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Superintendent of Taxes, Tezpur & Ors Vs. M/S. Bormahajan Tea Co. Ltd. [1978] INSC 8 (17 January 1978)

KAILASAM, P.S.

KAILASAM, P.S.

UNTWALIA, N.L.

CITATION: 1978 AIR 533 1978 SCR (2) 573 1978 SCC (1) 513

ACT:

Constitution of India Art. 136-The discretion of the Court at the final hearing to decide whether the court would interfere taking the totality of the facts into consideration.

Assam Taxation (On Goods Carried by Road or on Inland Waterways) Act. 1961. Section 7, 9, 11, 20-The return filed beyond the period prescribed whether non est.-Return filed without payment of the tax due whether non est.--Whether Revenue can treat the return as invalid and thereafter contend before this Court that the return was valid.

HEADNOTE:

The respondent is an assessee under the Assam Taxation (On Goods Carried by Road or on Inland Waterways) Act, 1961.

The respondent in C. A. 602 of 1974 submitted the return under section 7(1) of the Act for the period ending September 30, 1960, without paying the tax on the return as required under section 20(2) of the Act. The respondent in C. A. No. 603 of 1974 submitted his return under section 7(1) for the quarter ending 31st December 1960. The return was filed beyond the period of 30 days as required by section 7(3). No tax was paid along with the submission of the return in this case also. The assessing authorities treated the returns filed as invalid and therefore, proceeded with the best judgment assessment. The assessing authorities passed assessment orders in both the cases under section 9(4) of the Act. No notices either under section 7(2) or section 11 of the Act were served on the respondents.

The respondent filed a Writ Petition in the High Court and challenged the assessment orders on the grounds 1.Since the return was filed without depositing the tax in both cases and filed beyond time in one case the returns are not returns within the meaning of section 7(1) and no assessment proceedings can be made on that.

2.Since no notice as contemplated by section 7(2) and section 11 of the Act directing the assessee to show cause why assessment proceedings should not be initiated within two years from the date of the expiry of the return period ,:as issued no proceedings could be validly initiated ,is it had become time-barred under section 7(2) of the Act.

The appellant contended that the demand by the Taxing Officer under section 9(3) of the Act is in pursuance of the return filed voluntarily by the assessee though without payment of the tax and that it can be taken as a return and assessment made under section 9 of the Act.

The High Court held that under section 7(1) the return must be submitted within a period of 30 days after the completion of the return quarter and that the return submitted after the statutory period must be held to be non est for the purpose of initiating assessment proceedings. The High Court also held that the return submitted without the payment of due on the return which is a mandatory requirement makes the return non est and, therefore, no further proceedings could be taken on such a defective return.

In appeal by Special Leave the appellant contended 574

1. The High Court was in error in holding that the return submitted by the respondent is non est.

2. The return is complete and valid when it is submitted in such form to such authorities as prescribed by the rule and the fact that there was any defect in the return such as nonpayment of tax required under section 20(2) or delay in filing the return within the time prescribed under section 7(3) does not make the return non est.

The respondent contended that this Court should not allow the plea put forward on behalf of the appellant that the return was a valid one as it was admitted that the assessment did not proceed on the return submitted. That the appellant treated both the returns as invalid ones; that the Tax Authorities cannot be allowed to change their front and submit that they proceeded on the ?oasis of the returns furnished by the respondent.

Dismissing the appeal, the Court

HELD : 1. On a reading of section 7(1) and section 20(2) of the Act it cannot be said that the submission of the learned Counsel for the appellant that it is not necessary that the tax should be paid before valid return is submitted is without substance. This Court in the decision of Superintendent of Taxes v. Onkarmal Nathman has held that before proceedings could be taken under section 9(4) it is mandatory that notice under section 7(2) will have to be issued.

Therefore, the only approach which is available to the appellant and which has been taken by it before this Court is that the assessment proceedings are valid as the return is not non est. This Court should not allow the appellant to take this plea-. It was admitted before the High Court that the assessment was not based on the returns filed.

This Court under Article 136 of the Constitution cannot permit the State to contend that it can proceed on the basis that the returns were valid especially when the plea before the High Court was that the returns were invalid. [579 A, D, F-G] Superintendent of Taxes, Dhubri and Ors. v. Onkarmal Nathmal Trust etc. 1975 Supp. S.C.R. 365 at p. 375 referred to.

2.The exercise of powers under Article 136 is discretionary. Even though there may be substance in the argument put forward on behalf of the appellant the Court taking the totality of the circumstances may decline to interfere in an appeal by special leave. [579 G-H, 580 A] Trivedi v. Nagrashra, [1961] 1 SCR 113 at 117 and State of Gujarat and Ors. v. Gujarat Revenue Tribunal and Ors., [1976] 3 SCR 565 at 578, followed.

