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2016 (3) TMI 331 - SUPREME COURT

2016 (3) TMI 331 - SUPREME COURT - (2016) 4 SCC 769, [2016] 91 VST 23 (SC) - Validity of sales tax assessment - Assessing Officer sent notices after the expiry of three years - powers under sub-section (10) of Section 11 of Punjab General Sales Tax Act, 1948 - Held that:- there would be no question of extending the time for assessment when the assessment has already become time barred. A valuable right has also accrued in favour of the assessee when the period of limitation expires. If the Commi .....

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May 25, 2007 respectively. Thus, for the Assessment Year 2000-2001, order of extension is passed more than three years after the last date and for the Assessment Year 2001-2002, it is more than two years after the last date. Such a situation cannot be countenanced as rightly held by the High Court. - When the last date of assessment in respect of these Assessment Years expired, it vested a valuable right in the assessee which cannot be lightly taken away. As a consequence, sub-section (11) .....

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eals, the judgment which is impugned is passed by the High Court of Punjab & Haryana. The issue involved in these appeals is identical which pertains to the interpretation that is to be accorded to sub-section (10) of Section 11 of Punjab General Sales Tax Act, 1948 (hereinafter referred to as the "Act"). It is for this reason that all these appeals were heard together and can conveniently be disposed of by one common judgment. Since SLP (C) Nos. 21712-21717 of 2009 was taken as th .....

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rein is three years from the end of the year. Accordingly, assessments were to be made by 30th April, 2004 for the Assessment Year 2000-01, 30th April, 2005 for the Assessment Year 2001-02, 30th April, 2006 for the Assessment Year 2002-03 and 30th April, 2007 for the Assessment Year 2003-04. It is an admitted case that no assessment was made in respect of any of these Assessment Years by the aforesaid stipulated dates. 4) The Assessing Officer, however, sent notices to the respondent-assessee in .....

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or such further period as he may deem fit, after recording in writing the reasons for extending such period. When the objection was taken by the assessee that the notices were time barred, the Excise and Taxation Commissioner, Patiala passed orders dated August 17, 2007 granting extension of time. Reason given for extension of time was that the case of the assessee for the year 1999-2000 was pending with the Tribunal. This order of extension was challenged by the respondent along with the order .....

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that when the normal period of limitation for passing assessment order by the Assessing Officer was three years, as per Section 11(3) of the Act, the power to extend the period could be exercised within the said period of three years and not after the expiry of limitation period. This plea of the assessee was rejected by the Tribunal. 6) The assessee took up the matter further by filing appeals before the High Court. Here, the assessee has succeeded in its submission as the High Court of Punjab .....

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purposes of assessment. This order is assailed by the Revenue in the instant appeals before us. 7) It would also be pertinent to note, at this stage, that while arriving at the aforesaid conclusion, the Punjab and Haryana High Court has placed heavy reliance upon the view taken by a Division Bench of Karnataka High Court in Bharat Heavy Electricals Ltd. v. Assistant Commissioner of Commercial Taxes (INT-I), South Zone, Bangalore and others (2006) 143 STC 10 which judgment of Karnataka High Court .....

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better understood once the relevant statutory provision is noted, it would be apposite to reproduce the provisions of Section 11 of the Act, which are as follows: "11. Assessment of tax. - (1) If the Assessing Authority is satisfied without requiring the presence of dealer or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, he shall pass an order of assessment on the basis of such returns within a period of three years from .....

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nce on which such dealer may rely in support of such returns. (3) On the day specified in the notice or as soon afterwards as may be, the Assessing Authority shall, after hearing such evidence as the dealer may produce, and such other evidence as the Assessing Authority may require on specified points, [pass an order of assessment within a period of three years from the last date prescribed for furnishing the last return in respect of nay period.] (4) If a dealer having furnished returns in resp .....

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eturn in respect of such period and after giving the dealer a reasonable opportunity of being heard, pass an order of assessment to the best of his judgment. (6) IF upon information which has come into his possession, the Assessing Authority is satisfied that any dealer has been liable to pay tax under this Act in respect of any period but has failed to apply for registration, the Assessing Authority shall, within five years after the expiry of such period, after giving the dealer a reasonable o .....

