1988 (8) TMI 405 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Commercial Tax Officer (CTO) in assessing the petitioner.
2. Validity of the Joint Commissioner's order under Section 22-A(1) of the Karnataka Sales Tax Act.
3. Prejudice to the interests of the Revenue due to the error in the assessment order.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commercial Tax Officer (CTO) in assessing the petitioner:
The petitioner, an assessee under the Karnataka Sales Tax Act, 1957, was assessed by the CTO for the year 1983-84. The assessment was completed on October 1, 1985. However, the second respondent initiated action under Section 22-A(1) of the Act, issuing a notice on August 17, 1987, proposing to set aside the assessment order and remit the case for a de novo assessment to the Assistant Commissioner of Commercial Taxes (Assessments) ("ACCT"). The learned Government Pleader argued that the Commissioner, by a notification dated March 13, 1980, had conferred the assessing powers in cases where the tax liability exceeded Rs. 50,000, on the ACCT with effect from April 1, 1980. Therefore, the assessment order for the petitioner, whose tax liability exceeded Rs. 50,000, was made without jurisdiction. The Joint Commissioner, relying on the Supreme Court decision in Commissioner of Sales Tax, U.P. v. Sarjoo Prasad Ram Kumar [1976] 37 STC 533, set aside the assessment order on the grounds that the CTO was not the designated officer to make the assessment.

2. Validity of the Joint Commissioner's order under Section 22-A(1) of the Karnataka Sales Tax Act:
The Joint Commissioner exercised his powers under Section 22-A(1) and set aside the assessment order, remanding the case to the Assistant Commissioner (Assessments). The petitioner's counsel argued that there was no error in the CTO's order that prejudiced the interests of the Revenue, and the assessee had accepted the assessment and paid the tax. Therefore, a de novo proceeding was unnecessary. However, the court held that the order made by the Joint Commissioner was justified, as the CTO did not have the jurisdiction to assess the petitioner. The Supreme Court decision in Sarjoo Prasad Ram Kumar's case was cited, which emphasized that jurisdictional issues go to the root of the case and can be raised at any stage.

3. Prejudice to the interests of the Revenue due to the error in the assessment order:
The petitioner's counsel argued that not all errors are prejudicial to the interests of the Revenue and that the assessee's acceptance of the assessment and payment of tax negated any prejudice. However, the court noted that the revisional jurisdiction under Section 22-A requires that the order be both erroneous and prejudicial to the interests of the Revenue. The court cited various decisions, including B.C. Malliah v. State of Karnataka [1981] 47 STC 190 and Commissioner of Income-tax, Karnataka v. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal [1978] 115 ITR 301, to support the principle that an error that affects the jurisdiction of the assessing authority is prejudicial to the Revenue. The court concluded that the possibility of the assessee challenging the order on jurisdictional grounds in the future justified the Joint Commissioner's action.

Conclusion:
The court dismissed the writ petition, upholding the Joint Commissioner's order under Section 22-A(1) of the Karnataka Sales Tax Act, which set aside the assessment order made by the CTO and remanded the case for a de novo assessment by the ACCT. The court held that the CTO lacked jurisdiction to assess the petitioner, and this error was prejudicial to the interests of the Revenue, justifying the exercise of revisional powers by the Commissioner.