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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 ..... ision Bench of the Orissa High Court consisting of S. BARMAN, C.J., and S. ACHARYA, J., in O.J.C. No. 464 of 1967 dated 24th June, 1968, is as follows: BARMAN, C.J.- This is a writ petition where the petitioner challenges the legality of a notice dated 31st March, 1967, purporting to be under section 12(8) of the Orissa Sales Tax Act for alleged escaped assessment of his turnover for the year ending 1963-64 in the circumstances hereinafter stated. 2.. It is said that on 30th March, 1967, the Sales Tax Officer, Intelligence Wing, Vigilance, Berhampur, made a search in the business 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax Officer groping in darkness. (ii) The impugned notice issued by the Sales Tax Officer was contrary to the principles of natural justice as the petitioner was not intimated the reason for issue of such notice, and without knowing the reason, the petitioner was not in a position to place his case before the Sales Tax Officer; indeed, the impugned notice was like a charge-sheet without a charge and, therefore, invalid, inoperative and without jurisdiction. (iii) The Sales Tax Officer committed a serious illegality in not furnishing the information asked for by the petitioner nor giving any reason 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed notice which was by way of making a fishing enquiry without indicating therein any reason for the alleged under-assessment in that case; the said notice was held to be a charge-sheet without mentioning any charge. It was also held that the issue of the said notice by the Sales Tax Officer was in excess, colourable exercise of jurisdiction and violation of the principles of natural justice; issue of the said impugned notice by the Sales Tax Officer resulted in injustice to the assessee-petitioner. The basic principles which weighed with this court in deciding that case, which we also follow herein, are these: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to as the Act) should be quashed on the ground that it does not mention the reasons for the issue of the notice is the main question which arises for determination in these two appeals, Nos. 1190 and 1191 of 1969, which have been filed by special leave against the common judgment of the Orissa High Court allowing writ petitions filed by the respondents against the appellants. For sake of convenience, we may give the facts giving rise to Appeal No. 1190 of 1969, as it is the common case of the parties that the decision in that appeal would govern the other appeal also. The respondent in Appeal No. 1190 is a dealer registered 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 notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were, however, not supplied and the application filed by the respondent for obtaining copies of the statements was rejected by the Sales Tax Officer. It was mentioned by the Sales Tax Officer that the question of grant of copies of the statements would be considered if the statements were used against the respondent. The respondent filed a revision petition against the order rejecting that application, but the revision petition too was dismissed. The respondent thereafter filed petition under articles 226 and 227 of the Constitution in the High Court on December 26, 1967. The High Court accepted the writ petition on the ground that the Sales Tax Officer had not indicated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish incorrect particulars thereof, that the dealer shall pay, by way of penalty, in addition to the tax assessed under this sub-section, a sum not exceeding one-and-a-half times of the said tax so assessed. The Orissa Sales Tax Rules, 1947 (hereinafter referred to as the Rules), have been framed by the State Government in exercise of the powers conferred by section 29 of the Act. According to sub-section (1) of that section, the State Government may subject to the condition of previous publication make rules for carrying out the purposes of the Act. Sub-section (2) of that section mentions the subjects, without prejudice to the generality of the power given by sub-section (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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xist reason for the belief that- (a) the turnover of a dealer for any period to which the Act applies has escaped assessment or has been under-assessed; or (b) the tax has been compounded when composition is not permissible under the Act and the Rules made thereunder. (ii) In cases mentioned in clause (i), the sales tax authority may at any time within 36 months from the expiry of the year to which the above-mentioned period relates call for a return under section 11(1) of the Act. (iii) After taking the steps mentioned in clauses (i) and (ii) above, the sales tax authority may proceed to assess the amount of the tax due from the dealer in the manner laid down in section 12(5) of the Act. (iv) The sales tax authority may also 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped assessment or have been assessed at too low a rate. There is fortunately no dispute that the person who must make that decision is the Income- tax Officer, for, apart from the assessee, no one else is in a position to say whether income has been assessed or at what rate it has been assessed. The omission to prescribe expressly what the nature of the decision should be and by what procedure it must be reached is all the more surprising because in other sections of the Act the Legislature has been careful to define what is necessary in these respects. This circumstance was founded on by the learned counsel for the respondents, who pointed out that where some fact had to be established merely prima facie to the satisfaction of the Income-tax Officer 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee was not entitled to a copy of the reasons which were recorded by the Income-tax Officer when he issued the notice under section 34 of the Indian Income-tax Act, 1922. In the later case of S. Narayanappa v. Commissioner of Income-tax [1967] 63 I.T.R. 219 (S.C.)., an argument was advanced that the Income-tax Officer should have indicated to the assessee the reasons which led him to initiate the proceedings under section 34 of the Act. This contention was repelled in the following words: It was also contended for the appellant that the Income-tax Officer should have communicated to him the reasons which led him to initiate the proceedings under section 34 of the Act. It was stated that a request to this effect was made by the appellant to the Income-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference has also been made by Mr. Gobind Das to the fact that notice issued to the respondent on March 31, 1967, related not merely to the escaped assessment or under-assessment; it also called upon the respondent to show cause why penalty should not be imposed upon him. It is urged that such a combined notice is invalid even though it may be in accordance with Form VI prescribed by the Rules. Calling upon the respondent to show cause why penalty should not be imposed upon him, according to the learned counsel, is premature at this stage. In this respect we find that no such ground was taken by the respondent in the writ petition before the High Court. As such, it is not necessary for the purpose of this case to express an opinion on the point as to whether a notice under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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