Anandji Haridas & Co. (P.) Ltd. Vs.
S. P. Kushare, S. T. O. Nagpur & Ors [1967] INSC 224 (28 September 1967)
28/09/1967 HEGDE, K.S.
HEGDE, K.S.
WANCHOO, K.N. (CJ) BACHAWAT, R.S.
RAMASWAMI, V.
MITTER, G.K.
CITATION: 1968 AIR 565 1968 SCR (1) 661
CITATOR INFO :
R 1974 SC1300 (74) D 1979 SC1098
(12,15,17,18,29) RF 1980 SC1789 (36)
ACT:
Provinces and Berar Sales Tax Act (21 of
1947) as amendedBombay Sales Tax Laws (Validating Provisions and Amendment) Act
(22 of 1959) ss. 11(4)(a), 11A(1) and (3)-Section 11(4)(a), if violative of
Art. 14 of Constitution.
Notices under s. 11(4)(a)-One notice for
several quartersInapplicable portion of printed notice not struck offAssessment
year, wrongly mentioned in notice-Notice, if valid.
C.P. and Berar Sales Tax Rules, r. 32-30 days
notice prescribed for submitting explanation-Notice giving shorter
period-Validity.
HEADNOTE:
Under s.10(1) of the Central Provinces and
Berar Sales Tax Act 1947 every dealer required so to do by the Commissioner by
notice, and every registered dealer, shall furnish such returns by such dates
and so such authority as may be prescribed, and r.19 of the Rules framed under
the Act provides that every registered dealer should furnish quarterly returns
accompanied by a treasury challan in proof of payment of the tax payable. If
the registered dealer does not so furnish his return, the Commissioner may,
after giving the dealer a reasonable opportunity assess him to the best of his
judgment (4)(a). Under s.11(4) (a). Rule 32 prescribes that ordinarily not less
than 30 days notice should be given to an assessee for submitting his
explanation before action is taken under s.11(4)(a).
In 1953, s.11A was added to the Act. Under
s.11A(1) if in consequence of any information which has come into his
possession, the other Commissioner is satisfied that any turnover of a dealer
has escaped assessment, the Commissioner may, within three calendar years from
the expiry of such period, after giving the dealer a reasonable opportunity of
being heard, proceed to re-assess the tax payable on any such turnover and also
direct the dealer to pay a penalty. In 1959, s.11A(3) was added by which,
nothing in s.11A(1) shall apply to any proceeding including any notice under
s.11, that is, the period of limitation of 3 years mentioned in s.11A(1) shall
not apply to a proceeding under s.11(4)(a) on best judgment basis.
The appellants were registered dealers. Their
assessment year was from 1st November to 31st October. They submitted their
quarterly returns upto 30th April 1952. Since no returns were submitted
thereafter, on 13th September 1955, the assessing authority issued a notice
with respect to the period 1st January 1953 to 31st December 1953 calling upon
them to show cause why action should not be taken against them under s.11(4)
(a). A similar notice was issued on 27th October 1955 for the period 1st
January 1954 to 31st December 1954, and on 7th July 1956, for the period 1st
January 1955 to 31st December 1955. The appellants repeatedly took time for
submitting their explanation. In 1958, fresh notices were issued for L/P(N)
7SCI-(3)(a) 662 the calendar years1952 to 1955 and the appellants raised the
objection, for the first time, that their assessment year was not the calendar
year, but 1st November to 31st October.
In view of that objection, the first
respondent issued another set of notices on 8th July 1959 for the periods 1st
May 1952 to 31st October 1952, 1st November 1952 to 31st October 1953, 1st
November 1953 to 31st October 1954 and 1st November 1954 to 31st October 1955
respectively. The appellants contended that those notices were barred by the
3-year period of limitation under s.11A(1), but the assessing authority
assessed the appellants on best judgment basis under s. 11 (4) (a). The
appellants thereupon filed writ petitions in the High Court challenging the
validity of the notices and the order of assessment, but the petitions were
dismissed.
