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TMI Blog1964 (8) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to the purchase value of untanned hides and skins and the sale value of tanned goods should not be taken into account in view of the Bench decision of the Madras High Court in Noor Mohammed Co. v. State of Madras[1956] 7 S.T.C. 792. The said decision of the Madras High Court, however, was reversed by the Supreme Court in State of Madras v. M.A. Noor Mohammed Co.(2) with the result that even in the case of an unlicensed dealer his turnover relating to the purchase value of untanned hides and skins and the sale value of the tanned goods must be taken into account. In view of this pronouncement of the Supreme Court in State of Madras v. M.A. Noor Mohammed Co.[1961] 1 S.C.R. 148; 11 S.T.C. 570., the Deputy Commissioner of Commercial Taxes, Madras, after following the necessary procedure and after issuing notice to the assessee revised the assessment of the assessing authority. He fixed the assessable net turnover at Rs. 4,87,826-10-10. As per the rules in force during the year 1954-55, the assessment had to be completed within a period of three years, i.e., for 1954-55, before the expiry of 31st March, 1958. But before this period of three years had run out, the rule was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came up for consideration. In the view which we take of the facts of the instant case, we think it unnecessary to express a final opinion as to how far and to what extent, the judgment of the Full Bench in State of Madras v. Louis Dreyfus Co. Ltd.I.L.R. [1956] Mad. 1285; 6 S.T.C. 318 (F.B.).requires reconsideration in the light of the two judgments of the Supreme Court referred to above. At the same time we are of opinion that in view of the judgment of the Supreme Court in State of Kerala v. M. Appukutty[1963] 14 S.T.C. 242; A.I.R. 1963 S.C. 796., reversing the judgment of the Kerala High Court in Appukutty v. State of KeralaI.L.R. [1958] Ker. 1302; 9 S.T.C. 710 (F.B.)., a case which arose under the Madras General Sales Tax Act (Act IX of 1939) and the Madras General Sales Tax Rules of 1939, rule 17(1), and the judgment of the Supreme Court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax [1963] 14 S.T.C. 976; A.I.R. 1964 S.C. 766., a case arising under the C.P. and Berar Sales Tax Act (Act XXI of 1947) many of the observations contained in the judgment of the Full Bench in State of Madras v. Louis Dreyfus Co., Ltd.I.L.R. [1956] Mad. 1285; 6 S.T.C. 318 (F.B.)., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over or levy the licence fee, after issuing a notice to the dealer or licensee and after making such enquiry as he considers necessary." This rule was amended in 1957 enlarging the time-limit from three to five years. Rule 14(2) dealing with the powers of revision ran as follows: "The Commercial Tax Officer may, in his discretion, at any time, either suo motu or on application, call for and examine the record of any order passed or any proceedings recorded under the Act by an Assistant or Deputy Commercial Tax Officer working under him, for the purpose of satisfying himself as to the legality or propriety of such order or as to the regularity of such proceedings and may pass such order in reference as he thinks fit." The Act of 1959 while repealing the earlier Act and the Rules made thereunder has incorporated the provision corresponding to rule 17(1) in the Act itself. Section 16 in the new Act (subject to certain changes which are not relevant to the purposes of our case) takes the place of rule 17(1). Section 16 of the Act of 1959 reads as follows: "Assessment of escaped turnover.-(1) Where, for any reason, the whole or any part of the turnover of business of a dealer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble opportunity of being heard." Section 33 also confers certain powers of revision upon the Deputy Commissioner but they are not relevant for the present enquiry. The contention of learned counsel for the petitioner is that the assessing authority proceeded upon the view of the law that in the case of an unlicensed dealer his turnover relating to the purchase value of untanned hides and skins and the sale value of tanned goods could not be taken into account. The case is a clear case of an escaped turnover coming under section 16 of the present Act corresponding to rule 17(1) referred to above. He urges that the power of an assessing authority to assess an escaped turnover under section 16 is a distinct separate power, while the power of revision under section 32 is a separate head of power altogether, and that the said two provisions, section 16 and section 32, are mutually exclusive and will have only independent operation, and that if a case is governed by section 16, section 32 can have possibly no application. In other words, the power under section 16 and the power under section 32 are so mutually exclusive that they cannot co-exist, and that there can be no question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority and it was considered by it but by some error of law of fact the authority regarded the turnover or any part thereof as not assessable or allowed some exemption or allowance or deduction to which, however, the assessee was not entitled to under the provisions of the Act, such a case was not a case of an escaped turnover but was a case of an improper or wrong order of assessment which was certainly capable of revision under rule 14(2) by the revising authority. On the other hand, the contention of the assessee was that rule 17 should be given a wide and liberal interpretation and that it would cover all cases, where, by reason of some error or omission on the part of the assessing authority, the assessee had been directed to pay a lesser amount of tax than was properly payable by him. In support of this argument that a wide range of classes would come under the category of escaped turnover, on behalf of the assessee, reliance was placed upon the analogous provision, section 34 of the Indian Income-tax Act and the decisions thereunder as to the proper meaning to be given to the words escaped assessment. The