The Court found that on the facts of the case the court is not called upon to decide this question. [579 A]

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 602 and 603 of 1974.

Appeals by Special Leave, from the Judgment and Order dated the 3rd July, 1973 of the, Assam & Nagaland High Court in Civil Rule Nos. 1000 and 1001 of 1969.

L. N. Sinha and S. N. Chowdhary for the Appellant.

A. K. Sen, J. P. Bhattacharjee, P. H. Parekh and Miss Manju Jetley for Respondent.

The Judgment of the Court was delivered by KAILASAM, J. These appeals are preferred by the Superintendent of Taxes, Tezpur, by special leave against the judgment and order passed 575 by the High Court of Assam and Nagaland at Gauhati inCivil Rule Nos. 1000 and 1001 of 1969.

The respondent is M/s. Bormahajan Tea Co,. Ltd., who is assessee under the Assam Taxation (On Goods Carried by Road or on Inland Water-ways) Act, 1961. The Assam Taxation (On Goods Carried by Road or on Inland Water-ways) Act was passed in 19 5 4. The validity of the Act was challenged by various parties before the Assam High Court and this Court.

This Court on September 26, 1960 held that-the Act was ultra vires of the Constitution as the previous sanction of the President was not taken as required under Art. 304 of the Constitution. The present Act, The Assam Taxation (On Goods Carried by Road or Inland Water-ways) Act, 1961 (hereinafter called as "the Act"), was passed by the Assam Legislature with the sanction of the President for the purpose of validating the tax that had been imposed under the 1954 Act The Act received the assent of the President.., on April 6, 1961 and was published in the Assam Gazette on April, 15, 1961 and was to be in force only up to March. 31, 1962. The Validity of this Act was also challenged and the High Court of Assam by its order dated August 1, 1963 held that this Act was also ultra vires. The State Government appealed to this Court against this judgment. While the appeal was pending before this Court two writ petitions filed by different assessees under Art. 32 of the Constitution before this Court were disposed of on December 13, 1963 holding that the Act was valid. On an application made by the Government of Assam pending the appeal against the order dated August 1, 1963 of the Assam High Court this Court granted stay of the operation of the judgment of the High Court and on January 29, 1965 made the stay absolute subject to the condition that the assessment proceedings, could continue but no levy should be made. On April 1, 1968 this Court reversed the judgment dated August 1, 1963 of the Assam High Court and held the present Act to be valid.

Though the present Act was passed in 1961 as the matter was pending before the Courts the assessment proceedings could not be taken up till January 29, 1965 when this Court allowed the assessment proceedings to be continued.

The two appeals before us relate to the assessment quarter ending September 30, 1960 and December 31, 1960. In Civil Rule No. 1000 of 1969, Assam High Court, out of which Civil Appeal No. 602 of 1974 before this Court arises, the respondent company submitted the return on October 27, 1960 under section 7(1) of the Act for the period ending September 30, 1960. The respondent submitted the return without paying tax on the return as required under section 20 (2) of the Act. In Civil Rule No. 1001 of 1969 in the Assam High Court, out of which Civil Appeal No. 603 of 1974 arises in this Court, the respondent submitted a return on February 14, 1961 for the quarter ending December 31, 1960 under, section 7(1) of the Act. The return under section 7(1) has to be, submitted under section 7(3) within 30 days of the completion of the quarter in respect of which the returns are to be filed. In this return also no tax as required was paid prior to the submission of the return. It may be noted that 576 while in Civil Appeal, No. 602 of 1974 the return was filed within time but without payment of tax, in Civil Appeal No.

603 of 1974 the return was filed out of time and without payment of the tax.