In appeals to this Court, the appellant
contended that: (1) Section 11(4), (a) read with s.11A(3) contravenes Art. 14
of the Constitution, because, a registered dealer who had failed to submit his
return could be proceeded against either under s.11(4)(a) or s.11A(1), but,
whereas s.11A(1) provides a 3-year period of limitation, a proceeding under s.
11(4)(a) could be initiated at any time in view of s.11A(3); (2) the notices of
1959 were barred by time; and (3) the notices of 1955 and 1956 were not valid,
because, (a) the issue of one notice for several quarters was contrary to law,
(b) that portion of the printed notice which said that the appellants had
failed to furnish the return as required by a notice in that behalf served on
them under s.10(1) did not apply to the appellants as no notice under s.10(1)
had been given to them, (c) the assessment year mentioned in the notice was the
calendar year which was not the assessment year of the appellants, and (d)
though r.
32 provides that ordinarily not less than 30
days notice should be given to the assessee for submitting his explanation, the
first notice gave to the appellants only 9 days time.
Held: (Per Wanchoo C. J., Mitter and Hegde,
JJ.) (1) Section 11(4) (a) is void as it is violative of Art. 14.
The expression 'dealer' in s.11A(1) includes
both registered and unregistered dealers, and it cannot be contended that
dealers are classified into registered and unregistered dealers, the former
coming under s.11(4)(a) and the latter under s.11A(1). To be a valid
classification, it must not only be founded on an intelligible differential
which distinguishes persons and things that are grouped together from others
left out of the group, but that differentia must have a reasonable relation to
the object sought to be achieved. In the present case, both s.11(4)(a) and s.
11A(1) are concerned with taxing escaped
assessments, and judged from this object sought to be achieved by the Act, the
classification of dealers into registered and unregistered dealers is not
reasonable. Therefore, even registered dealers are covered by s. 11A(1). As the
'information' contemplated by s.11A(1) need not be from outside sources but
could be gathered by the assessing authority from his own records, his
knowledge of the facts that the appellants had not submitted quarterly returns
and treasury challans and that they were notassessed to tax with respect to the
turnovers in question constituted 'information' to the assessing authority from
which he could be satisfied that the turnovers had escaped assessment. It would
thus be open to the assessing authority to proceed against the appellants either
under s.11(4)(a) or s.11A(1).
But as they were proceeded against under s.
11(4)(a), they could not get the benefit of the limitation prescribed under S.
11A(1). It follows that s. 11(4)(a) has become a discriminatory provision in
view of s. 11A(3), [672 B; 674 D-E; 675 H; 676 A-G].
663 Ghanshyam Das v. Regional Assistant
Commissioner of Sales tax, Nagpur [1964] 4 S.C.R. 436 and Suraj Mall Mohta
& Co. v. A, V. Visvanatha Sastri & Anr. [1955] 1 S.C.R. 448, followed.
Maharaj Kumar Kamal Singh v. Commissioner of
Income-tax, Bihar & Orissa [1959] Supp. 1 S.C.R. 10, Commissioner of
Incometax, Bombay City v. M/s. Narsee Nagsee & Co. Bombay, [1960] 3 S.C.R.
988. Salem Provident Fund Society Ltd. v. C. I, T. Madras, 42 I.T.R. 547 and
United Mercantile Co.
Ltd. v. Commissioner of Income-tax, Kerala,
64 I.T.R. 218 referred to.
(2) But s.11(4)(a) is severable from the rest
of the Act and its severance does not affect the implementation of the other
provisions of the Act. Therefore, the validity of the notices should be tested
under s.11A(1). So tested, the notices of 1959 are all barred by the 3-year
period of limitation. [676 G-H].
(3) Since there was no valid notice for the
period 1st May 1952 to 31st October 1952, there could be no assessment in
respect of that period. As regards the quarter 1st November 1952 to 31st
January 1953 also, there was no valid notice.
