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TMI Blog2001 (5) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... /B dated March 23, 1992. After almost four years from the finalisation of assessment for the year 1985-86, three years from the date of finalisation of assessment for the year 1986-87 and almost two years from the finalisation of assessment for the year 1987-88, respondent No. 2 issued notices dated February 18, 1994 under Section 40 of the Act proposing suo motu revision of the assessment orders on the ground that the amount received by the petitioner in the form of hiring and service charges had escaped levy of tax at the hands of Assessing Authority. The petitioner challenged the jurisdiction of respondent No. 2 to initiate action under Section 40 of the Act by contending that the assessment orders did not suffer from any impropriety or illegality. On merits, it contested the notices by asserting that the so-called hiring and services cannot be treated as covered by the definition of sale because there was no transfer of property in goods either for cash or deferred payment. The petitioner also asserted that tractors, etc., were made available to the farmers with its own drivers/labour and mechanical staff for harvesting their crops, etc., without allowing them even to touch t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped levy of tax at the hands of Assessing Authority. He further argued that power under Section 40 of the Act can be exercised by the competent authority only for the purpose of satisfying itself as to the legality or propriety of any proceedings or of any order made therein and not for dealing with the cases of escaped assessment. Learned counsel pointed out that the cases of escaped assessment are covered by Section 31 of the Act under which power can be exercised only by the Assessing Authority within three years from the date of final assessment order. He then referred to the contents of notices issued by respondent No. 2 to show that the only ground on which the said respondent had proposed revision of assessment orders was that the amount received by the petitioner from hiring and service charges had escaped levy of tax at the hand of Assessing Authority and not on the ground that those orders were vitiated by any illegality or impropriety. In supports of his argument, Shri Sawhney relied on the following decisions : 1. State of Kerala v. K.M. Cheria Abdulla and Co. 2. Hari Chand Rattan Chand and Co. v. Deputy Excise and Taxation Commissioner (Additional), Punjab [FB] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the expiry of a period of five years from the date of the order : Provided further that the aforesaid limitation of period shall not apply where the order in a similar case is revised as a result of the decision of the Tribunal or any court of law : Provided further that the assessee or any other person shall have no right to invoke the revisional powers under this sub-section. (2) The State Government may, by notification, confer on any officer the powers of the Commissioner under Sub-section (1) to be exercised subject to such conditions and in respect of such areas as may be specified in the notification. (3) No order shall be passed under this section which adversely affects any person unless such person has been given a reasonable opportunity of being heard. (See Rule 60). 8. A conjoint reading of the provisions quoted above shows that while Section 31 speaks of reassessment of tax, Section 40 provides for revision. Under Section 31, the Assessing Authority can reassess the tax payable on the turnover which has been under-assessed or has escaped assessment. This power can be exercised within three years from the date of finalisation of assessment and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree with Shri Sawhney that the notices issued by respondent No. 2 under Section 40 of the Act were ultra vires of the powers of the said respondent and on that ground alone the impugned orders are liable to be quashed. 10. In KM. Cheria Abdulla's case [1965] 16 STC 875, their Lordships of the Supreme Court considered the scope of Sections 12(2) and 19 of the Madras General Sales Tax Act, 1939 and Rule 14-A of the Madras General Sales Tax Rules, 1939 and held as under : The words of Section 12(2) of the Madras General Sales Tax Act, 1939, that the Deputy Commissioner 'may pass such order with respect thereto as he thinks fit' means such order as may in the circumstances of the case for rectifying the defect be regarded by him as just. Power to pass such order as the revising authority thinks fit may in some cases include power to make or direct such further enquiry as the Deputy Commissioner may find necessary for rectifying the illegality or impropriety of the order, or irregularity in the proceeding. It is therefore not right baldly to propound that in passing an order in the exercise of his revisional jurisdiction, the Deputy Commissioner must in all cases b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g before any Assessing Authority or appellate authority in order to determine the legality or propriety of the proceedings. But, before he decides to exercise this power, he must come to the conclusion that the order or the proceedings suffer from the vice of impropriety or illegality and for this conclusion he has to confine himself to the record which is called for by him and which was before the lower authority, as the lower authority can be presumed to have applied his mind only to that record. He cannot take into consideration any fresh material in order to come to this conclusion. After having come to that conclusion, he will be entitled to scrutinise the proceedings and the order passed in order to determine the correct turnover which should have been assessed to tax on the basis of that record. He cannot, however, bring to tax, in the purported exercise of revisional powers, any turnover which had not been disclosed to the Assessing Authority by the dealer or which was not discovered by him during the course of assessment and which has come to the notice of the revising authority after the expiry of three years following the close of the year to which the turnover proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded any part of the turnover, then certainly it would be a case for the revisional authority to revise the assessment. Where the assessee, a co-operative institution having a sugarcane factory, included harvesting charges incurred in the purchase of sugarcane to the factory, the assessing authority without applying his mind omitted to include those expenses in the taxable turnover, and the Deputy Commissioner in exercise of his powers under Section 21(2) of the Karnataka Sales Tax Act set aside the assessment and directed the assessing authority to redo the assessment by including in the purchase turnover, the harvesting charges incurred by the assessee. Held, that since the assessing authority did not apply his mind to the disputed turnover, the revising authority could not have invoked the powers under Section 21(2) of the Act. The argument of Shri Jaswant Singh that the expression legality or propriety used in Section 40(1) of the Act should be liberally construed so as to include a case of escaped assessment sounds attractive but having regard to the scheme of the Act, we are unable to accept the same. If the Legislature intended to invest the revisional autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Authority. In our opinion, this is sufficient to draw a conclusion that respondent No. 2 had mechanically issued the impugned notices. In Barium Chemicals Ltd. v. Company Law Board [1966] 36 Comp Cas 639, a Constitution Bench interpreted the expression if in the opinion of Central Government appearing in Section 237(b) of Companies Act, 1956 and held that for exercise of power under that section, there must exist circumstances referable to the relevant statutory provisions. Their Lordships also held that an order passed in the printed pro forma do not satisfy the requirement of formation of an objective opinion with reference to the relevant statutory provision. 18. For the reasons mentioned above, we hold that orders, annexures P3, P3/A and P3/B, passed by respondent No. 2 are ultra vires to Section 40 of the Act and liable to be quashed as such. Order, annexure P4, passed by the Tribunal is also liable to be quashed on that ground. 19. In view of the above conclusion, we do not consider it necessary to deal with other grounds of challenge raised by the petitioner. 20. In the result, the writ petition is allowed. The impugned orders are declared illega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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