TMI Blog1994 (5) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... nspection Report. Exhibit P1(b) prepared by the Kottayam officer, of which a copy was served on spot on the petitioner's son S. Gopalakrishnan, a partner of the firm who was present at the time of the search. The Kottayam Officer thereafter called upon the dealer to produce its books of accounts for the year 1987-88 along with the other details called for by his notice exhibit P3 dated October 7, 1987, on October 17, 1987. Two of the partners Saravanan and Gopalakrishnan appeared with the accounts on the date notified in response to this notice. According to the counter-affidavit filed on behalf of the respondents, it was then found necessary to verify the accounts for 1985-86 and 1986-87 as well, as some of the seized slips related to those years. The books for those years were accordingly produced and verified on 22nd, 27th and 28th October, 1987 and December 29, 1987, in the presence of the partners. The Kottayam officer, thereafter issued the notice exhibit P3 on January 21, 1988 alleging irregularities in the accounts as also stock variation at the time of inspection, and calling upon the dealer to show cause why penalty in the sums mentioned may not be imposed on it for the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as only tentative, which was liable to be revised, if and when necessary materials were furnished before him to that effect. 7.. The Kottayam Officer then proceeded to pass his order, exhibit P11, on November 10, 1988, imposing penalties of Rs. 24,32,387 for 1985-86 and Rs. 18,35,249 for 1986-87 under section 45A of the Act for non-maintenance of true and complete accounts for these two years. He issued a fresh notice exhibit P12 dated November 14, 1988, to show cause why a penalty of Rs. 8,61,470 shall not be imposed similarly for the year 1987-88. The petitioner filed the writ petition on receipt of exhibits P11 and P12 and further proceedings pursuant thereto were stayed by this Court. The challenge in the writ petition is to exhibits P11 and P12. 8.. Pending this writ petition, the assessment for the year 1985-86 was completed on March 29, 1990, based on the records seized at the inspection on September 24, 1987. The petitioner challenged this order in appeal before the Appellate Assistant Commissioner of Sales Tax together with a petition for staying the recovery of the amounts demanded pending the appeal. In the absence of any order on the application for stay and apprehe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who argued the case for the petitioner, that the attention of the Division Bench had not been focussed on a vital aspect of discrimination which vitiates the section. I shall deal with this aspect in deference to counsel as the validity of the section has otherwise been upheld in Paisons [1992] 85 STC 337 (Ker); 1991 KLJ (TC) 557. 11.. The contention in short is this. Section 45A(1)(b) entitles imposition of penalty for non-maintenance of true and complete accounts. Sub-section (2) of section 19 also contains a similar provision which enables the assessing authority to impose penalty as provided in section 45A if he is satisfied that the escape from assessment was due to wilful non-disclosure of assessable turnover by the dealer. If the penalty is imposed independently under section 45A, the only remedy available to the aggrieved dealer to get redress is a revision to the Deputy Commissioner under section 45A(3), with a further revision to the Board of Revenue, followed by a writ petition to this Court. As against this, it is pointed out that an order imposing penalty under section 19(2) is subject to the right royal remedy of an appeal to the Appellate Assistant Commissioner wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution. 14.. The case of Suraj Mall Mohta [1954] 26 ITR 1 (SC); AIR 1954 SC 545 was one where the person proceeded against before the Commission had no statutory remedy at all to get redress. But that is not the position in a proceeding under section 45A. The dealer on whom a penalty is imposed under section 45A has the right to make an application under sub-section (3) to the Deputy Commissioner (referred to as a revision petition), who has got wide powers either to confirm, reduce or waive the penalty, or to remand the case to the original authority for reconsideration. Sub-section (5) confers powers on the Board of Revenue, either suo motu or on application to call for the records either of the original authority or the Deputy Commissioner and to make such order as it thinks fit. These remedies are not so constricted as are portrayed to be. The powers are wide enough to grant relief in proper cases and are not limited to questions of law or jurisdiction only. In fact the Division Bench in Paisons [1992] 85 STC 337 (Ker); 1991 KLJ (TC) 557 relied on the existence of these remedies as a reason for repelling the attack on section 45A as conferring an unbridled or uncanalised power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er opportunity should be afforded. This plea had therefore only to fail. 17.. The other contention raised is regarding the validity of the search and the seizure, for non-compliance with sub-sections (3) and (4) of section 28. The submission is that a search is authorised by sub-section (3) only if the authority had reason to believe (which necessarily had to be on tangible materials available with him), that the dealer was attempting to evade payment of tax under the Act. According to the petitioner there were no such materials with the authority for him to form the jurisdictional belief and therefore the search is vitiated. It is also stated that the search has to be conducted in accordance with the provisions of the Code of Criminal Procedure, 1973, but it was not so conducted, as there were no independent witnesses for the search as mandated by section 165 of the Code. 18.. I do not think it necessary to labour long on this submission for the reason that the challenge in the main is to the imposition of the penalty under section 45A. The question for consideration is whether the authority concerned had materials with him which would justify the imposition of the penalty. