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TMI Blog1980 (1) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... rity/Excise and Taxation Officer, Batala, in form S.T.-XIX, requiring the petitioner to appear before him on 11th June, 1979. The reasons for the issuance of the notices in question, that the deductions claimed under section 5(2)(a)(ii) of the Act had been found to be ungenuine/ fictitious, were mentioned in each notice. The petitioner on 3rd September, 1979, sent a letter, annexure P-5, containing its objections contesting the validity of the notices on various grounds. Respondent No. 2 on 5th September, 1979, sent letters, annexures P-6, P-7 and P-8, to the petitioner replying. The petitioner, instead of appearing before respondent No. 2 as required by him, filed the present petition in this Court praying, inter alia, that the notices, annexures P-1, P-2 and P-3, be quashed. It has sought the quashing of the impugned notices and the proceedings taken by respondent No. 2 on the following grounds: (i) That the notices, annexures P-1 and P-2, were issued by Shri K.K. Hans, respondent No. 3, in August, 1979, when he had no jurisdiction over the petitioner-concern, the case of the petitioner having been transferred to Shri Gurbachan Singh, respondent No. 2, by the Assistant Excise a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then what would follow is that there had been no such sales by the petitioner and consequently, there had been no turnover which could be said to have escaped assessment. Before proceeding with the consideration of the submissions advanced on the basis of grounds above-noted, it is necessary to take notice of the notices (annexures P-1, P-2 and P-3) served upon the petitioner by the Assessing Authority, the letter (annexure P-5) of the petitioner in reply thereto, and the replies (annexures P-6, P-7 and P-8) of the Assessing Authority. Since the notices, annexures P-1 and P-2, are identical except that they relate to two different years, only annexure P-1 by way of sample is being reproduced; and since the replies, annexures P-6, P-7 and P-8, are identical except that they relate to three different years, only annexure P-6 by way of sample is being reproduced: Annexure P-1: "To M/s. Kailash Oil Mills, Dera Road, Batala, GRD-IV-7734. Whereas in consequence of definite information in my possession I have reasons to believe that the turnover of your business assessable to sales tax for the under-assessed year ending the 31st March, 1975, has been----------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. But such orders cannot be passed at the back of the assessee and without affording an opportunity to the dealer to ascertain whether the transfer orders are prejudicial to him or not. In absence of issue of such notice by the Assistant Excise and Taxation Commissioner to the assessee, it can safely be presumed that no such orders of transfer of case have been passed. Thus the said notice in form S.T. XIX is absolutely without jurisdiction. 4.. The fixation of office of the Excise and Taxation Commissioner, Gurdaspur, as venue of hearing of reassessment case, is mala fide especially when,- (a) the Assessing Authority having jurisdiction in the case is having his office at Batala. (b) the assessee is resident at Batala, and (c) the counsel is also having his office at Batala. It will not be undue harassment to the assessee alone but also undue inconvenience to the counsel who will have to appear at Gurdaspur, not only in this case, but also in cases of reassessments of sister concerns, at the cost of his local work at Batala, where his work-load is much greater. If the Assistant Excise and Taxation Commissioner has no faith in the Assessing Authority having jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of law, entitled to receive copies of those documents. If reassessment proceedings are initiated against a dealer on the basis of statements made by certain persons, it is the duty of the department to produce such persons before the Assessing Authority to enable the dealer to cross-examine them.' We hope the Assessing Authority concerned shall pay due heed to the above submissions and shall not drive us to unnecessary litigation, submitted." Annexure P-3: "Subject: Reassessment proceedings for the year 1974-75. Reference: Your letter dated 3rd September, 1979. This is brought to your notice that your assessment records for the year 1974-75 has been transferred to the undersigned under rule 39 of the Punjab General Sales Tax Rules, 1949, by the Assistant Excise and Taxation Commissioner, in-charge of Gurdaspur District, by his order dated 22nd June, 1979. Consequently, reassessment proceedings have been initiated by the undersigned. The question of invalid jurisdiction does not arise. The action by the Assistant Excise and Taxation Commissioner, Gurdaspur, has been taken under rule 39 of the Punjab General Sales Tax Rules, 1949; no question affording an opportunit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC), Swastik Oil Mills Ltd. v. H.B. Munshi, Deputy Commissioner of Sales Tax, Bombay [1968] 21 STC 383 (SC), Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanalakshmi Vilas Cashew Company [1969] 24 STC 491 (SC), State of Kerala v. K.E. Nainan [1970] 26 STC 251 (SC) and 0. Kassim Kannu v. State of Kerala [1970] 26 STC 530. In our opinion, the ratio of