Orders of assessments were passed in both the cases on June 19, 1969 in pursuance of the provisions of section 9(4) of the Act. It is the common case that no notice either under section 7(2) or Section 1 1 of the Act was served on the respondent for the submission of the return for the periods in question. In the High Court the respondent-submitted that order of assessment made by the Revenue on June 19, 1969 is not valid in law on two grounds. Firstly, it was contended that as the return in Civil Rule No. 1000 of 1969 was filed without the necessary deposit of the tax the return is not a return within the meaning of section 7(1) and no assessment proceedings can be taken on that, It was further submitted that as no notice as contemplated under section 7(2) and section 11 of the Act directing the assessee to show cause why assessment proceedings should not be initiated within 2 years from the date of the expiry of the return period was issued, no assessment proceedings could be validly initiated as. it became time-barred under section 7(2) of the Act. The plea on behalf of the Government was that the demand by the taxing officer under section 9(3) of the Act is in pursuance of the return filed voluntarily by the assessee though without payment of the tax and out of time and that it can be taken as a return and assessment made under section 9 of the Act. In this view the submission was that it is not necessary for the tax authorities to issue any notice under section 7(2) within 2 years from the date, on which the return ought to have been submitted. The High Court held that as under section 7(1) the return must be submitted within a period of 30 days after the completion of the return quarter, the return submitted after the statutory period must be held to be nonest for the purpose of initiating assessment proceedings based thereon and as no action had been taken, either under section 7 (2) or section 11 of the Act, in the present case, the assessment order dated June 19, 1969 is beyond the competence of the authorities. With regard to Civil Rule No. 1000 of 1969 the High Court came to the same conclusion on the ground that though the return was admittedly submitted within the prescribed time, the tax due on that return was not paid and as payment of tax before, furnishing a return under section 7_(1) of the Act is mandatory such failure would result in making the return non-est and therefore no further proceedings can be taken or such a defective return. In the result the High Court held that the return submitted in Civil Rule No. 1000 of 1969 although within the, prescribed period is not a return within the meaning of section 7(1) and that the return in Civil Rule No. 1001 of 1969 as it was beyond the prescribed period and Without payment of tax cannot be treated as a return under section 7(1) of the Act and as admittedly no proceedings were taken under section 7(2) of the Act the tax authorities were not competent to proceed with the assessment.

In the appeals before us Mr. Lal Narain Sinha, the learned counsel for the appellant, submitted that the High Court was in error in holding that the return submitted by the respondent is non est.

The learned counsel referred to section 7(1) which requires that the return shall be furnished in such form and to such authorities as may be prescribed The form is prescribed by Assam Taxation (On Goods Carried by Road or on Inland Water-ways) Rules, 1961. Rule 6 prescribes that the return shall be furnished in Form No. 1 and Rule 7 requires ,that return shall be signed and verified by the dealer or producer or his agent. Form No. 1 under the Rules requires in Column E that ,the amount paid with the Challan No. and date should be noted. Section 20 prescribes the manner in which the tax shall be paid. Section 20(2) provides that before any producer or dealer furnishes'the return required by sub-section (1) of section 7, he shall in the prescribed manner pay into the Government Treasury the full amount of tax due from him under this Act on the basis of such return and shall furnish along with the returns a receipt from such Treasury in token of payment of such tax. Section 13 provides penalty for failure to pay tax. It was submitted by Mr. Lal Narain Sinha that a return is complete and valid when it is submitted in such form and to such authority as prescribed by the Rules and the fact that there was any defect in the return such as non-payment of tax as required under section 20(2) or delay in filing the return within the time prescribed under section 7(3) the return will not become non est. The consequence of filing a defective return is not to make the return non est but to make the assessee liable to penalty under section 13 of two other proceedings. So long as there is a return the learned counsel submitted that it was not necessary for the tax authorities to proceed under section 7(2) which is applicable to cases where no return has been submitted. In support of his contention that any defect in the return would not make the return non est, the learned counsel referred us to three decisions. A.I.R. 1931 Cal. 476, A.I.R. 1932 P. C. 165 and 48 I.T.R. 1. In Chandra Nath Bagchi vs. Nabadwip Chandra Dutt and Others(l) the judgment debtor pleaded want of notice under Order 21, Rule 22 of the Civil Procedure, Code, which requires that an opportunity should be given to the judgment-debtors against whom execution is taken out more than a year after the decree to show cause why execution should not proceed. It was admitted, that no such notice was in fact given but as the judgment-debtor in that case was actively litigating objecting to the execution being taken against him, he cannot be permitted to plead failure of notice under 0.21 Rule 22. Chief Justice Rankin while accepting the requirement that a notice under 0.21, Rule 22, is necessary found that in the case before him the parties have been litigating actively with each other upon the question whether the execution should proceed and how it should proceed. In the circumstances the learned C. J. observed :

"It appears to me to be merely piling unreason upon technicality to hold upon the circumstances of this case that it is open to the judgment-debtors on these grounds to object to the jurisdiction of the Court because they have not got a formal notice to do something, namely to dispute the execution of the decree when in point of fact they were busy disputing about it in all the courts for the best part of the last two years." Relying on the above observation the learned counsel submitted that the respondent who challenged the A.T.R. 1931 Cal. 476.

578 validity of the assessment for several years and who have the return (cannot now contend that the assessment is not valid having been filed beyond time or without payment of the tax.

In Nagendra Nath Dey and Anr. vs. Suresh Chandra Dey and Others,(1) the Judicial Committee held that any,application by a party to an appellate Court, asking it to set aside or revise a decision of a Subordinate Court, is an appeal within the ordinary acceptation of the term, and that it is no less an appeal because it is irregular or incompetent.

Relying on this decision it was submitted that the return is no less a return though it was defective in that tax was not paid and was presented out of time.

