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TMI Blog1972 (9) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... iness premises of the petitioner and seized several books of accounts stated to have been found in the business premises of the petitioner; on the next day, 31st March, 1967, also he seized some more books of account alleged to have been recovered from the business premises of the petitioner; on both the occasions neither the petitioner nor any of the adult male members of the petitioner were present at the time when the seizure was made by the Sales Tax Officer as stated by the petitioner. 3.. On 31st March, 1967, the Sales Tax Officer issued a notice purporting to be under section 12(8) of the Act, the relevant portion of which is set out as follows: "Whereas it appears to me that your gross turnover* in the year immediately preceding the commencement of the Orissa Sales Tax Act, 1947,/during the financial year ending the 31st March, 19 had exceeded Rs. 10,000 but that you have nevertheless wilfully failed to apply for registration under section 9 of the Act; *Whereas I have reason to believe that your turnover for the quarter ending 1963-64 on which sales tax was payable under the Orissa Sales Tax Act, 1947, has escaped assessment/has been under-assessed. You are hereby requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for proceeding under section 12(8) of the Act; it was submitted that the notice issued was also violative of the provisions of the statute inasmuch as the statute requires the use of the words "for any reason" and not "have reason to believe" as mentioned in the impugned notice. 7.. The Sales Tax Officer filed counter-affidavit denying the allegations of the petitioner. The points taken by the Sales Tax Officer are, in substance, these: The impugned notice under section 12(8) of the Act was based upon positive materials available with the Sales Tax Officer and, as a matter of fact, the seizure of documents which formed the basis of the proceedings under section 12(8) was known to the assessee-petitioner as stated in paragraph 3 of the counter-affidavit; this is not a case based upon no materials; the petitioner was not entitled to have a copy of the statements recorded by the Sales Tax Officer until and unless the Sales Tax Officer sought to make use of them in any assessment proceedings; the information relating to disclosure of such facts is protected from being disclosed under section 28 of the Act and that the petitioner can have grievance only when he is not given a due oppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e: The court cannot decide unless there is some indication in the notice under section 12(8) of any reason for the alleged escaped assessment; whether or not the Sales Tax Officer has jurisdiction to issue the notice only depends on the existence of the reason for the alleged escaped assessment for which the impugned notice was issued; in other words, there must be, in fact, a reason for the alleged escaped assessment and natural justice demands that the notice issued to the dealer must mention the reason of the alleged escaped assessment so as to enable the dealer to meet the charge of escaped assessment; it is not understandable how the dealer would meet the charge of alleged escaped assessment unless there is at least some indication of one transaction, the turnover of which was not included in the previous assessment. 9.. Mr. R.N. Misra, the learned counsel appearing for the sales tax department, sought to distinguish the present case on facts from those in B. Patnaik Mines (P.) Ltd. v. N.K. Mohanty, Sales Tax Officer I.L.R. [1967] Cutt. 446., cited above. His point is that in the present case, the petitioner was given every opportunity to have access to the materials on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under the Act. The matter relates to the assessment for 1963-64. The date of the order of assessment is not on file, but it is stated that it was made sometime in the later part of 1964. On March 30, 1967, the Sales Tax Officer, Intelligence Wing, Vigilance, Berhampur, made a search of the business premises of the respondent and seized several account books. On the following day further search was made and some additional account books were taken into possession. Later on that day, viz., March 31, 1967, the Sales Tax Officer issued the following notice under section 12(8) of the Act to the respondent: "Notice to a dealer under section 12(8) of the Orissa Sales Tax Act. [See rules 22, 23 and 28(2)] To M/s. Uttareswari Rice Mills (Dealer) At/P.O. Berhampur, CAI 2127-A (Address) ........................ *Whereas I have reason to believe that your turnover for the quarter ending 1963-64 on which sales tax was payable under the Orissa Sales Tax Act, 1947, has escaped assessment/has been under-assessed. Page No: 572 You are hereby required to submit within one calendar month from the date of receipt of this notice a return in Form IV (enclosed) showing the particulars of your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated any reason for issuing notice under section 12(8) of the Act. This fact, in the opinion of the High Court, was sufficient to warrant quashing of the notice. The High Court in this context relied upon its earlier decision in the case of B. Patnaik Mines (P.) Ltd. v. N.K. Mohanty, Sales Tax Officer I.L.R. [1967] Cutt. 446. It was held in the earlier case that the Sales Tax Officer had no jurisdiction under section 12(8) of the Act to issue notice for making a fishing enquiry without indicating therein the reason for the alleged under-assessment. In appeal before us, Mr. Ramachandran on behalf of the appellants has referred to the provisions of section 12(8) of the Act and has argued that it is not essential to give the reasons in the notice issued under the above provision of law. The impugned notice, according to the learned counsel, cannot be quashed for non-mention of the reasons. The above stand has been controverted by Mr. Gobind Das on behalf of the respondent and, according to him, the failure of the Sales Tax Officer to mention the reasons which led to the issue of the impugned notice would vitiate the notice. There is, in our opinion, considerable force in the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), regarding which rules may prescribe. Section 29-A requires that all rules made under section 29, and notifications issued under section 3-13, sub-section (1) of section 5 and section 6 shall, as soon as possible after they are made or published, as the case may be, be laid before the Assembly for a total period of fourteen days which may be comprised in one or more sessions. Rule 23 may be reproduced below: "23. Calling for return when turnover has escaped assessment or has been under-assessed.