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no nexus between the jewellery business and the diaries and the slips. He states that when he has denied such connection, the burden was on the department to establish it, but the burden has not been discharged with any relevant material. In any case, it is stated that the element of mens rea on which stress was laid in Paisons [1992] 85 STC 337 (Ker); 1991 KLJ (TC) 557, has not been established. 21.. An equally vehement attack was mounted on the quantum of penalty imposed by exhibit P11. It was pointed out that the assessments for 1985-86 and 1986-87 have been subsequently completed. The turnover allegedly suppressed and on which penalty at double the amount of tax evaded was imposed was Rs. 2,02,69,890 for 1985-86, going by exhibit P11. But as per the revised assessment exhibit P18 for that year (same as exhibit P2 in O.P. No. 8422 of 1990) the turnover additionally assessed consequent on the search is only Rs. 1,39,02,920 with a tax liability of Rs. 6,95,136 (which itself is under challenge in appeal). The quantum of penalty imposed for 1985-86 is thus out of all proportion to the amount of suppression alleged as per the assessment for that year and therefore exhibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kottayam officer's jurisdiction in paragraphs 19 to 27 of the writ petition and paragraphs 16, 17, 19, 20 and 23 of the reply-affidavit. Briefly, the submission is that the petitioner is carrying on business in Kollam, that he is an assessee on the files of the Sales Tax Officer, I Circle, Kollam, that he is ordinarily subject to the jurisdiction of the officers at Kollam only, that the Kottayam officer purports, according to exhibit P11 and the counter-affidavit, to exercise jurisdiction in this matter only because of the Statewide jurisdiction conferred on him by exhibits P13 and P14, that these notifications are ultra vires the Act, as the Government's power under the relevant provisions of the Act is only to appoint officers to function within local limits, that this has been violated by empowering officers to exercise Statewide jurisdiction and therefore all the proceedings initiated by the Kottayam officer have to fail. 26.. I shall deal with this point with some prefatory remarks about the introduction of section 45A and the authorities empowered to act thereunder. The section was inserted in the Act by Act 12 of 1976 with effect from October 27, 1976. It provides that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under which the Kottayam officer purported to act and impose the penalty on the petitioner at Kollam by the proceedings exhibit P11. 28.. Later Government issued the notification exhibit P14 on March 29, 1984, under explanation II to sub-section (1) of section 45A, specifying Intelligence Officers of Agricultural Income-tax and Sales Tax as "assessing authorities" for the purposes of the said sub-section with effect from April 1, 1984. This notification did not prescribe the areas to which the jurisdiction of the respective officers extended. It was a general notification making Intelligence officers also among others, as assessing authorities for purposes of section 45A(1). This notification is relied on in the counter-affidavit as a source of power for the Kottayam officer to make the order exhibit P11 and issue the notice exhibit P12. 29.. According to the respondents exhibits P13 and P14 empower the Kottayam officer to exercise authority under section 45A(1) throughout the State of Kerala and therefore the proceedings exhibit P11 and the notice exhibit P12 are sustainable and valid. 30.. One of the two authorities who could act under section 45A(1) is "the assessing aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as by Webster, Funk and Wagnall and others. I need not elaborate. When a legislation applicable to the entire State speaks of a locality or local limit, it clearly signifies that it does not refer to the entire State, but to a defined part thereof. Therefore when section 3(2) speaks of the appointed officers exercising their powers within the local limits assigned to them, it means that their jurisdiction cannot extend to the entire State but to defined areas or parts of the State only. The scheme of the Act also requires such an interpretation as otherwise, conflict of jurisdiction will arise if different authorities of equal status and exercising coeval powers purport to exercise jurisdiction over the same person in respect of the same subject-matter. I shall refer to some of these provisions which reinforce the above conclusion of mine. 33.. Section 14 read with rules 3(h) and 5 requires an application for registration to be made to the assessing authority in whose area of jurisdiction the principal place of business of the dealer applying for registration is situated. Rule 18 likewise speaks of the assessing authority of the area in which the principal place of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that the subsequent Bench proceeded on the basis of the correctness of the earlier decision and did not doubt it. 37.. The decision of this Court in Intelligence Officer v. Swarnambhal Jewellers [1988] 69 STC 175 only held that the object of explanation II to section 45A(1) was to confer the power under section 45A(1) on Intelligence Officers as well in addition to the authorities vested with jurisdiction under sections 2(iv) and 3(2). But the further ramification, whether this power of an Intelligence Officer, could be exercised throughout the State, or only within local limits, was not under consideration by the Bench and therefore it is of no assistance to the respondents. 38.. Faced with this situation, the Senior Government Pleader (Taxes), Sri T. Karunakaran Nambiar, made an alternate submission that if exhibits P13 and P14 are ultra vires to the extent mentioned, the power conferred by S.R.O. No. 335 of 1963 will revive and therefore the Kottayam officer will have jurisdiction over the matter. I cannot agree. Apart from the fact that such a plea is not reflected in the correspondence or in the pleadings, no material has also been placed before me to show that the Kot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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