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TMI Blog1994 (4) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3802 of 1989, Civil Appeal No. 1329, Civil Appeal No. 1330 of 1987, Civil Appeal No. 7361, Civil Appeal No. 7362, Civil Appeal No. 7363, Civil Appeal No. 7364, Civil Appeal No. 7365, Civil Appeal No. 7366 of 1993, Civil Appeal No. 4599, Civil Appeal No. 4600 of 1990, Civil Appeal No. 3961 of 1989 C. Sitaramiah, Senior Advocate (T.V.S.N. Chari, Nikhil Nayyar and Ms. Promila Choudhary, Advocates, with him), for the State of Andhra Pradesh. Harish N. Salve, Senior Advocate (Vivek Kohli, Ms. Meenakshi Grover, Suman Khaitan and Raja Chatterji, Advocates, with him), for the respondent (dealer) in C.A. No. 7360 of 1993. A.T.M. Sampath, P.N. Ramalingam, T.N. Banerjee, Joseph Pookkatt for Raju Ramachandran and Sunil K. Jain, Advocates, for the respondets (dealers) in other appeals. A. Mariarputham and Ms. Aruna Mathur, Advocates, for the State of Tamil Nadu. -------------------------------------------------- The judgment of the Court was delivered by B.P. JEEVAN REDDY, J. -Rates of tax on sales effected in the course of inter- State trade or commerce are prescribed by section 8 of the Central Sales Tax Act, 1956. The rates prescribed vary depending upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed by sub-section (1), he has to comply with the requirements prescribed by it. If the sale is to the Government [section 8(1)(a)] the selling dealer must produce before the prescribed authority (assessing authority) a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government. The Rules made under the Act have prescribed the form of the certificate contemplated by the clause-it is called "form D". Similarly, if the selling dealer says that he has sold the goods of the description referred to in sub-section (3) to a registered dealer [section 8(1)(b)] he shall have to produce a declaration duly filled and signed by a registered dealer to whom the goods are sold containing the prescribed particulars in the prescribed form obtained from the prescribed authority. The Rules made under the Act have prescribed the form in which such a declaration has to be issued by the purchasing dealer-it is called "form C". In case form D or form C is produced, the assessing authority would levy tax on inter-State sales at 4 per cent only; otherwise the sales will attract the higher rate of tax prescribed in sub-section (2). Before we deal with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edy the lacuna pointed out by this Court, the Parliament enacted the aforesaid Amendment Act No. 61 of 1972. The proviso empowers the rule-making authority to prescribe the time within which form C, i.e., the declaration referred to in clause (a) of sub-section (4) is to be furnished. The proviso not only empowers the rule-making authority to prescribe such time but also provides that for sufficient reasons, the assessing authority may permit the said forms to be filed within the time prescribed (?). Pursuant to the said proviso, the rule-making authority introduced the proviso to sub-rule (7). While the main limb of sub-rule (7) says that form C can be furnished "up to the time of the assessment by the first assessing authority", the proviso says that if the prescribed authority is satisfied that the dealer was prevented by sufficient cause from furnishing such certificate "within the aforesaid time-limit" he may allow such certificate to be furnished within such further time as he may permit. Reading sub-rule (7) as a whole it follows that form C shall be furnished up to the time of assessment by the first assessing authority but in a proper case the prescribed authority (which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellate authority, whether first or the second appellate authority. It is pointed out that the power of appeal under the State sales tax enactments concerned herein (which have to be read into the Central Sales Tax Act by virtue of section 9) is different in character and scope from an appeal under the Code of Civil Procedure. An appellate authority under the Tamil Nadu and Andhra Pradesh sales tax enactments has the power not only to confirm, reduce or annul the orders under appeal but also to enhance the tax liability even though the appeal is preferred by the dealer. In short, the appeal-in particular the first appeal-is in the nature of a reassessment where the whole assessment is open even though the dealer may have filed the appeal confined to certain aspects. The learned counsel for the dealers point out that no particular sanctity attaches to the use of the appellation "first assessing authority" in sub-rule (7) of rule 12. They also point out that the Andhra Pradesh Sales Tax Appellate Tribunal is expressly empowered by the Regulations made under the Act to receive additional evidence which too indicates the power of the Tribunal to receive form C by way of additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to "confirm, reduce, enhance or annul the assessment or the penalty or both", to set aside the assessment and direct the assessing authority to make a fresh assessment after such further enquiry as may be directed, as also to pass such other orders as he may think fit. Similar powers are available even where the appeal is against an order other than an order of assessment. Section 31-A provides for an appeal to the Deputy Commissioner against the orders specified therein. Sub-section (3) of section 31-A confers