TMI Blog1963 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... RAO., RAGHUBAR DAYAL., N. RAJAGOPALA AYYANGAR., J. R. MUDHOLKAR JJ. M/s. J.M. Thakar and H.M. Thakar, Advocates, and O.C. Mathur, J.B. Dadachanji and Ravinder Narain, Advocates of M/s. J.B. Dadachanji and Co., for the appellant (in both the appelas). B. Sen, Senior Advocate, (I.N. Shroff, Advocate, with him), for the respondents (in both the appeals). JUDGMENT The judgment of DAS, ACTING C.J., SUBBA RAO, RAJAGOPALA AYYANGAR and MUDHOLKAR JJ. was delivered by SUBBA RAO J. RAGHUBAR DAYAL J. delivered a separate judgment. SUBBA RAO J.-- -These two appeals by certificate raise the question of the true interpretation of the meaning of the expression " escaped assessment " in section 11-A of the Central Provinces Berar Sales Tax Act, 1947 (XXI of 1947), hereinafter called the Act. The facts in Civil Appeal No. 101 of 1961 are as follows : The appellant is the manager of a joint Hindu family firm carrying on business in bidis. He is registered as a dealer under section 8 of the Act. Every registered dealer under the Act is required to furnish quarterly returns of his turnover within one month from the end of the quarter. For the year 1949-50, i.e., for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt. On the formation of the State of Madhya Pradesh, the above appeals were transferred to the Madhya Pradesh High Court and were heard by a Division Bench consisting of Hidayatullah C.J. and Choudhuri J. The Division Bench held that section 11-A of the Act could apply only to a case where there was a final assessment and that in the instant cases the first assessment proceedings were pending and, therefore, the said section had no application thereto. In the result, by a common judgment, they set aside the orders of Kotval J. Hence the present appeals. Mr. J. M. Thakar, learned counsel for the appellant, raised before us the following four points : (1) The expression " escaped assessment " in section 11-A of the Act would apply also to a case where there was no assess ment at all. (2) Even if the first assessment proceedings were pending be fore the appropriate authority the said authority could only make the assessment within three years from the date of the commencement of the said proceedings, which, according to him, would start from the date of issue of notice by the said authority in the manner prescribed by the Central Provinces and Berar Sales Tax Rules, 1947, hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived the attention of courts in different contexts. In Commissioner of Income-tax, Bombay v. Pirojbai N. Contractor, the words " escaped assessment " in the Indian Income-tax Act were defined. It was held therein that the said words were wide enough to include cases where no notice under section 22(2) of the Income-tax Act had been issued to the assessee and therefore his income had not been assessed at all under section 23 thereof. The said view has been assumed to be correct by this court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, and Maharajadhiraj Sir Kameshwar Singh v. State of Bihar and extended to cover a case where the first assessment was made in due course but a part of the income escaped therefrom. This court in Commissioner of Income-tax v. Narsee Nagsee and Co., construing the provisions of section 14 of the Business Profits Tax Act, 1947, reviewed the law on the subject and came to the following conclusion : "All these cases show that the words ' escaping assessment ' apply equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the assessee before them, and endorsed the said view. That decision turned upon the interpretation of section 34 of the Indian Income-tax Act. There, Burn and Co., an unregistered firm, made a return of their total income on January 13, 1928. On February 25, 1928, the Income-tax Officer made an assessment on Martin and Co., the partners whereof purchased the business of Burn and Co., in respect of the combined incomes returned by Martin and Co. and Burn and Co. The High Court held that under the Income-tax Act the income of the said firm could not be aggregated and that the income of each must be separately assessed. Thereafter, on November 8, 1930, an assessment was made on Burn and Co. on their income as returned by them on January 13, 1928. It was contended that under the Income-tax Act it was not competent to make any assessment to tax after the expiry of the year for which the tax was charged except in the cases provided for under section 34 of the Income-tax Act. It was held by the Judicial Committee that the income of Burn and Co. had not escaped assessment within the meaning of section 34 of the Income-tax Act. It was observed therein : " If an assessment is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and when do they terminate ? While learned counsel for the appellant contends that the said proceedings under the Act start only after the appropriate authority issued a notice under section 10(1) or section 11(2) or section 11(5) of the Act, learned counsel for the respondent contends that whatever may be said in the case of an unregistered dealer, in the case of a registered dealer the proceedings commence from the date fixed in the registration certificate within which the said dealer has a statutory obligation to furnish his return. To appreciate the rival contentions it is necessary to notice the relevant provisions of the Act and the Rules. Under section 4 of the Act, every dealer whose turnover exceeds the specified limits prescribed under sub-section (5) thereof shall be liable to pay tax in accordance with the provisions of the Act on all sales effected by him. Under section 8 no dealer