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TMI Blog2006 (3) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... e not excluded by clause 2 of the said scheme. The said clause 2 lays down three eventualities but for the purposes of the present case condition Nos. 2(ka) and 2(ga) are relevant, wherein it has been provided that the scheme shall not be applicable in respect of such dealers who do not carry on any sale in the State of U.P. and all their sales are inter-State sales and secondly, the taxable turnover of such dealer exceeds Rs. 7 lakhs for any reason for the assessment year 1994-95 including the sales in U.P. and inter-State sales. Thus, a dealer whose taxable turnover exceeds Rs. 7 lakhs inclusive of Central sales for the assessment year 1994-95 would not be entitled to avail the benefits under the said scheme. Except M/s. Chandana Traders none of the applicants were registered as a dealer under the Act for the assessment year 1993-94, but they applied for and were granted registration by the assessing officer for the relevant assessment year namely 1994-95. M/s. Chandana Traders was already a registered dealer. The applicants, after getting themselves registered for the relevant assessment year, applied for availing the benefit of the aforesaid composition scheme and agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and the Tribunal has now held that the contention of the dealer-applicants in this regard is meritless. The department also filed rectification applications in all the appeals. The Tribunal by the impugned order dated March 5, 2004 has dismissed all the applications filed under section 22 of the Act after considering the various submissions made on behalf of the counsel for the parties, on merits, and maintained its earlier order dated December 17, 2003. Feeling aggrieved against the aforesaid two orders the present revisions have been filed at the instance of the applicants only. The department has not challenged the order of the Tribunal rejecting its application for rectification filed under section 22 of the Act and as such the matter is finally closed so far as the department is concerned. Shri Rakesh Ranjan Agrawal, learned counsel for the applicant, firstly, submitted that on plain language of section 7D of the Act, an order accepting the composition application filed by an assessee cannot be revised in exercise of power under section 10B of the Act. Section 7D, according to him, is prefaced with the words notwithstanding anything contained in other provisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised its option, cannot be permitted to turn around and resile from its liability on the ground that he had no turnover or had not done any manufacturing activity during the relevant assessment year. On the interpretation of section 7D it was held that this gives an option to a dealer who is covered by a scheme to opt for payment of lump sum amount in lieu of amount of tax and non obstante clause therein excludes the applicability of other provisions of the Act which deals with the assessment and payment of tax. It has been further held that liability to pay the composition money is not relatable to actual sale at all. Thus the aforesaid decision does not throw much light on the controversy in hand. It does not advance the case of either parties. The question presently involved was not directly or remotely agitated or decided in the above decision. It is desirable to reproduce sections 7D and 10B of the Act. Section 7D reads as follows: Section 7D. Composition of tax liability. Notwithstanding anything contained in this Act, but subject to directions of the State Government, the assessing authority may agree to accept a composition money either in lump sum or at an agreed rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred on the authorities to take appropriate action when the order under section 7D is prejudicial to the interest of Revenue. It has observed that besides power of rectification under section 22 of the Act the power of revision under section 10B of the Act, is there . The argument of the learned Standing Counsel that when an order under section 7D has been incorrectly passed, in such circumstances the department is entitled to initiate reassessment proceedings under section 21 of the Act, was rejected in the aforesaid case. There may be some substance in the argument of the applicant that the applicability of section 10B was not directly called upon for decision with respect to an order passed under section 7D in the aforesaid case. But it is not necessary to deal with this question in detail in view of the fact that there is substance in the other argument of the applicant. Therefore, I leave the issue as it is and treat it as covered by the decision of Kothari Contract Interiors [2007] 10 VST 60 (All); [2006] UPTC 74. The applicant's second argument is on the merits of the case. Contention is that the authorities below have misinterpreted and misconstrued the Compositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not say that a dealer who was not a registered dealer in the year 1993-94 would stand excluded. On the plain language and on harmonious constructions of the scheme, it is difficult to construe the scheme in the manner it has been construed by the authorities below and to hold that only a dealer registered for the year 1993-94 is entitled to invoke the scheme. Registration as a dealer for year 1993-94 is not precondition, under the scheme. The Deputy Commissioner (Executive) as well as the Tribunal both have swayed away and tried to read the condition of registration in the year 1993-94 as a precondition to qualify for entitlement to apply under the aforesaid scheme. There being no such stipulation in the scheme in question, the view taken by the authorities below on this point cannot find approval by this court. The second objection taken by the Deputy Commissioner (Executive) as also by the Tribunal, to disentitle the applicants from the benefit of the scheme in question, is, that the turnover of the applicant exceeds Rs. 7 lakhs for the assessment year 1994-95 by invoking section 18 of the Act. This point needs a little elaboration and it is necessary to recapitulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the language employed. The title assessment of reconstituted or new firms, and change of partnership , is itself suggestive of the situation embraced in section 18 of the Act. This section, as its heading discloses, has only a limited application. The section has been enacted for the purpose of assessment of reconstituted or new firms and change of partnership, during the course of an assessment year. It nowhere provides enhancement of turnover proportionally to the entire assessment year in question. This section should be read in the light of section 3 of the Act for the purpose of determining the basic exemption limit of reconstituted or new firm for the remaining period of the assessment year. Section 3 of the Act provides basic exemption limit for the entire assessment year. This section provides that change in constitution of the partnership or opening of a new firm or reconstitution of a new firm would not in any way give an advantage to already existing dealers qua the basic exemption limit. If a new firm comes into existence in the course of an assessment year, for the purposes of determination of basic exemption limit, the basic exemption limit shall be proportiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover is not taxable, the same cannot be taxed by invoking the principle of estoppel or any other equitable doctrine, as observed by the Supreme Court in the case of Commissioner of Income-tax v. V.M.R.P. Firm Muar [1965] 56 ITR 67; AIR 1965 SC 1216. The relevant paragraph is reproduced below (page 1221 of AIR): . . . If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income. The Tribunal also committed illegality in mechanically upholding the order of the Deputy Commissioner (Executive) on this point without making any analysis of section 18. This approach of the Tribunal is far from satisfactory. The section 18 has been enacted for a different purpose. Before the Tribunal, in respect of Chandana and Company, an argument was raised that it has done the business of fireworks in the year 1993-94 and since the said firm was admittedly registered in the year 1993-94, it was entitled to get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department and the assessee, no inference of suppression of facts can be drawn. Although the above observations were made by the apex court in the context of Central Excise Act, they are applicable to the facts of the present case and the observation made by the Deputy Commissioner (Executive) in his order is totally uncalled for so far as the applicant-dealers are concerned. In a nutshell this court is of the view that registration for the assessment year 1993-94 was not a precondition to invoke the benefit of the scheme in question and for the purposes of determining the maximum limit of Rs. 7 lakhs, provisions of section 18 of the Act cannot be pressed into service. The Deputy Commissioner (Executive) as well as the Tribunal both have committed legal error in holding otherwise and their orders being indefensible are hereby set aside. In the result all the revisions are allowed with costs of rupees one thousand each. The orders of the Deputy Commissioner (Executive) dated August 18, 1999 (annexure 5), and of the Tribunal December 17, 2003 (Annexure 10) and March 5, 2004 (annexure 12) are hereby set aside. The department shall pay Rs. 1,000 as costs to each applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X
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