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TMI Blog1967 (9) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... July 8, 1959, are valid. - Civil Appeal No. 511, 512, 513, 514 of 1966 - - - Dated:- 28-9-1967 - WANCHOO K.N. C.J. AND BACHAWAT R.S. JJ. N.S. Bindra, Senior Advocate (P.K. Chatterjee and S.P. Nayar for R.H. Dhebar with him), for the respondents in all the appeals. H.R. Gokhale, Senior Advocate (M.R. Bhandare and P.C. Bhartari and O.C. Mathur of J.B. Dadachanji and Co, with him), for the appellants in all the appeals. -------------------------------------------------- The judgment Of WANCHOO, C.J., MITTER and HEGDE, JJ., was delivered by HEGDE, J. The judgment of BACHAWAT and RAMASWAMI, JJ., 'was delivered by BACHAWAT, J. HEGDE, J. -The principal question canvassed in this group of appeals by special leave is whether section 11(4)(a) of the Central Provinces and Berar Sales Tax Act, 1947, to be referred to as the Act hereinafter, is ultra vires Article 14 of the Constitution and consequently the notices impugned in the writ petitions from which these appeals arise are liable to be struck down and the respondents restrained from levying sales tax on the appellants for the period May 1, 1952 to October 31, 1955. The appellants are a private limited c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis for the classification made. According to him the classification complained of has brought about a discrimination. Further he asserted that the Act had conferred arbitrary power on the assessing authority to pick and choose from the persons belonging to the same class to be dealt with either under section 11(4)(a) or under section 11A(1). He urged that as a case coming under section 11(4)(a) also falls under section 11A, as the law now stands, the persons proceeded against under section 11A(1) will have the benefit of the period of limitation prescribed therein while the said benefit is not available for those proceeded under section 11(4)(a). According to the learned counsel for the revenue, sections 11(4)(a) and 11A deal with different classes of persons; the classification made under those provisions is a reasonable classification having nexus with the object sought to be achieved. Before adverting to the points at issue, it would be convenient to set out the circumstances under which section 11A(3) which is said to have brought about the discrimination complained of came to be enacted. The Act is in force ever since 1947. Section 11A as it originally stood was inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of a proceeding in which a notice under section 11(2) is given, it undoubtedly changed the law in respect of proceedings under section 11(4)(a). Before we proceed to consider the aforementioned complaint of discrimination, it is necessary to have a survey of the relevant provisions of the Act. "Dealer " is defined in section 2(c) as meaning a person who, whether as principal or agent, carries on in the State the business of selling or supplying goods, whether for commission, remuneration or other- wise and includes a firm, a partnership, a Hindu undivided family or a State Government or any of their departments and includes also a society, club or association selling or supplying goods to its members. A "registered dealer" is defined in section 2(f) as meaning a dealer registered under the Act. Section 2(j) defines "turnover" as meaning the aggregate of the amounts of sale prices and parts of sale prices received or receivable by a dealer in respect of the sale or supply of goods or in respect of the sale or supply of goods in the carrying out of any contract, effected or made during the prescribed period; and the expression "taxable turnover" means that part of a dealer's tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose read: "11. (1) If the Commissioner is satisfied that the returns furnished by a dealer in respect of any period are correct and complete, he shall assess the dealer on them. (2) If the Commissioner is not so satisfied he shall serve the dealer with a notice appointing a place and day directing him (i) to appear in person or by an agent entitled to appear in accordance with the provisions of section 11B; (ii) to produce evidence or have it produced in support of the returns; or (iii) to produce or cause to be produced any accounts, registers, cash memoranda or other documents as may be considered necessary by the Commissioner for the purpose. (3) After hearing the dealer or his agent and examining the evidence produced in compliance with the requirements of clause (ii) or clause (iii) of sub-section (2) and such further evidence as the Commissioner may require, the Commissioner shall assess him to tax. (4) If a registered dealer (a) does not furnish returns in respect of any period by the prescribed date, or (b) having furnished such returns fails to comply with any of the terms of a notice issued under