The notice issued on 13th September 1955, no
doubt refers to the period 1st January 1953 to 31st January 1953, but that is
only a part of the quarter. As a quarter is a unit in itself and there should
be a notice for the entire quarter, the proceeding in respect of the quarter
from 1st November 1952 to 31st January 1953 is also barred by limitation [677
E-F].
But the notices issued in 1955 and 1956 are
valid notices in so far as they relate to the period 1st February 1953 to 31st
October 1955. Any irregularity in the issue of the notices does not vitiate the
proceeding, because, the liability to pay tax is founded on the charging
sections.
[680 B-C].
Chatturam & Ors. v. C.I.T. Bihar, [1947]
F.C.R. 116; 15 I.T.R. 302, applied.
Further, (a) The issue of one notice for
several quarters is not contrary to law. [678 E].
State of Orissa and Anr. v. M/s. Chakobhai
Chelabhai & Co.
[1961] 1 S.C.R. 719, followed.
(b) The assessing authority, by mistake, had
failed to strike out the portion in the printed form which was inapplicable to
the appellants who were registered dealers and on whom no notice need be served
to furnish a return.
But this circumstance could not have
prejudiced the appellants and such a mistake does not vitiate the notice.
[678 H].
Chakobhai Chelabhai's case, [1961] 1 S.C.R.
719, followed.
(c) The mistake as regards the assessment
year in the notices does not render the notices invalid. The assesses
deliberately kept silent and when they felt that the period of limitation
prescribed by s. 11A had expired, brought the fact to the notice of the
authority. The assesses were not prejudiced and could not be permitted to take
advantage of such a mistake. [679 G-H].
(d) Rule 32 prescribes that ordinarily 30
days' notice should be given. Therefore, the period is not mandatory.
All that ss.11(4) and 11A require is that an
assessee should be given a reasonable opportunity before he is proceeded
against. Since, in the present 664 A case, the appellants appeared before the
assessing authority and did not object to the validity of the notices but asked
for sub-mitting their explanation, and as the time asked for was given, the
appellants had a reasonable opportunity, for submitting their explanation. [679
D-G].
(Per Bachawat and Ramaswami JJ.) (1) Section
11(4) is not violative of Art. 14.
Construing ss.11(4)(a) and 11A(1) together it
must be held that cases falling within s.11(4)(a) are excluded from the purview
of S.11A(1). Section 11(4)(a) specially provides for the initiation of
proceedings against a registered dealer. Having made this special provision,
the legislature must be taken to have intended that the sales tax authorities
must proceed against. a registered dealer under s.11(4)(a) and not under
s.11A(1). [683 C-B].
The classification and differential treatment
of registered and unregistered dealers are based on substantial difference
having a reasonable relation to the object of the Act. The legislature did not
prescribe a period of limitation for a proceeding initiated under s. 11(4)(a)
against a registered dealer, because, (i) the registered dealer is under a
statutory obligation to file a return, (ii) no penalty is leviable under s.11(4)
and (iii) the registered dealer is given many advantages under the Act which
are denied to an unregistered dealer. Therefore, the bar of limitation in the
case of an unregistered dealer and the absence of such a bar in the case of a
registered dealer cannot be regarded as unjust or discriminatory.[684 B, G-H].
Ghanshyam Das v. Regional Assistant
Commissioner of sales Tax Nagpur, [1964]4 S.C.R. 436, Maharaj Kumar Kamal Sing
v.
Commissioner of Income-tax, Bihar &
Orissa, [1959] Supp. 1 S.C.R. 10 and Commissioner of Income-tax v. Narsee
Nagsee & Co. [1960] 3 S.C.R. 988, explained.
(2) Section 11A(3) expressly provides that
nothing in s. 11 A(1) shall apply to any proceeding including any notice under
s. 11 and the section is retrospective. It follows that the period of
limitation provided by s.11A(1) cannot be applied to a proceeding or notice
under S. 11(4).