powers upon the Deputy Commissioner similar to those conferred by section 31(3). Section 36 provides for an appeal to the Appellate Tribunal against the orders of the Appellate Assistant Commissioner as well as the Deputy Commissioner. Sub-section (3) of section 36 again is in the same terms as sub-section (3) of section 31 and sub-section (3) of section 31-A. The position under the Andhra Pradesh General Sales Tax Act is no different. Section 19 provides for an appeal to the specified authority. Sub- section (3) of section 19 [which corresponds to sub-section (3) of section 31 in the Tamil Nadu Act] reads: "(3) The appellate authority may, after giving the appellant an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Income-tax Act, 1922 provided that "in disposing of an appeal, the Appellate Assistant Commissioner may, in the case of an order of assessment,- (a) confirm, reduce, enhance or annul the assessment, or (b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Income-tax Officer shall thereupon proceed to make such fresh assessment, and determine where necessary the amount of tax payable on the basis of such fresh assessment". Construing the said provision, it was held by Chagla, C.J. (speaking for the Bench comprising himself and Tendolkar, J.) in Narrondas Manordass v. Commissioner of Income-tax [1957] 31 ITR 909 (Bom) that: "........... in giving the power of enhancing the assessment, the Legislature has strikingly deviated from the ordinary principles that govern the court of appeal. Although the Department cannot appeal against the order of the Income-tax Officer and although the appeal is only by the assessee, even so the Legislature confers upon the Appellate Assistant Commissioner the power to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority in the sense that once the appeal is before him, he can revise not only the ultimate computation arrived at by the Income-tax Officer, but he can revise every process which led to the ultimate computation or assessment'. In such a situation, it is idle to contend that because of the language of rule 12(7), the appellate authorities cannot do what the first assessing authority could do. We are unable to agree with the Revenue's contention that because rule 12(7) speaks of "up to the time of assessment by the first assessing authority"-or for that matter the proviso to the said sub-rule-it excludes, by necessary implication, the appellate authorities. The decision in McMillan [1958] 33 ITR 182 (SC) furnishes a complete answer to this contention. We may elaborate. Section 13 of the Indian Income-tax Act, 1922 (corresponding to section 145 of the present Act) read as follows: "13. Income, profits and gains shall be computed, for the purposes of sections 10 and 12, in accordance with the method of accounting regularly employed by the assessee: Provided that, if no method of accounting has been regularly employed, or if the method employed is such that, in the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and determines the sum payable on the basis of such assessment; under sub-section (4) the Income-tax Officer makes the assessment to the 'best of his judgment'-an expression much stronger than 'in the opinion of the Income-tax Officer'. It is not disputed that in an appeal from an assessment under section 23, the Appellate Assistant Commissioner can interfere with the determination or judgment of the Income-tax Officer, and in such an appeal the Appellate Assistant Commissioner can make his own assessment and exercise the power which the Income-tax Officer could exercise. Since 1939 an appeal lies from a 'best of judgment' assessment made under sub-section (4) of section 23, but the right is restricted to 'the amount of income assessed or the amount of tax determined'. Why can he not then interfere with the opinion of the Income-tax Officer under the proviso to section 13? It is contended that both sub-sections (3) and (4) of section 23 prescribed objective conditions for the exercise of the power referred to therein. It is true that under both sub-sections the assessment must be a fair and honest estimate and not arbitrary or capricious. Apart from that, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Income-tax Officer could exercise." The aforesaid observations show that the mere use of the words "the first assessing authority" in sub-rule (7) of rule 12 cannot and does not mean, in the context and scheme of the enactments concerned herein, that the appellate authorities do not have the power to receive form C in appeal. This power can of course be exercised only where sufficient cause is shown by the dealer for not filing them up to the time of assessment before the first assessing authority. If in a given case, a dealer had obtained further time from the first assessing authority and yet failed to produce them before him, it is obvious that the appellate authority would adopt a stiffer standard in judging the sufficient cause shown by the dealer for not producing them earlier. It is necessary to reiterate that receipt of those forms in appeal cannot be a matter of course; it should be allowed only where sufficient cause is established by the dealer for not producing them before the first assessing authority as contemplated by rule 12(7). The requirement of the said sub-rule cannot be excluded from consideration by the appellate court, while judging the sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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