sub- section (2), or (c) has not regularly employed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his return. The only other rule relevant for our present purpose is rule 32 in Part VII of the Rules, which deals with assessment of tax and/or penalty. That rule provides that where a registered dealer has rendered himself to a best judgment assessment as well as penalty by reason of his default in furnishing the prescribed return or returns in respect of any period by the prescribed date, the assessing authority shall serve on him a notice in Form 12 specifying the default, escapement or concealment as the case may be and calling upon him to show cause by such date ordinarily not less than 30 days, from the date of issue of the notice, as may be fixed in that behalf, why he should not be assessed or reassessed to tax, or a penalty should not be imposed upon him and directing him to produce on the said date his books of account and other documents which the assessing authority may require or which he may wish to produce in support of his objection. That rule further provides that no such notice shall be necessary where the dealer, having appeared before the assessing authority, waives such notice. Now we may turn to the questions formulated for decision. As mentioned earlier, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the appellants turnovers for the period 1st May, 1952 to 31st October, 1955, had escaped assessment. There is no dispute that those turnovers had not been assessed. From the fact that those turnovers had not been assessed, can it be said that they had escaped assessment. In Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, Bihar and Orissa [1959] Supp. 1 S.C.R. 10; 35 I.T.R. 1., this Court laid down that the expression "has escaped assessment" in section 34(1)(b) of the Indian Income-tax Act, 1922, is applicable not only where the income has not been assessed owing to inadvertence or over- sight or owing to the fact that no return has been submitted, but also where a return has been submitted but the Income-tax Officer erroneously failed to tax a part of assessable income. In Commissioner of Income-tax, Bombay City v. M/s. Narsee Nagsee and Co., Bombay [1960] 3 S.C.R 988; 40 I.T.R. 307., interpreting the words" profits escaping assessment" in section 14 of the Business Profits Tax Act, 1947, this Court held that those words apply equally to cases where a notice was received by the assessee but resulted in no assessment, under-assessment or excessive relief and to case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construing the meaning of the expression 'escaped assessment' in section 11A of the Act there is no reason why the said expression should bear a more limited meaning than what it bears under the said two Acts. All the three Acts are taxing statutes and the three relevant sections therein are intended to gather the revenue which has improperly escaped. A Division Bench of the Madras High Court in the State of Madras v. Balu Chettiar [1956] 7 S.T.C. 519, 522., following the decision of a Full Bench of that Court, held that where an assessee did not file at any time a return of his turnover for a year and, therefore, there was no assessment made, the turnover escaped assessment. It was observed therein: 'Whether it was a case of omission or of deliberate concealment on the part of the assessee, he did not submit any return. It was his default that led to the escape of the turnover for 1951-52 from assessment to the tax lawfully due. It was the whole of the turnover for that year that escaped assessment.' It is not necessary to multiply citations. We, therefore, hold that the expression 'escaped assessment' in section 11A of the Act includes that of a turnover which has not been as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922, includes information as to the true and correct state of the law and so would cover information as to the relevant judicial decisions. It was laid down therein 'that the information need not be about any fact; it may be even as to the legal position. In other words, the term "information" in sec- tion 34(1)(b) of the Income-tax Act, 1922, really means knowledge. In Salem Provident Fund Society Ltd. v. Commissioner of Income-tax, Madras [1961] 42 I.T.R. 547., a Division Bench of the Madras High Court interpreting the scope of the words "information which has come into his possession" found in section 34 of the Indian Income-tax Act, observed thus: "We are unable to accept the extreme proposition, that nothing that can be found in the record of the assessment, which itself would show escape of assessment or under-assessment, can be viewed as information which led to the belief that there has been escape from assessment or under- assessment. Suppose a mistake in the original order of assessment is not discovered by the Income-tax Officer himself on further scrutiny but it is brought to his