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TMI Blog1972 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 some time 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 notice under section 12(8) of the Act to the respondent : " Notice to a dealer under section 12(8) of the Orissa Sales Tax Act. To M/S. Uttareswari Rice Mills (Dealer) At/P. O. Berhampur, CAI 2127-A (Address) Whereas I have reason to believe that your turnover for the quarter ending 1963-64 on which sales tax was payable under the Orissa Sales Tax Act, 1947, has escaped assessment/has been under-assessed. You ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 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 enquity without indicating therein the reason for the alleged under-assessment. In appeal before us, Mr. Ramachandran on behalf of the appellants has referred to the provisions of section 12(8) of the Act and has argued that it is not essential to give the reasons in the notice issued under the above provision of law. The impugned notice, according to the learned counsel, cannot be quashed for non-mention of the reasons. The above stand has been controverted by Mr. Gobind Das on behalf of the respondent and, according to him, the failure of the Sales Tax Officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying 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-B, 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) If for any reason the turnover of sales or the turnover of purchases of a dealer has escaped assessment or has been under-assessed or has not been assessed due to the tax having been compounded when composition is not permissible under the Act and these rules and it is proposed to assess it the Commissioner shall serve on the dealer a notice in Form VI calling upon him to furnish a return in Form IV within one calendar month from the date of receipt of such notice. (2) Such notice may also require the dealer to atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assess, (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 not " if the sales tax authority has reason to believe ", the difference in phraseology, in our opinion, should not make much material difference. A reason cannot exist in vacuum. Somebody must form the belief that reason exists and looking to the context in which the words are used, we are of the view that it should be the sales tax authority issuing the notice who should have reason to believe that the turnover of a dealer has escaped assessment or has been under-assessed. The approach in this matter has to be practical and not pedantic. Any view which would ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 observed : " The section, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable ut res valeat potius quam pereat. " In view of the criticism levelled against the wording of section 34 of the Indian Income-tax Act, the above section was amended by Amendment Act of 1939. Despite the amendment made in section 34 of the Indian Income-tax Act, the Orissa Legislature, it would appear, has used ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 proceedings. The earlier stage of the proceeding for recording the reasons of the Income-tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi-judicial. The scheme of section 34 of the Act is that, if the conditions of the main section are satisfied, a notice has to be issued to the assessee containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22. But, before issuing the notice, the proviso requires that the officer should record his reasons for initiating action under section 34 and obtain the sanction of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 so would invalidate the notice, would be tantamount to reading something in the statute which, in fact, is not there. We are consequently unable to accede to the contention that the notice under the above provision of law should be quashed if the reasons which led to the issue of the notice are not mentioned in the notice. At the same time, we would like to make it clear that if the Sales Tax Officer is in possession of material which he proposes to use against the dealer in proceedings for reassessment, the said officer must before using that material bring it to the notice of the dealer and give him adequate opportunity to explain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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