none of these decisions is applicable to the facts of the present case and these decisions can be of no avail to the petitioner. Before dealing with the contention aforesaid and embarking upon an analysis of the ratio of the decisions primarily relied upon, it would be desirable to notice at this very stage the relevant provisions, which define "turnover" and "taxable turnover" and of sections 11-A and 21 of the Act: "2. In this Act, unless there is anything repugnant in the subject or context,- * * * (i) 'turnover' includes- (i) the aggregate of the amounts of sales and purchases and parts of sales and purchases actually made by any dealer during the given period less any sum allowed as cash discount according to ordinary trade practice, but including any sum charged for anything done by the dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose, reference to the facts of only one (C.C.C.A. No. 137 of 1951) of the cases dealt therein would suffice. Therein, the. Deputy Commercial Tax Officer, Harbour Division, vide order dated 26th March, 1946, had determined the turnover of the assessee at Rs. 2,02,26,736-0-0 for the assessment year 1944-45. The assessee preferred an appeal to the Commercial Tax Officer which was dismissed on 25th March, 1947. On 5th March, 1948, the Commercial Tax Officer (revising authority) issued notice to the assessee to show cause why the assessment for the year 1944-45 should not be revised by including in the turnover a sum of Rs. 7,45,593-11-0. The assessee appeared and denied the jurisdiction of the revising authority. The Commercial Tax Officer, disagreeing with the assessee, proceeded with the case and by his order dated 1st December, 1948, increased the turnover by the addition of the sum mentioned earlier and the assessee was required to pay the tax due according to the revised assessment. It has to be noticed that in the case of Louis Dreyfus and Company Ltd. [1955] 6 STC 318 (FB) what was under challenge was the jurisdiction of the revising authority to reopen the assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped but while rule 14(2) is directed to the correction of improper or illegal assessment orders which have levied less or more tax than justified, rule 17(1) lays emphasis on escaped turnover. The distinction between the two provisions might be expressed by saying that rule 14(2) deals with escaped assessments and 17(1) with escaped turnovers, notwithstanding that the latter also would mean that a lesser amount of tax has been levied. So understood the two provisions would be completely reconcilable and the two jurisdictions-to revise assessments and to reopen them-would each be assigned to the proper authority. The language of rule 17(1) is consistent with this construction. The 'escape' that serves as the foundation of the jurisdiction to reopen an assessment is that of 'turnover' and not, be it noted, an assessment. 'Turnover' escapes when it is not noticed by the officer either because it is not before him by reason of an inadvertence, omission or deliberate concealment on the part of the assessee, or because of want of care on the part of the officer the turnover though in the books has not been taken notice of. This would be the natural and normal meaning of the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire assessment file and in the intermediate cases also if from a perusal of the record or the assessment files the revising authority can find that the turnover was before the assessing officer it is competent for it to pronounce upon the legality or propriety of the assessment order under rule 14(2). We are of the opinion that the construction which we have placed upon the relative content of rules 14(2) and 17(1) gives proper effect to both the provisions and assigns to each the rule which it was designed to accomplish." As already observed, in the case of Louis Dreyfus and Company Ltd. [1955] 6 STC 318 (FB) what was under challenge was the jurisdiction of the revising authority to bring to tax the escaped turnover while exercising powers under rule 14(2) of the Madras General Sales Tax Rules and it was in that context that a reference to the provisions of rule 17(1) thereof was made only to point out that in a case of escaped turnover, jurisdiction lay with the assessing authority to reopen the assessment and not with the revising authority. The revising authority under rule 14(2) has to accept the turnover as recorded in the order of the assessing authority and if it fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine" or "determination" respectively. The incongruity would be apparent the moment these latter two expressions are substituted for the expressions "assess" and "assessment" occurring in section 11-A of the Act. When so substituted, the relevant expression in section 11-A of the Act would read: "the turnover of the business of a dealer has been under-determined or escaped determination in any year". There is no such thing as "under-determined" or "escaping determination". As already observed, the expression "assess" in the taxing context has only one meaning which is synonymous with the expression "tax". (A business turnover thus can be under-taxed or can escape taxation). On taking the expression "assess" as synonymous with the expression "tax", the situation that emerges is that the Assessing Authority shall be entitled to reopen an