shall, while being liable to pay tax under the Act, carry on business as a dealer unless he has been registered as such and possesses a registration certificate. Part IV of the Rules prescribes the manner in which a dealer shall get himself registered under the Act. Under section 8, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribes that the notice under section 11(2) shall be served on the dealer in Form XI. It may be stated that the mention of sub-section (1) in that rule appears to be a mistake for no notice is contemplated under that sub-section. If the registered dealer fails to furnish his return under section 10(1) of the Act in the manner prescribed within the time prescribed under sub-section (3) thereof, the Commissioner, after giving a reasonable opportunity of being heard, may impose on him by way of penalty a sum not exceeding one-fourth of the amount of the tax which may be assessed on him under section 11. Rule 32, which is an omnibus provision, says that in such an event, a notice in Form III has to be issued on him. Under sub-section (4) of section 11, if a registered dealer makes the defaults mentioned therein the Commissioner shall, in the prescribed manner, assess him to the best of his judgment. Rule 32 also governs the procedure for making the said assessment. Rule 33 prescribes the maintenance of a register of cases instituted under section 11. Rule 34 gives the form of the order to be made and rule 39 provides for the preparation of assessment record. At this stage an argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to do so by such dates and to such authority as may be prescribed. Now coming to the case of a dealer who did not register himself under the Act, the position is different. There is no statutory obligation cast on him by any section to submit a return. His is really a case of evasion from his obligation to get himself registered under the Act. Section 10(1) enables the Commissioner to issue a notice to him requiring him to furnish a return in the prescribed manner. In his case also the same procedure as prescribed in sections 10(3), 11(1) and 11(2) has to be followed in the matter of assessment. But sub-section (5) of section 11 introduces a stringent provision to prevent evasion of tax. Under that sub-section if upon information the Commissioner is satisfied that any such dealer, who is liable to pay tax under the Act in respect of any period, has wilfully failed to apply for registration, he shall at any time within three calendar years from the expiry of such period, after giving the dealer a reasonable, opportunity of being heard, proceed in the 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry, the assessment proceedings will certainly be pending till the final assessment is made. Even in a case where no return has been made, but the Commissioner initiated proceedings by issuing a relevant notice either under section 10(3) or under section 11(4), the proceedings will be pending thereafter before the Commissioner till the final assessment is made. But where no return has been made and the Commissioner has not issued any notice under the Act, how can it be held that some proceedings are pending before the Commissioner when none existed as a matter of fact ? We are concerned in this case with the last contingency. It is manifest that in the case of a registered dealer the proceedings before the Commissioner start factually when a return is made or when a notice is issued to him either under section 10(3) or under section 11(2) of the Act. The acceptance of the contention that the statutory obligation to file a return initiates the proceedings is to invoke a fiction not sanctioned by the Act. The obligation can be enforced by taking a suitable action under the Act. Taking of such an action may have the effect of initiating proceedings against the defaulter. The default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st tribunal or court under the Act. At this stage some of the decisions cited at the Bar may conveniently be noticed. A Full Bench of the Bombay High Court in Bisesar House v. State of Bombay held that a notice under sub-section (2) of section 11 of the C. P. and Berar Sales Tax Act, 1947, could not be issued more than three years after the expiry of the period for which it was proposed to make the assessment ; but an assessment under sub-section (1) of section 11 could be made more than three years after the expiry of such period. There, a dealer made his return and paid the tax, which according to him was due for three chargeable accounting years. The Commissioner of Sales Tax served notices on him under section 11(2) in respect of the first two years more than three years after the end of the chargeable accounting years. The court drew a distinction between sub-sections (1) and (2) of section 11 and came to the conclusion that in the former case it was only a formal appropriation of the amounts paid towards the tax due and therefore it could be done even after three years, but in the latter case the issue of notice under section 11(2) was in a substantial sense an initiation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November 8, 1950, he had to submit 4 returns for the four quarters. But he had submitted only one return on October 5, 1950, for one quarter. No assessment was made in respect of any of the four quarters. So the assessment proceedings must be held to be pending before the Commissioner only in respect of the quarter for which the appellant had made the return. In respect of the other quarters no proceedings could be said to be pending before the Commissioner. The Tribunal has no jurisdiction to issue a notice under section 11A with respect