-(1) If for any reason the turnover of sales or the turnover of purchases of a dealer has escaped assessment or has been under-assessed or has not been assessed due to the tax having been compounded when composition is not permissible under the Act and these rules and it is proposed to assess it the Commissioner shall serve on the dealer a notice in Form VI calling upon him to furnish a return in Form IV within one calendar month from the date of receipt of such notice. (2) Such notice may also require the dealer to attend in person or by his agent at the office of the authority issuing the notice on the date specified therein and to produce or cause to be produced the accounts and docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso direct in cases where escapement or under-assessment or composition is due to the dealer having concealed particulars of his turnover or having without sufficient cause furnished incorrect particulars thereof that the dealer shall pay penalty in addition to the tax assessed. (v) Such penalty shall not exceed one-and-a-half times the amount of the tax so assessed. Although the opening words used in section 12(8) are "if for any reason" and not "if the sales tax authority has reason to believe", the difference in phraseology, in our opinion, should not make much material difference. A reason cannot exist in vacuum. Somebody must form the belief that reason exists and looking to the context in which the words are used, we are of the view that it should be the sales tax authority issuing the notice who should have reason to believe that the turnover of a dealer has escaped assessment or has been under-assessed. The approach in this matter has to be practical and not pedantic. Any view which would make the opening words of section 12(8) unworkable has to be avoided. It may be noted in this context that in Form VI appended to the Rules, which has been prepared in pursuance of rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in the bona fide exercise of his discretion, this was expressed by such phraseology as 'When it appears to the Income-tax Officer,' or 'if the Income-tax Officer has reason to believe'. On the other hand, when the statute requires that the Income- tax Officer shall make a decision, which is final so far as he is concerned, upon a matter of fact, the usual expression is 'if he is satisfied'." It was further observed: "The section, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable, ut res valeat potius quam pereat." In view of the criticism levelled against the wording of section 34 of the Indian Income-tax Act, the above section was amended by Amendment Act of 1939. Despite the amendment made in section 34 of the Indian Income-tax Act, the Orissa Legislature, it would appear, has used phraseology in section 12(8) of the Act similar to that of section 34 of the Indian Income-tax Act, 1922, as it existed before the said amendment. The above decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer, but the Income-tax Officer declined to disclose the reasons. In our opinion, the argument of the appellant on this point is misconceived. The proceedings for assessment or reassessment under section 34(1)(a) of the Income-tax Act start with the issue of a notice and it is only after the service of the notice that the assessee, whose income is sought to be assessed or reassessed, becomes a party to those proceedings. The earlier stage of the proceeding for recording the reasons of the Income-tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi-judicial. The scheme of section 34 of the Act is that, if the conditions of the main section are satisfied, a notice has to be issued to the assessee containing all, or any of the requirements which may be included in a notice under sub-section (2) of section 22. But before issuing the notice, the proviso requires that the officer should record his reasons for initiating action under section 34 and obtain the sanction of the Commissioner who must be satisfied that the action under section 34 was justified. There is no requirement in any of the provisions of the Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 12(8) should be struck down on the aforesaid ground. There is nothing in the language of section 12(8) of the Act which either expressly or by necessary implication postulates the recording of reasons in the notice which is issued to the dealer under the above provision of law. To hold that reasons which led to the issue of the said notice should be incorporated in the notice and that failure to do so would invalidate the notice, would be tantamount to reading something in the statute which, in fact, is not there. We are consequently unable to accede to the contention that the notice under the above provision of law should be quashed if the reasons which led to the issue of the notice are not mentioned in the notice. At the same time, we would like to make it clear that if the Sales Tax Officer is in possession of material which he proposes to use against the dealer in proceedings for reassessment, the said officer must before using that material bring it to the notice of the dealer and give him adequate opportunity to explain and answer the case on the basis of that material. Mr. Gobind Das has also argued that the existence of a reason that the turnover of a dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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