assessment of a given year if on the basis of definite information on being received by it, it transpires that the business turnover disclosed by the assessee had been under-taxed, that is, the tax that ought to have been levied on such a disclosed turnover had not been levied. One of the reasons for disclosed turnover being under-taxed could be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not wish to go into details of these cases except that of the Full Bench of this Court in the case of Hari Chand Rattan Chand and Company [1969] 24 STC 258 (FB) and suffice it to say, as already observed, that the ratio of these cases is not attracted to the facts of the present case, as the relevant provisions of statutes or rules giving powers to the Assessing Authority and the revisional authority in those cases (which came up for construction in those cases) and the provisions of section 11-A of the Act are not at all in pari material as we have shown in the case of Louis Dreyfus and Company Ltd. [1955] 6 STC 318 (FB). In Hari Chand Rattan Chand's case [1969] 24 STC 258 (FB) the competence of the Commissioner under revisional jurisdiction under section 21(1) of the Act when he sought to disallow certain deductions, which had been allowed by the Assessing Authority, was challenged on the ground that it being a case of escapement of turnover and the requisite peroid for reassessing envisaged under section 11-A of the Act having expired, he was not competent to bring to assessment the escaped turnover. Repelling the contention, it was observed that it was not a case of escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revisional authority under section 21(1) of the Act, as it is not a case which is covered by section 11-A of the Act. On the contrary, it has been held that the provisions of section 21 of the Act are not attracted to a case where an order passed. by the Assessing Authority is sought to be revised on the basis of some definite information received by the revisional authority which was not available on the record of the Assessing Authority when it finalised the assessment in the first instance, after the period of limitation envisaged in section 11-A of the Act has expired. It clearly shows that section 11-A envisages reassessment by bringing to assessment not only that part of the turnover which was not disclosed by an assessee but also that part of the gross turnover which escaped assessment as a result of deductions which the definite information later on received by the Assessing Authority revealed was not legally justified. So far as the first ground that the notices, annexures P-1 and P-2, had been issued by Shri K.K. Hans, respondent No. 3, who had been left with no jurisdiction as a result of the order dated 22nd June, 1979, annexure P-4, passed by the Assistant Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was clearly mentioned that deductions claimed under section 5(2)(a)(ii) of the Act had been found to be ungenuine/fictitious. As regards ground No. (iii), it may be observed that the question whether the Assessing Authority was or was not possessed of definite information before the issuance of the impugned notices is a question of fact on which the Assessing Authority had to give its finding after the evidence in that regard was furnished on the record in the form of statements of purchasing dealers in question who could be cross-examined by the petitioner in regard to the fact as to when they had given their statements to the Assessing Authority as also regarding the factum of their having or having not effected the purchases from the petitioner-firm. The petitioner cannot presume that the Assessing Authority had no definite information before issuing the impugned notices and consequently decline to appear before the Assessing Authority. The petitioner could show cause before the Assessing Authority that it had no definite information before issuing the impugned notices, and therefore, it could not proceed with the case and if that authority had passed a wrong order, then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the question of any turnover as represented by such sales having escaped assessment would not arise. Support for this was sought from a Division Bench decision of this Court rendered in Pahar Chand and Sons v. State of Punjab [1972] 30 STC 211. That was a case in which the Assessing Authority disallowed certain exemptions on the basis of material which was never brought to the notice of the assessee and regarding which the assessee was given no chance to meet. So far as gross turnover is concerned, that is a turnover which an assessee has himself shown and stands by it. In order to claim exemptions in that gross turnover, he has to satisfy the requirements envisaged in that regard by the statute. If on the basis of the material on the record, he fails to do so, then such exemptions will not be allowed. However, if such an exemption is denied not on the basis of the material on the record but on the basis of knowledge of some facts available only to the Assessing Authority and regarding which the assessee had not been taken into confidence and an opportunity had not been granted to him to rebut that, then the exemption claimed by the assessee cannot be denied to him. And i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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