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r interest payavble under this Act shall be paid by the dealer in the manner prescribed, by such date as may be specified in the notice issued by the Assessing Authority for the purpose and the date so specified shall not be less than fifteen days and not more than thirty days from the date of service of such notice: Provided that the Assessing Authority may, with the prior approval of the Assistant Excise and Taxation Commissioner, Incharge of the District extend the date of such payment or all .....

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m him. (9) Any assessment made under this section shall be without prejudice to any penalty imposed under this Act. (10) The Commissioner, may for reasons to be recorded in writing, extends the period of three years, for passing the order of assessment for such further period as he may deem fit. (11) Where the proceedings of assessment are stayed by an order of any court, the period for which such stay remains in force, shall not count towards computing the period of three years specified under .....

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f such period. On the other hand, in those cases where return is not filed or any dealer, who is liable to pay the tax under the Act, does not get himself registered therein, the period of assessment prescribed is five years. We are not concerned with the alternate situation as in the instant appeals not only the assessees are registered dealers, they had also filed their returns regularly within the prescribed period and, therefore, assessments were to be completed within a period of three year .....

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such reasons are to be recorded in writing. Obviously, the purpose of giving reasons in writing is to ensure that the power to extend the period of limitation is exercised for valid reasons based on material considerations and that power is not abused by exercising it without any application of mind, or mala fide or on irrelevant considerations or for extraneous purposes. Such an order of extension of time, naturally, is open to judicial review, albeit within the confines of law on the basis of .....

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id provision 'extension' of time is in contradistinction to the word 'deferment' which appears in the Karnataka Legislation. On that basis, he argued that it was inappropriate on the part of the High Court to refer to and rely upon the judgment of Karnataka High Court inasmuch as provision of law contained in the Karnataka Sales Tax Act is entirely different. He further submitted that since in Punjab Legislation, the expression used is 'extension of time', the Court was r .....

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defer' and 'deferment' as can be seen from the above definitions, clearly contemplate postponement, which presupposes that the time period originally fixed is not extinguished. In other words, an action, which is deferred, (i.e. an action which is required to be completed within a specified time frame) can only be deferred of which the time so fixed has not expired. It was submitted that, in contrast, Black's Law Dictionary defines the expression 'extension' as follows: & .....

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nder Title III of Omnibus Crime Control and Safe Streets Act is of same premises, involves substantially same persons, and is part of same investigation, second Title III surveillance order issued after expiration of first order is 'extension' of first order for purposes of requirement of sealing of recordings, even if there is gap of time in between expiration of first order and entry of second." (Emphasis supplied) 12) Mr. Ganguli also referred to the concept of extension as incor .....

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cted. "148. Enlargement of time.- Where any period is fixed or granted by the court for the doing of any act prescribed or allowed by this Code, the court may, it its discretion, from time to time, enlarge such period not exceeding thirty days in total, even though the period originally fixed or granted may have expired." A plain reading of the above would show that when any period or time is granted by the court for doing any act, the court has the discretion from time to time to enla .....

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39(2) of the Income Tax Act, which empowered the Assessing Officer to grant an extension of time for filing of the return of income, upholding the power of the Income Tax Officer to extend the time for filing of the Income Tax return by the assessee even after the expiry of the time originally granted, this Court held as follows: "9. In this context, the question whether a belated application could be regarded as valid or not has to be considered. As rightly pointed out by the Punjab and Ha .....

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that discretion for proper reasons. No fetters were placed upon the discretion of the ITO as regards the number of times he could extend the date or the period for which he could extend it. It is conceded that repeated applications could be made within the time allowed, in view of the clear indication to that effect in Form No. 6, by the use of words "it has not been possible". If it was intended that the application for extension of time under Section 139(2) was to be made within the .....

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xtension could be made even after the period allowed originally or as a result of extension granted had expired. Keeping in mind the object of giving discretion to the ITO and the consequences that were to follow from not filing the return within time, we see no justification for reading into the section any limitation to the effect that no application could be made after the time allowed had expired. We see no good reason to construe the section so narrowly." (emphasis supplied) In that ju .....

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e proceeding cannot be called in aid to while interpreting a procedural provision contained in the Act. Section 148 of the Code provides that where any period is fixed or granted by the court for the doing of any act prescribed or allowed by the Code, the court may, in its discretion, from time to time, enlarge such period, even though the period originally fixed or granted may have expired. Various situations can be envisaged where a party to the proceeding is prevented by circumstances beyond .....