In Gursahari Saigal vs. Commissioner of Income-tax, Punjab (2) the Supreme Court was construing section 18A(6) and (8) of the Indian Income-tax Act, 1922. Sub-section (6) provided thatwhen the tax paid on the basis of his own estimate is less than 80% of the tax determined on the basis of the regular assessment simple interest at the rate of 6% per annum from the first day of January in the financial year in which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent. According to the sub-section interest has to be calculated from first January in the financial year in which the tax mentioned was paid and such calculation has to be made on the short-fall between the amount paid and 80 per cent of the tax which was found payable on the regular assessment. According to sub-section (8) where on making the regular assessment Income-tax Officer finds that no payment of tax has been made in accordance with the provisions of this section, interest calculated in the manner laid down in sub-section (6) 'shall be, added to the tax as determined on the basis of regular assessment. The assessee's contention was that since he had not paid any tax at all it is not possible to calculate interest in the manner laid down in sub-section (6). The plea was that in a case in which no tax had been paid at all, sub-section (6) will have no application as there is no short-fall between 80 per cent of the tax payable, on regular assessment and the amount actually paid. The Court rejected the plea and held that sub-section (6) should be read according to the provisions of which interest has to be calculated as provided in sub-section (8), in farmer which makes it workable and thereby prevent the clear intention of sub-section (8) being defeated. The Court further held that the intention was that interest should becharged from first January of the financial year in which the tax oughtto have been paid and those who paid the tax but a smaller amount and those who did not pay tax at all would then be put in the same position substantially. On the strength of the decision it was submitted that the respondent who had not paid the tax cannot take advantage of his omission and say that the assessment proceedings cannot be proceeded with on the return submitted.

(1) [1932] P.C. 165.

(2) 48 I.T.R. 1.

579 On a reading of section 7(1) and section 20(2) of the Act it cannot be said that the submission of the learned counsel for the appellant that it is not necessary that the tax should be paid before valid return is submitted is without substance. On the facts of the case we feel we are not called upon to decide this question. Certain enactments, as pointed out by the High Court, provide that the return submitted will not be valid unless it is accompanied by Treasury Receipt showing payment of tax (vide sub-section (6) of section 19 of the Assam Agricultural Income-tax Act, 1939). Section 16 of the Assam Sales-tax Act, 1947 providesthat no return submitted under this section shall be valid unless it isaccompanied by a Treasury Receipt showing payment of the tax due. Section 7( l) of the Act merely requires that the return should be furnished in such form and to such authority as may be prescribed. The returns were admittedly submitted to the authorities.

Though the form requires mentioning of the particulars of the Treasury challan for the payment of the tax, it was submitted that the return furnished without payment of the tax cannot be said to be return at all. It was further pleaded that the failure to pay the tax as required under section 20(2) will not make the return non-est. We, refrain from deciding this question.

Mr. A. K. Sen, the learned counsel for the, respondent, submitted that this Court should not allow the plea put forward on behalf of the appellant that the return was a valid ode as it was admitted that the assessment did not proceed on the return submitted. He referred to the judgment of the High Court wherein it is stated :"It is also the admitted position in both these cases, the Superintendent of Taxes treated the returns filed as invalid ones." It was submitted that the tax authorities cannot now be allowed to change their front and submit that they proceeded to assess on the basis of the returns furnished by the respondent. It is common ground that no notice under section 7(2) of the Act within 2 years of the expiry of the return period was issued to the respondent. This Court, by a majority in Supdt. of Taxes, Dhubri and Others vs.

Onkarmal Nathmal Trust etc.,(1) has held that before proceedings could be taken under section 9(4) it is mandatory that notice under section 7(2) will have to be issued.

Therefore, the only approach that is available to the State and which has been taken by the learned counsel, is that the assessment proceedings are valid as the return is not nonest. The question that arises for consideration is whether we should allow this plea to be taken by the State when it admitted before the High Court that the assessment was not based on the return. It has to be seen that the ground that was urged by the respondent was that the returns were nonest which was accepted by the High Court. We do not think we will be justified in these appeals under Art. 136of the Constitution to permit the State to contend that it can proceed onthe basis that the returns were valid, especially when the plea before the High Court was that the returns were invalid. this Court has repeatedly held that the exercise of power under Art. 1.36 is discretionary.

(vide Trivedi vs. Nagrashra (2) In State of Gujarat & Ors vs. Gujarat Revenue Tribunal & Ors. (3) this Court (1)[1975] Supp. S.C.R. 365 at p. 375, (2) [1961] S.C.R. 113, 117.

(3) [1976] 3 S.C.R. 565, 578.

580 held that ever though there may be substance in the argument Pat forward on behalf of the appellant the Court taking the totality of the circumstances may decline to interfere in an appeal filed by special leave of the Court under Art. 136 of the Constitution.

In the result the appeals are dismissed. No order as to costs, P.H.P. Appeals dismissed.

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