assessee in that case, therefore, contended that und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation for the application of the cases construing one provision for determining the scope of the other. We therefore propose to confine our attention to the language used in the two rules 14(2) and 17(1) and gather the intention of the rule-making authority as expressed by words employed." Dealing with the relative application of rule 14(2) and rule 17(1) the Full Bench observed as follows (at page 1295): "The other question that has to be considered is thus formulated in the order of reference: 'Whether the powers of revision thereunder [under rule 14(2)] can be exercised in cases to which rule 17 relating to escaped assessment is applicable'. In the form in which it has been stated above, it is capable of only one answer namely that the two rules are mutually exclusive and that in cases which fall within rule 17(1) and where the jurisdiction to reopen the assessment is vested in the assessing authority, the Commercial Tax Officer would not have power to pass such an order under rule 14(2). And this was in fact conceded by the learned Advocate-General who appeared for the State. The point however debated before us-and we consider rightly-was the relative scope of rules 14(2) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Income-tax Act that if in the assessment order the turnover had been returned by the dealer but the assessing authority, however, treated either the whole turnover or any part thereof as not taxable or subject to any exemption, that would be a case of an escaped turnover which could be set right only by resort to the proceedings under rule 17(1). The Full Bench was clearly of the view that the revising authority would have undoubted jurisdiction to revise the assessment in such cases where it was not legal or proper, when the assessing authority had erroneously treated a portion of the turnover as not taxable. The Full Bench also pointed out that such an extreme view that rule 17(1) would alone apply to such cases, would render the powers of revision under rule 14(2) absolutely useless and futile and that it would be difficult to conceive any case to which rule 14(2) could apply at all. The Full Bench also took the view that there might be an intermediate class of cases in which the entire turnover is before the assessing authority, but he fails to levy the tax upon the whole or any portion of it, taking the view that the same is not taxable and on the view that certain deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The material portion of section 11-A of that Act read as follows: "(1) If in consequence of any information which has come into his possession, the Commissioner is satisfied that any turnover of a dealer during any period...........has escaped assessment.......the Commissioner may, at any time within three calendar years from the expiry of such period.......proceed in such manner as may be prescribed to .......assess.......the tax payable on any such turnover......." In that case a registered dealer submitted his return on 5th October, 1950, for the year 1949-50, i.e., 22nd October, 1949 to 9th November, 1950, for one quarter only and made default in respect of the other quarters. The Assistant Commissioner of Sales Tax issued a notice to the assessee on 13th August, 1954, in respect of the turnover of the firm for the rest of the period, i.e., for the other three quarters. Two main questions arose for decision: (a) Whether it was a case of turnover escaped assessment within the meaning of section 11-A and (b) if so, when would the period of three years specified under section 11-A commence and terminate. The Supreme Court held that a turnover can be said to have escaped asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the relevancy and bearing of the cases arising under the Income-tax Act the view taken by the Madras High Court that there is no real analogy between rule 17(1) of the Madras General Sales Tax Rules and the provisions contained in section 34 of the Indian Income-tax Act and that the scheme of the two enactments is wholly different, cannot be regarded as correct. Decisions of the Privy Council and the Supreme Court arising under the Income-tax Act would undoubtedly be useful and relevant for determining the precise import of the words escapement of turnover and the ambit of the jurisdiction of the assessing authority under section 16 in the matter of assessment of escaped turnover. We shall now examine the scope of the decisions of the Supreme Court aforesaid. In Maharaj Kumar v. Income-tax CommissionerA.I.R. 1959 S.C. 257; 35 I.T.R. 1. , the Income-tax Officer, following an earlier decision of the Patna High Court, omitted to bring to assessment a certain sum representing the interest and arrears of rent due to the assessee in respect of agricultural lands in the view that the amount was agricultural income. Subsequently the Privy Council reversed the decision of the Patna High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural income chargeable to agricultural income-tax has escaped assessment for any financial year, or has been assessed at too low a rate, the Agricultural Income-tax Officer may, at any time within one year of the end of that financial year, serve on the person liable to pay agricultural income-tax on such agricultural income or, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 17, and may proceed to assess or reassess such income, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section: Provided that the tax shall be charged at the rate at which it would have been charged if such income had not escaped assessment or full assessment, as the case may be." The argument of the assessee was that despite the use of the opening words of the section if for any reason the section should not receive the wide interpretation as contended for by the department but that the scope of the section should be restricted so as to have no application to cases where the whole income is returned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We are of the opinion that it does not help the assessee for the