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tenance from the Arbitration Act, 1940 which gave power to the Court to extend time. It was submitted that this Court has held in the matter of Hindustan Steelworks Construction Ltd. v. C. Rajasekhar Rao (1987) 4 SCC 93 that the Court has got the power to extend time even after the award has been given or after the expiry of the period prescribed from the award. 15) Mr. Ganguli re-emphasised that reliance upon the decision of Gujarat High Court in the impugned judgment was untenable as the provi .....

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ction (10) of Section 11 states, in no uncertain term, that the assessment order is to be passed 'within a period of three years......'. It was emphasised that the word 'within' was of significance. It was pointed out that before the year 1998, no period of limitation was prescribed and such a provision came to be inserted by way of amendment vide Act No. 12 of 1998 dated April 20, 1998 . It was further argued that sub-section (10) of Section 11 obligates the Commissioner to reco .....

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lam Agro India Ltd. (formerly Olam Export India Ltd.); decided by the Punjab & Haryana High Court on August 20, 2013. (ii) State of Punjab v. M/s. Olam Agro India Ltd.; Daily Order; Dismissed by the Supreme Court vide Oder dated May 08, 2015. (iii) A.B. Sugars Limited v. The State of Punjab and others; Decided by the Punjab & Haryana High Court on September 01, 2009. 17) It was also argued that conceptually there was no difference between 'deferment' and 'extension' insof .....

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re, those cases were rightly relied upon by the High Court in the impugned judgment. 18) In rejoinder, Mr. Ganguli refuted the aforesaid submissions of the learned counsel for the assessees. The arguments advanced by him was that the submission of the assessees that the Commissioner has to afford an opportunity of hearing to the dealer before extending the period of limitation does not arise in the present case as this was not the issue raised in the Courts below. He argued that the question to .....

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our serious considerations to the submissions made by the counsel who argued the matter. 20) We may say at the outset that though provisions of the Punjab Act are couched in different language from Karnataka Act or Gujarat Act, the essence of these provisions is same. As noticed above, insofar as scheme of Punjab Act is concerned, the assessment order is to be normally passed within a period of three years. At the same time, power is given to the Commissioner under Section 11(10) of the Act to e .....

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to justify his action of extending time but also the period by which the time is extended. In the Karnataka Legislation, the power is of 'deferment'. In that Legislation as well, the Assessment Order is to be passed within three years as sub-section (5) of Section 12 of Karnataka Sales Tax Act stipulates that no assessment shall be made after a period of three years from the date on which the return under sub-section (1) of that order is submitted by a dealer subject to two provisos men .....

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sioner for reasons to be recorded in writing shall be excluded." 21) Clause (b) of sub-section (6) indicates that Joint Commissioner, in appropriate cases, may pass an order for deferment of Assessment Order to be passed by the Assessing Authority and once such an order is passed, that period has not to be counted while computing the period of limitation. Significantly, this provision also mandates the Joint Commissioner to record reasons for deferring the orders of assessment. In essence, .....

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istinction between "deferment" and "extension" as per the definitions contained Black's Law Dictionary in the given situation, which is dealt with in the instant appeals. 22) Even otherwise, it is important to understand the ratio laid down in the judgment of Karnataka High Court in Bharat Heavy Electricals Ltd. (supra). The issue in the said case before the Karnataka High Court was as to whether the power to pass a deferment order is to be exercised even after the expiry .....

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the situation. There is no question of deferring assessment which has already become timebarred. The provision for exclusion of time in computing the period of limitation of deferment of assessment is meant to prevent further running of time against the Revenue if the limitation had not expired." (emphasis supplied) 23) It was also observed that upon the lapse of the period of limitation prescribed, the right of the Department to assess an assessee gets extinguished and this extension confe .....

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question of extending the time for assessment when the assessment has already become time barred. A valuable right has also accrued in favour of the assessee when the period of limitation expires. If the Commissioner is permitted to grant the extension even after the expiry of original period of limitation prescribed under the Act, it will give him right to exercise such a power at any time even much after the last date of assessment. In the instant appeals itself, when the last dates of assessm .....

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