Consequently, the impugned notices of 1959,
issued under s.11(4) are not barred by limitation and are not invalid [682 H;
683 A].
Ghanshyam Das's Case, [1964] 4 S.C.R. 436,
referred to (3) Even the notices issued in 1955 and 1956 initiated proceedings
validly under S. 11(4) for the period from 1st February 1953 to 31st October
1955, as the irregularities in the notices did not invalidate them. [685 B-C].
CIVIL APPERLATE JURISDICTION: Civil Appeals
Nos. 511-514 of 1966.
Appeals, by special leave from the judgments
and orders dated August 9, 1961, July 20, 1964, of the Bombay High Court,
Nagpur Bench in Misc. Civil Applications Nos. 1118 of 1959. 192 of 1961. 1360
of 1959 and 193 of 1961 respectively.
H. R. Gokhale, M. R. Bhandare, P. C. Bharta,
and O. C. Mathur, for the appellant (in all the appeals).
N. S. Bindra, P. C. Chatterjee, S. P. Nayar
for R.H. Dhebar, the respondents (in all the appeals).
665 The Judgment of WANCHOO C. J., MITTER and
HEGDE, JJ. was delivered by HEGDE, J. The dissenting judgment of BACHAWAT and
RAMASWAMI, JJ. was delivered by BACHAWAT, J.
HEGDE, J. The principal question canvassed in
this group of appeals by special leave is whether s. 11(4)(a) of the Central
Provinces and Berar Sales Tax Act 1947, to be referred to as the Act
hereinafter, is ultra vires Article 14 of the Constitution and consequently the
notices impugned in the writ petitions from which these appeals arise are
liable to be struck down and the respondents restrained from levying sales tax
on the appellants for the period May 1, 1952 to October 31, 1955.
The appellants are a private limited company
carrying on business inter alia as dealers in iron and steel materials in
Vidharba region of the Maharashtra State. In that region they have more than
one place of business. They registered themselves as dealers under s. 8A of the
Act and obtained a certificate of registration on August, 17, 1947. Their assessment
year as shown in their registration certificate is from November 1 to October
31. They were required to submit quarterly returns of their turnovers. They did
so till April 30, 1952. Thereafter no returns were submitted.
On September 13, 1955, the Assistant
Commissioner of Sales Tax, the assessing authority at that time, issued a
notice calling upon the appellants to show cause why action should not be taken
against them under ss. 10(3) and 11(4)(a), on account of their failure to
furnish the return for the period 1.1.53 to 31.12.53. Similar notices were
issued to them on October 27, 1955 for the period 1.1.54 to 31.12.54 and on
July 7, 1956 for the period 1.1.55 to 31.12.55. It appears that the appellants
repeatedly took time for submitting their explanation. The first respondent to
whom the appellants' case stood transferred issued in 1958 fresh notices to the
appellants similar to those issued in 1955.
At that stage the appellants objected to the
validity of those notices both orally as well as in writing on the ground that
their assessment year was not the calendar year as mentioned in those notices
but the year ending October
31. Evidently in view of that objection, the
first respondent issued another-set of notices on July 8, '1959. The appellants
contended that those notices were barred by time.
Thereafter the appellants challenged the
validity of the notices issued in 1959 in the petitions under Art. 226 from
which these appeals arise.
In these apneals the questions arising for
decision are whether s. 11 (4)(a) or s. 11 A(3) or any parts thereof contravene
the guarantee of equal protection of the laws or equality before the law or
whether those provisions are based on a valid classification which is
reasonable in view of the object with which they were enacted. Mr. H.R.
