TMI Blog1989 (2) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... ent herein to show as to why the turnover in regard to cardboard boxes should not be subjected to tax at the rate of 4 per cent. Though in the said notice the assessing authority referred to section 20 of the Act and rule 50(3) of the Rules framed under the Act, it can be held that it was a notice issued under section 14(4) as the assessing authority is not the revisional authority who can revise under section 20 of the Act. After giving an opportunity to the respondent of being heard, the entire turnover was subjected to tax at the rate of 4 per cent by holding that the cardboard boxes would come within the ambit of item 19 of the First Schedule. The appeal thereon to the Commercial Tax Officer, No. 1, Rajahmundry, was dismissed. In the appeal to the Sales Tax Appellate Tribunal, it was held by relying upon the judgment of a Division Bench of this Court in Fatechand and Sons v. Commercial Tax Officer [1983] 54 STC 166 that a mere change of opinion cannot be the basis for exercising the power vested under section 14(4) read with sub-clause (cc) and hence the appeal was allowed. The learned Government Pleader contended that the power to reopen under section 14(4) arises even on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by him rectify any clerical or arithmetical mistake apparent from the record: Provided that no such rectification which has the effect of enhancing an assessment or any penalty or fee shall be made unless the assessing, appellate or revising authority has given notice to the dealer of his intention to do so and has allowed him a reasonable opportunity of being heard. (2) Where such rectification has the effect of reducing an assessment, penalty or fee the assessing authority shall make any refund which may be due to the dealer. (3) Where any such rectification has the effect of enhancing an assessment, penalty or fee, the assessing authority shall serve on the dealer a revised notice in form B-3 or B-6 as the case may be, and thereupon the provisions of the Act and these rules, shall apply as if such notice had been served in the first instance. (4)............... (5)..............." It can be seen that while the power of revision under section 20 of the Act is with the revisional authority, the power to reopen under section 14(4) is conferred not only upon the assessing authority but also upon the revisional authority. Further, the period of limitation prescribed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not before him by reason of an inadvertence, omission or deliberate concealment on the part of the assessee, or because of want of care on the part of the officer the turnover though in the books has not been taken notice of. This would be the natural and normal meaning of the expression 'turnover which has escaped' in rule 17(1)." It may be noted that rules 17(1) and 14(2) of the Madras General Sales Tax Rules, 1939 were so construed even when the revisional authority was not vested with the power to reopen in regard to escaped turnover. Later, rule 17(3-A) of the Madras General Sales Tax Rules was incorporated conferring the power of reopening in regard to the escaped turnover on the revisional authority also. While dealing with section 12(2) of the Madras General Sales Tax Act and rule 17(1) and rule 17(3-A) of the Madras General Sales Tax Rules, 1939, the Supreme Court held in State of Kerala v. M. Appukutty [1963] 14 STC 242 that "in exercising the revisional jurisdiction under section 12(2), the Deputy Commissioner would be restricted to the examination of the record for determining whether the order of assessment was according to law. Rule 17 confers power to assess es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice under sub-section (2) of section 17, and may proceed to assess or reassess such income, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section: ................................................." In that case, the High Court had not accepted the contention that restricted meaning had to be given to the word "escaped", i.e., only in cases where an item of income was not charged to tax due to a mistake or oversight on the part of the taxing authorities, that item could well come within the term "escaped" was not accepted. Therein it was held that in view of the words "any reason" and in view of the latter part of section "where income............ has been assessed at too low a rate" the phrase "escaped assessment" includes a case where there was a deliberate action. The said view of the High Court was approved by the Supreme Court in the above decision. But, in the Bihar Agricultural Income-tax Act, there is no provision conferring power upon the assessing authority to reopen the assessment. Further, in State of Kerala v. M. Appukutty [1963] 14 STC 242, Deputy Commissioner v. Dhanalakshmi Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 959 held that it is competent for the assessing authority in a reassessment proceeding to assess an item of turnover which had been omitted to be taxed earlier for any reason. The authority has, therefore, power to reassess a turnover even though in the return that turnover was included and the officer then thought that it was exempt. The said decision is strongly relied upon for the department to contend that it is open to the assessing authority to reopen under section 14(4) of the Act on the basis of mere change of opinion in regard to classification. But, the Madras High Court in the above judgment after referring to the decisions in State of Kerala v. M. Appukutty [1963] 14 STC 242 (SC), Deputy Commissioner v. Dhanalakshmi Vilas Cashew Co. [1969] 24 STC 491 (SC) and State of Kerala v. K.E. Nainan [1970] 26 STC 251 (SC) observed as follows: "The Supreme