notice by another assessee or even by a subordinate or a superior officer, that would ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it was open to the assessing authority to proceed against them under any one of those two sections. But as they were proceeded aginst under section 11(4)(a) they cannot have the benefit of the period of limitation prescribed under section 11A(1). Hence, it must be held that the present case falls within the rule laid down by this Court in Suraj Mall Mohta and Co. v. A. V. Visvanatha Sastri and Another [1955] 1 S.C.R. 448; 26 I.T.R. 1. On the facts found it follows that section 11(4)(a) has become a discriminatory provision in view of section 11A(3). Hence ,he same is liable to be struck down under Article 14. But for the inclusion of sub-section (3) in section 11A, there would have been no discrimination between those dealt with under section 11(4)(a) and those under section 11A(1). The period of limitation prescribed in section 11A(1) would have attracted itself to proceedings under section 11(4)(a) as held by this Court in Ghanshyamdas's case [1964] 4 S.C.R. 436; 14 S.T.C. 976. Mr. Bindra, learned counsel for the revenue, contended that a registered dealer has certain advantages over an unregistered dealer; therefore the classification made under the Act is a reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Sales Tax issued a notice under section 10(3), section 11(4)(a), section 11A and sub-section (1) of section 22C of the Act, calling upon the petitioners to show cause why action should not be taken against them under section 10(3) and section 11(4) of the Act on account of their failure to furnish the returns for the period 1-1-53 to 31-12-53. Similar notices were given on 27th October, 1955 for the period 1-1-54 to 31-12-54 and on 7th July, 1956, for the period 1-1-55 to 31-12-55." From those facts, it is seen that no notice had been issued within three years in respect of the turnover relating to the period Ist May, 1952 to 31st December, 1952. The assessment in respect of that period is clearly barred in view of our earlier conclusion. The period, 1st November, 1952 to 31st December, 1953, forms part of the quarter commencing from 1st November, 1952. No notice was given in respect of that quarter. A quarter forms a unit by itself. Therefore, it follows that the proceeding in respect of that quarter is also barred by limitation. Now we shall take up the question whether the notices issued in 1955 in respect of the turnovers relating to other quarters were in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the notice did not apply to the appellants. They are registered dealers. No notice under section 10(1) had been given to them. The assessing authority by mistake had failed to strike out the first alternative shown in the printed form. That circumstance could not have prejudiced the appellants. It was held by this Court in Chakobhai Ghelabhai's case [1961] 1 S.C.R. 719; 11 S.T.C. 716. referred to earlier that such a mistake does not vitiate the notice issued. But the more serious mistake pointed out by Mr. Gokhale in that notice is that the assessment year mentioned in that notice is not the assessment year of the appellants. Their assessment years commenced from Ist November. This error according to Mr. Gokhale vitiated the notices issued. Yet another complaint made by Mr. Gokhale was that though rule 33 provides that ordinarily not less than 30 days' notice should be given to the assessee, only 9 days' notice was given. But this defect was found only in the notice quoted above and not in the other notices issued in 1955. For the reasons to be mentioned presently, we see no merit in either of these contentions. We are unable to accept the contention of Mr. Gokhale t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 302., the Federal Court held that any irregularity in issuing a notice under section 22 of the Income-tax Act, 1922, does not vitiate the proceeding; that the income-tax assessment proceedings commence with the issue of the notice, but the issue or receipt of the notice is, however, not the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessee to pay the tax. The liability to pay the tax is founded on sections 3 and 4 of the Income-tax Act which are the charging sections. Section 22 and others are the machinery sections to determine the amount of tax. The ratio of that decision applies to the facts of the present case. In our opinion, the notices issued in the year 1955 are valid notices so far as they relate to the period commencing from February 1, 1953 to October 31, 1955. In view of our conclusion that every escapement of assessment coming within the scope of section 11(4)(a) is also an escapement of assessment under section 11A(1), a notice issued under section 11(4)(a) would be a valid notice in respect of a proceeding under section 11A(1). In the result, we hold that the assessing