective operation. The following passage, which is relevant for our purpose, may usefully be quoted: "Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection shall be construed so as to prevent the imposition of levy or collection of the tax in respect of the first purchase of split or processed foodgrains merely because tax has been imposed, levied or collected earlier in respect of the first purchase of those foodgrains in their unsplit or unprocessed form. Section 7 also validated the earlier levies and declared the notification issued under section 3-D to be deemed to have been issued under the Act as so amended. An assessee who succeeded in getting the assessment order set aside by the High Court under article 226 of the Constitution of India, challenged the right of the Government to levy sales tax on the purchases made by him of split or processed foodgrains subsequent to the amendment. One of the contentions raised by him was that the newly added explanation to section 3-D read with section 7 of the amending Act, which validated the earlier levies, amounted to unlawful usurpation of judicial power of the legislature. Repelling this argument, the Supreme Court held that the legislature had not purported to either directly or by necessary implication, overrule the decision of the court; but, on the other hand, it had accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the petitioners, relying on the decision in Smt. Indira Nehru Gandhi v. Raj Narain(4), argued that the effect of validating an assessment, which had already been set aside by the court, would amount to setting aside the judgment of this court itself and that it was not open to the legislature to encroach on the judicial field. The learned counsel referred to the relevant portions, where clauseA.I.R. 1975 S.C. 2299. of article 329A of the Constitution inserted by the Constitution (Thirty-ninth Amendment) Act, 1975, was considered. That clause reads as follows: "(4) No law made by Parliament before the commencement of the Constitution (Thirty-ninth Amendment) Act, 1975, in so far as it relates to election petitions and matters connected therewith, shall apply or shall be deemed ever to have applied to or in relation to the election of any such person as is referred to in clause (1) to either House of Parliament and such election shall not be deemed to be void or ever to have become void on any grounds on which such election could be declared to be void or has, before such commencement, been declared to be void under any such law and notwithstanding any order made by any court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f judgment at Rs. 26,37,640.30. This was on the basis that the slips recovered during surprise inspection, which related to the assessees, disclosed sales and that one pattial disclosed a suppression to the tune of Rs. 20,312. With reference to the serial numbers found in the various pattials recovered in such surprise inspection, the assessing officer was of the view that there should have been at least 909 pattials during the year of assessment. He accordingly multiplied 20,312 by 909 (sic) and arrived at the figure 26,37,640.30. In so far as the assessment year 1962-63 was concerned, the assessing officer found that one slip revealed a sale to the extent of Rs. 5,442.70, but in the regular accounts only a sum of Rs. 447.83 was disclosed in respect of this sale bill. The turnover assessed originally under section 12 with reference to the accounts produced by the assessees was Rs. 3,40,327. In the view of the assessing authority, therefore, the estimate should be 5,445 by 448 x 3,40,327 and on that basis estimated suppressed turnover at Rs. 41,34,821. The Tribunal pointed out that it could not be said that a businessman always suppressed at a uniform basis and that the suppression ..... 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