to the quarters other than that covered by the return made by the appellant. So far as Civil Appeal No. 102 of 1961 is concerned, the appellant had not submitted any returns for the year 1950-51, i.e., for the period from November 10, 1950, to October 31, 1951. The Assistant Commissioner of Sales Tax issued a notice to him on October 15, 1954, in Form XII purporting to be under section 11(4) of the Act. The said notice was within 3 years from October 16, 1951, which fell within the 4th quarter of the concerned year. Under section 11A of the Act the period of 3 years has to be calculated from the expiry of the period in regard whereto any turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers have to get themselves registered and obtain a registration certificate : vide section 8. The registered dealer is required by section 10(1) to furnish the prescribed returns by prescribed dates to the prescribed authority. Rule 19 of the Rules provides for the furnishing to the Sales Tax Officer quarterly returns in Form IV within one calendar month from the expiry of the quarter to which the return relates. In certain cases, such a return is to be submitted within two calendar months. The amount of tax calculated on the turnover shown in the return is to be deposited in the treasury and the treasury receipt in Form V is to accompany the return. If the registered dealer furnishes the necessary return, the Sales Tax Officer can assess on the amount of turnover shown in the returns in case be considers them to be correct and complete : vide section 11(1). If he be not so satisfied be has to serve a notice under sub-section (2) of section 11 on the registered dealer to take the various steps he requires for satisfying him about the correct amount of the turnover and, on his computing this amount, he has to assess the tax in accordance with sub-section (3) of section 11 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, in such a case, has not only to pay the tax assessed, but has to pay the penalty which is not to exceed one and a half times the amount of the tax assessed. If such a dealer had been one to whom a notice under sub-section (1) of section 10 had been issued and had failed, without any sufficient cause, to comply with the requirements of that notice, he could also be ordered to pay, by way of penalty, a sum not exceeding one-fourth the amount of the tax which is assessed on him under section II, in view of the provisions of sub-section (3) of section 10. It will be seen that though the Sales Tax Officer has to proceed to make the assessment within three calendar years of the period whose turnover was liable to tax, there is no time-limit within which he must finish the assessment proceedings. They are simply to be started within the prescribed period of time, but can be finished at any later period. It may also be noticed here that the " period of three years " in sub-section (5) of section 11 was substituted by the Amending Act XX of 1953 in place of the expression " from the commencement of this Act and thereafter within twelve months " and that section 11-A which deals with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial for the Sales Tax Officer to determine the amount of the turnover and, if assessable to tax, to assess the tax due on that turnover. The notice is a step towards the proceedings for the assessment of the sales tax. In the case of the unregistered dealer, the Sales Tax Officer commences the proceedings for assessment by the issue of a notice under sub-section (1) of section 10, and in the case of a registered dealer, the statute has already fixed the date for the furnishing of the return and therefore has set in motion the process for the assessment of the sales tax by the Sales Tax Officer. I do not see any good reason why the statutory notice to the registered dealer be not considered to be at par with the notice issued to the ordinary dealer by the Sales Tax Officer and why it should not be taken to initiate the assessment proceedings just as the issue of a notice by the Sales Tax Officer would have initiated the proceedings against the ordinary dealer. The failure of the registered dealer to furnish the return enables the Sales Tax Officer to assess the tax to the best of his judgment, of course, after giving an opportunity to the registered dealer of being heard. It would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax and has wilfully failed to apply for registration that he can take action under sub-section (5) of section 11. The circumstances in which the Sales Tax Officer can take action against the unregistered dealer are different from the circumstances in which he takes action against the registered dealer. I am therefore of opinion that the Sales Tax Officer does not contravene article 14 of the Constitution as contended for the appellant, if he takes action against a registered dealer under sub-section (2) or sub-section (4) of section 11 even after the expiry of three years from the period whose turnover is to be assessed. It is to be noticed that the Act, as originally enacted, did not have section 11-A. That was introduced in 1953 and made retrospective from June 1, 1947. Amendment was made in 1953 in section 11(5) and it made the period of limitation for proceeding to assess tax three years. No amendment providing limitation was however made in section 11(2) and (4) in 1953. This must be deliberate and indicates the intention of the Legislature not to limit the period during which action can be taken under section 11(2) and (4). The Register of Cases in Form XIII of the Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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