authority has no competence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he considers necessary, proceed in such manner as may be prescribed to reassess or assess, as the case may be, the tax payable on any such turnover; and the Commissioner may direct that the dealer shall pay, by way of penalty in addition to the amount of tax so assessed, a sum not exceeding that amount. (2) The assessment or reassessment made under sub-section (1) shall be at the rate at which it would have been made, had there been no under- assessment or escapement." The Bombay Sales Tax Laws (Validating Provisions and Amendment) Act, 1959, inserted the following sub-section (3) in section 11A: "(3) (a) Nothing in sub-sections (1) and (2)- (i) shall apply to any proceeding (including any notice issued) under section 11 or 22A or 22B, and (ii) notwithstanding any judgment, decree or order of a court or Tribunal, shall be deemed ever to have been applicable to such proceeding or notice. (b) The validity of any such proceeding or notice shall not be called in question merely on the ground that such proceeding or notice was in- c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and section 11A, as it stood before its amendment by the Bombay Sales Tax Laws (Validating Provisions and Amendment) Act, 1959, that a notice under section 11(4) initiates new proceedings and it also decided or to be more accurate, assumed that the period of limitation prescribed by section 11A(1) should be imported into section 11(4). The case was decided without reference to section 11A(3) inserted by the Amending Act and is no authority on the interpretation of that sub-section. Section 11A(3) now expressly provides that nothing in section 11A(1) shall apply to any proceeding including any notice issued under section 11. The section is retrospective in operation. It follows that the period of limitation prescribed by section 11A(1) cannot be applied to a proceeding or a notice issued under section 11(4). There is no period of limitation prescribed for a notice or a proceeding initiated under section 11(4). Consequently, the impugned notices issued under section 11(4) are not barred by limitation and are not invalid. The argument then is that section 11(4)(a) offends Article 14 of the Constitution in two ways. Firstly, it is said that it is open to the Sales Tax Authorities to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial provisions of section 11(4) read with section 11A(3), the power under section 11A(1) as interpreted in Ghanshyamdas's case to assess turnover which escaped assessment by reason of non-filing of returns must be con- fined to cases of unregistered dealers. As pointed out already, cases of registered dealers falling within section 11(4) are excluded from the purview of section 11A(1). It is next said that section 11(4) offends Article 14 of the Constitution because no period of limitation is prescribed for a notice under it, whereas periods of limitation are prescribed for notices under sections 11A(1) and 11(5). We see no merit in this contention. The Act deals with registered and unregistered dealers differently in many ways. The classification and differential treatment of registered and unregistered dealers are based on substantial differences having reasonable relation to the object of the Act. A registered dealer unlike an unregistered dealer is under a statutory obligation to file returns without any notice being served upon him and to pay the full amount of tax due from him before furnishing the return (sections 10 and 12). A dealer who has registered himself under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered and unregistered dealers. In Ghanshyamdas's case [1964] 4 S.C.R. 436; 14 S.T.C. 976., Raghubar Dayal, J., at page 459 clearly held that section 11(4) is not violative of Article 14. The majority did not dissent from this opinion. We hold that section 11(4) is not violative of Article 14 and we uphold it. It follows that the notices issued on July 8, 1959, under section 11(4) are valid in respect of the entire period from Ist November, 1952 to 31st October, 1955. As regards the alternative contention of the respondent that the notices issued in 1955 validly initiated proceedings under section 11(4) for the period from 1st February, 1953 to 31st October, 1955, we are glad to find that the majority has accepted this contention. The irregularities, if any, in the notices do not invalidate them. However, for the reasons already mentioned, we are of opinion that the impugned notices issued on July 8, 1959, are valid. In the result, the appeals are dismissed with costs. Order In accordance with the opinion of the majority these appeals are partly allowed with respect to turnover from Ist May, 1952 to 31st January, 1953. In other respects the appeals are dismissed. No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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