Gokhale learned counsel for the appellants,
urged that both these provisions deal with the same class of persons having
common characteristics and Properties and hence there is no just 666 basis for
the classification made. According to him the classification complained of has
brought about a discrimination. Further he asserted that the Act had conferred
arbitrary power on the assessing authority to pick and choose from the persons
belonging to the same class to be dealt with either under S. 11(4)(a) or under
11A(1). He urged that as a case coming under s. 11(4)(a) also falls under S. 11
A, as the law now stands, the persons proceeded against under s. 11A(1) will
have the benefit of the period of limitation prescribed therein; while the said
benefit is not available for those proceeded under S. 11(4)(a).
According to the learned counsel for the
revenue, ss. 11(4)(a) and 11A deal with different classes of persons; the
classification made under those provisions is a reasonable classification
having nexus with the object sought to be achieved.
Before adverting to the points at issue, it
would be convenient to set out the circumstances under which s.
11A(3) which is said to have brought about
the discrimination complained of came to be enacted. The Act is in force ever
since 1947. Section 11A as it originally stood was inserted into the Act in
1953. In Bisesar House v. State of Bombay(1) the question arose whether a
notice under s. 11(2) initiates a fresh proceeding and if that is so, whether
the limitation prescribed under s.11A(1) is attracted to that proceeding. A
Full Bench of the Bombay High Court speaking through Chagla, C. J. held that a
notice under S. 11(2) initiates a fresh proceeding and to such a proceeding the
limitation prescribed in s. 11A is attracted.
From the ratio of that decision it followed
that the limitation prescribed under S. 11 A also governed proceedings under
s.11(4)(a). Evidently, to get over the effect of that decision, the Bombay
Legislature enacted the Bombay Sales Tax Laws (Validating Provisions and
Amendment) Act 1959 (No. 22 of 1959) which came into force on April 18, 1959.
Section 6 of that Act inserted the new subsection (3) into S.11A and the reason
for that amendment, as stated in the statement of objects and reasons, is as
follows:
"In its judgment in Bisesar House v. Commissioner
of Sales Tax, Nagpur, the Bombay High Court has held that the period of
limitation laid down in S.IIA of the Central Provinces and Berar Sales Tax Act,
1947, for reassessment of the turnover which has escaped assessment applies to
original assessment also. It has also been found that the said limitation
applies to suo motu revisions also.
The said decision affects the original assessments
and suo motu revisions, which have been made after the expiry of the period of
limitation laid down for the reassessment of turnover escaping assessment under
the different sales tax laws in force in this State. It has, (1) 60 B.L.R. 1395
667 therefore, become necessary to establish the validity of all such
assessments and to provide that the period of limitation prescribed for
reassessment of escaped turnovers does not apply to original assessment and suo
motu revisions." In Ghanshyam Das v. Regional Assistant Commissioner of
Sales Tax, Nagpur(1) this Court did not agree with that decision so far as the
scope of s.11(2) is concerned. Therein it was held that a notice under s. 11(2)
does not initiate a fresh proceeding and to that proceeding the limitation
prescribed in s. 11A does not apply. Though in view of that decision, s.11A(3)
became superfluous in respect of a proceeding in which a notice under s. 11 (2)
is given, it undoubtedly changed the law in respect of proceedings under
s.11(4)(a).
Before we proceed to consider the aforementioned
complaint of discrimination, it is necessary to have a survey of the relevant
provisions of the Act. 'Dealer' is defined in s. 2(c) as meaning a person who
whether as principal or agent carries on in the State the business of selling
or supplying goods whether for commission, remuneration or otherwise and
includes a firm, a partnership, a Hindu undivided family or a State government
or any of their departments and includes also a society, club or association
selling or supplying goods to its members. A 'registered dealer' is defined in
s. 2(f) as meaning a dealer registered under the Act.