extreme contention urged on his behalf that whenever the true turnover has not been assessed to the tax section 16 alone would be applicable ruling out section 32 altogether. In that case the Supreme Court held that if an assessee did not submit a return and if the assessing authority assessed the turnover it was clearly a case in which the turnover has escaped assessment. It should not be overlooked that the Supreme Court had not to consider the relative jurisdiction of the assessing authority in juxtaposition with the jurisdiction of the appellate authority or the revising authority in a situation like the instant case. Further in that case no return at all was submitted by the assessee and there was no question of the assessing authority applying its mind to the return and excluding a portion of the turnover from an assessment by granting some exemption or deduction or allowance. The other two decisions of the Supreme Court, Maharaj Kumar v. Income-tax CommissionerA.I.R. 1959 S.C. 257; 35 I.T.R. 1. and Maharajadhiraj Sir Kameshwar Singh v. State of Bihar[1960] 1 S.C.R. 332; 37 I.T.R. 388. do not advance the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the question as to whether in that situation, the revisional authority, the Deputy Commissioner, could have exercised its powers of revision under section 32 of the Act. We are of the opinion that under the present scheme of the Act, in which the entire machinery for assessment regarding the jurisdiction and powers of the original assessing authority as well as the appellate or the revisional authority have been incorporated in the Act itself, the question has to be decided upon the plain terms of the corresponding sections. It should be noticed that even under the old Act of 1939, by G.O. 193, dated 28th January, 1954, sub-rule (3A) was added to rule 17 to the effect that powers conferred under sub-rules (1) and (3) of rule 17 upon the assessing authority or the licensing authority may also be exercised by the appellate authority or by the revising authority within a period of five years next succeeding that to which the tax relates. This amendment makes the position clear that the Legislature did not visualise a clear-cut, well defined, mutually exclusive jurisdiction of the assessing authority as against the revisional authority, each being restricted to operate in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pukuttyA.I.R. 1963 S.C. 796; 14 S.T.C. 242. In that case the scope of rule 17(1), (1-A), (3-A) and section 12 of the Madras General Sales Tax Act of 1939 came up for consideration. The Supreme Court rejected the argument put forward on behalf of the assessee that the totality of the powers of the Deputy Commissioner are contained in section 12(2) and that unless there was a substantive proceeding pending in his file the Deputy Commissioner had no power to assess an escaped turnover. While explaining the scope of the two powers and jurisdiction the matter was put thus by the Supreme Court at page 799: "Moreover section 9 does not deal with escaped turnovers but is a provision for the determination of the turnover of a dealer in the first instance nor can it be said that rule 17 is in conflict with section 12(2). That section deals with another state of affairs and another jurisdiction, i.e., where the Deputy Commissioner suo motu on an application made calls for the record and determines the legality or propriety of an order made by one of the subordinate officers. It cannot be said in view of rule 17 that the power of revision by the Deputy Commissioner is limited to powers under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 23(3) of the Act, exercised the powers of revision. The argument of the assessee that the impugned orders of the Collector in the purported exercise of the powers of revision under section 23(3) of the Act were in substance under section 12(7) was not accepted. The Supreme Court (majority judgment) explained the position thus dealing with the relative scope of the provisions, section 12(7) and section 23(3), at page 1417: "The first contention urged on behalf of the State of Orissa is that the High Court is wrong in holding that an order of assessment of the revising authority is necessarily one made under section 12(7). The power of revision granted by section 23(3) is clearly a distinct and separate power from the power to assess after calling for a return in case of under-assessment or escaped assessment. The mere fact that in a particular case the revising authority has by a fresh order of assessment made the dealer liable for tax in respect of which he can be said to have been under-assessed or to have escaped assessment does not make the two powers one and the same. We therefore find it difficult to agree with the High Court that section 12(7) includes also the reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear: "According to the learned Government Pleader, rule 14-A empowers the Deputy Commissioner to reassess the petitioners to tax in respect of the escaped turnover. Rule 14-A, as is clear from the language, contemplates the case of a tax determined by the initial assessing authority. Where an appellate or revising authority considers that the tax so determined is less than the correct amount of the tax payable by the dealer, it is open to the revising authority to determine the correct amount of tax payable by the dealer after following the prescribed procedure. The very basis on which power of revision envisaged by rule 14-A could be exercised, therefore, should be with reference to the tax determined by the initial assessing authority........... As already pointed out, the revising authority is not an assessing authority' and cannot make an assessment or re-assessment in respect of an escaped turnover. His duties are purely revisional, that is, they are confined only to revise an order already passed by the initial assessing authority." In the course of the hearing, learned counsel for the petitioner laid considerable stress on the fact that in the instant case his client ..... X X X X Extracts X X X X X X X X Extracts X X X X
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