1972 (9) TMI 16 - SC - Income Tax

Whether notice issued under section 12(8) of the Orissa Sales Tax Act, 1947 should be quashed on the ground that it does not mention the reasons for the issue of the notice - held that when the Sales Tax Officer is in possession of material which is proposed to be used against the assessee, he must be given an adequate opportunity to explain the materials

Summary

Issues Involved:
1. Whether the notice issued under section 12(8) of the Orissa Sales Tax Act, 1947, should be quashed for not mentioning the reasons for its issuance.

Issue-wise Detailed Analysis:

Issue 1: Validity of the Notice under Section 12(8) of the Orissa Sales Tax Act, 1947

Facts:
The respondent, a registered dealer under the Orissa Sales Tax Act, 1947, faced an assessment for the year 1963-64. On March 30, 1967, the Sales Tax Officer conducted a search and seized several account books from the respondent's business premises. Subsequently, on March 31, 1967, the Sales Tax Officer issued a notice under section 12(8) of the Act, indicating that the respondent's turnover for 1963-64 had escaped assessment or had been under-assessed. The notice required the respondent to submit a return and to attend a hearing, but it did not specify the reasons for its issuance.

High Court Judgment:
The High Court quashed the notice on the grounds that it did not indicate any reason for its issuance, relying on an earlier decision in B. Patnaik Mines (P.) Ltd. v. N. K. Mohanty, which held that a notice under section 12(8) without reasons amounted to a "fishing enquiry" and was invalid.

Supreme Court Analysis:
The Supreme Court examined whether it is essential for the notice under section 12(8) to mention the reasons for its issuance. The Court noted that section 12(8) allows the Sales Tax Officer to issue a notice if the turnover has escaped assessment or has been under-assessed. The Court emphasized that while the section uses the phrase "if for any reason," it implies that the Sales Tax Officer must have a reason to believe that the turnover has escaped assessment. However, the Court clarified that the statute does not require these reasons to be stated in the notice itself.

The Court referenced similar provisions under section 34 of the Indian Income-tax Act, 1922, where it was held that the Income-tax Officer is not required to convey the reasons for the alleged escapement in the notice. In the case of Commissioner of Income-tax v. Mahaliram Ramjidas, the Judicial Committee held that the Income-tax Officer need not intimate the nature of the alleged escapement to the assessee in the notice.

Conclusion:
The Supreme Court concluded that the requirement to state reasons in the notice under section 12(8) is not mandated by the statute. The Court held that the notice is valid even if it does not mention the reasons for its issuance. However, if the Sales Tax Officer intends to use any material against the dealer in reassessment proceedings, the dealer must be given an opportunity to respond to that material. The Court found that the Sales Tax Officer had sufficient reason to believe that the respondent's turnover had escaped assessment, as indicated by the affidavit of the Sales Tax Officer, Intelligence Circle.

Judgment:
The Supreme Court set aside the High Court's judgment and upheld the validity of the notice issued under section 12(8) of the Orissa Sales Tax Act, 1947. The writ petitions filed by the respondents were dismissed, and each party was directed to bear its own costs.

Appeals Allowed.