Court considered the words 'escaped turnover' in the context of the power given to the same authority to revise an assessment on the ground of illegality and impropriety and, therefore, their Lordships have restricted the scope of these words 'escaped turnover'. In the absence of such different provisions vesting the power o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed then the assessing authority can assess the correct amount of tax payable under section 14(4)(cc). When in view of mere change of opinion, the assessing authority felt that the exemption or deduction originally allowed has been wrongly allowed then he can have the power to reopen under section 14(4)(cc) and there are no words in the above provision to whittle down the said power. Under the scheme of our Act the revisional authority has also been given the power to reopen under section 14(4) as can be seen from section 14(4-C) of the Act. While dealing with similar provisions of the Kerala General Sales Tax Act whereunder the revisional authority was also vested with the power to reopen in case of escaped turnover the Supreme Court held in Deputy Commissioner v. Dhanalakshmi Vilas Cashew Co. [1969] 24 STC 491 and State of Kerala v. K.E. Nainan [1970] 26 STC 251 that while the power of revision can be exercised by looking into assessment record only, the power of reopening has to be exercised on the basis of the material de hors the record. The contention for the department that the power of reopening can be exercised even in regard to turnover which was already considered at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings of the purchasers from the assessee, it was noticed that the sales of cotton yarn by the assessee were last sales within the State and hence the said turnover was exigible to tax in his hands in view of the relevant provision and so it was held that the exemption was wrongly granted in regard to the said turnover. So it is a case of escapement of turnover due to the erroneous grant of exemption of turnover, which had come to the notice of the assessing authority on the basis of the material de hors the assessment record. Thus it can be stated that if it can be held by a perusal of the assessment record itself that deduction or exemption has been wrongly granted, then it is for the revisional authority to correct it by exercising the power under section 20 of the Act. But, if it is a case where it is found on the basis of the material de hors the assessment record that the exemption or deduction has been wrongly granted, the same has to be corrected under section 14(4) by reopening the assessment. In Menta Narasimhaswamy Co. v. State of Andhra Pradesh [1983] 54 STC 6 (AP) one of us (Jeevan Reddy, J.) held that the order of the Deputy Commissioner, which was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed by my learned brother, Neeladri Rao, J. However, having regard to the importance of the question involved, I wish to add a few words. The question in this case is whether it is open to the assessing authority to reopen an assessment on a mere change of opinion. A Bench of this Court has opined, in Fatechand and Sons v. Commercial Tax Officer [1983] 54 STC 166, that the Commercial Tax Officer cannot reopen the assessment on a mere change of opinion. This was held following the decision of the Gujarat High Court in Arvind Boards and Paper Products Ltd. v. M.T. Keshruwala, Income-tax Officer [1980] 124 ITR 626. Another Bench of this Court, comprising one of us (Jeevan Reddy, J.), in Menta Narasimhaswamy Company v. State of A.P. [1983] 54 STC 6, also expressed a somewhat similar opinion. It was held that the power under sub-section (4) of section 14 is invoked when, on the basis of some fresh material or information not available at the time of making the assessment, it appears that certain turnover has escaped assessment, or that it has been under-assessed, or assessed at a lower rate. The said power, it was observed, cannot be exercised for reviewing an order on the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exercised is that a certain turnover has escaped assessment to tax, or has been under-assessed, or assessed at a rate lower than the correct rate. There is no other condition. He is equally right in saying that the power to reopen an assessment conferred by section 147 of the Incometax Act is a conditioned power. Section 147 reads as follows: "147. Income escaping assessment.-If- (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstance, the consideration, that there must be a finality to assessment proceedings once concluded, and that assessments should not be reopened lightly, or in a cavalier manner, but for good reasons alone. It is, therefore, necessary to construe the power under section 14(4) in such a way as to ensure that tax legitimately due to the State is not evaded and, at the same time, the assessees are not put to harassment by repeated reopening of assessments. It is in this sense that the observations of this Court in Fatechand and Sons v. Commercial Tax Officer [1983] 54 STC 166 and Menta Narasimhaswamy Co. v. State of A.P. [1983] 54 STC 6 must be understood. We proceed to elaborate. When an assessment order is made, it should be presumed that the assessing authority applies his mind to all the relevant facts and makes the assessment keeping in mind the principles of law applicable thereto. For example, take this very case. The assessing authority treated the cardboard boxes as "general goods" and exempted them from tax inasmuch as the total turnover of the assessee was below the prescribed limit of Rs. 25,000. Subsequently, the same officer, or his successor-in-office may feel di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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