Section 2(j) defines 'turnover' as meaning
the aggregate of the amounts of sale prices and parts of sale prices received
or receivable by a dealer in respect of the sale or supply of goods or in
respect of the sale or supply of goods in the carrying out of any contract
effected or made during the prescribed period; and the expression 'taxable
turnover' means that part 'of a dealer's turnover during such period which
remains after deducting there from his turnover during that period in respect
of the sale of goods declared tax free under s. 6 The definition of the term
'year' as provided in s. 2(1) to the extent necessary for our present purpose
reads:"year' means the 12 months ending on 31st day of March, or if the
accounts of the assessee are made up to any other day in respect of a year
ending on any date other than the 31st day of March, than at the option of the
assessee the year ending on the day to which his accounts have been so made
up................." Section 8 says:
"(1) No dealer shall, while being liable
to pay tax under this Act, carry on business as a dealer unless he has been
registered as such and possesses a registration certificate." (1) [1964] 4
S.C.R 436.
668 Section 8A provides for voluntary
registration of a dealer.
Sub s.(3) thereof provides that every dealer
who has been registered upon an application made under this section so long as
his registration remains in force, be liable to pay tax under that Act. Sub-s.
(4) of that section stipulates that the registration of a dealer upon an
application made under that section shall be in force for a period not less
than three complete years and shall remain in force thereafter unless cancelled
under the provisions of the Act.
Section 10 provides for returns by dealers.
It reads:
"(1) Every such dealer as may be
required so to do to by the Commissioner by notice served in the prescribe
manner and every registered dealer shall furnish such returns by such dates and
to such authority as may be prescribed." Sub-s. (2) of that section is not
necessary for our present purpose. Sub-s. (3) of that section reads:
"(3) it a dealer fails to comply with
the requirement of a notice issued under subsection (1) or a registrate dealer
fails to furnish his return for any period within prescribed time to the
prescribed authority without any sufficient cause, the Commissioner may, after
giving such dealer a reasonable opportunity of being heard, direct him to pay,
by way of penalty, a sum not exceeding one-fourth of the amount of the tax
which may be assesses on him under s. 11 ".
Sections 11 and 11A are important for our
present purpose. They deal with assessment and assessment on turnover escaping
assessment. They, to the extent necessary for our present purpose read:
"11(1). If the Commissioner is satisfied
that the returns furnished by a dealer in respect of any period are correct and
complete, he shall assess the dealer on them.
(2) If the Commissioner is not so satisfied
he shall serve the dealer with a notice appointing a place and day and
directing him (i) to appear in person or by an agent entitled to appear in
accordance with the provision of section 11B, (ii) to produce evidence or have
it produced in support of the returns or (iii) to produce or cause to be
produced any accounts, registers, cash memoranda or other document, as may be
considered necessary by the Commissioner for the purpose, (3) After hearing the
dealer or his agent and examining the evidence produced in compliance with the
requirements of clause (ii) or clause (iii) of sub-section(2) and such further
evidence as the Commissioner may be require, the Commissioner shall assess him
to tax.
669 (4) If a registered dealer (a) does not
furnish returns in respect of any period by the prescribed date. or (b) having
furnished such returns fails to comply with any of the terms of a notice issued
under sub-section (2), or (c) has not regularly employed any method of
accounting or if the method employed is such that, in the opinion of the
Commissioner, assessment cannot properly be made on the basis thereof, the
Commissioner shall in the prescribed manner assess the dealer to the best of
his judgment:
Provided that he shall not so assess him in respect
of the default specified in clause (a) unless the dealer has been first given a
reasonable opportunity of being heard." (Subss. 5 and (6) are not
necessary for our present purpose).
Section 11A provides:
"(1). If in consequence of any
information which has come into possession, the Commissioner is satisfied that
any turnover of a dealer during any period has been underassessed or has
escaped assessment or assessed at a lower rate or any deduction has been
wrongly made therefrom, the Commissioner may, at any time within three calendar
years from the expiry of such period, after giving the dealer a reasonable
opportunity of being heard and after making such enquiry as he considers
necessary, proceed in such manner as may be prescribed to reassess or assess,
as the case may be, the tax payable on any such turnover;
and the Commissioner may direct that the
dealer shall pay, by way of penalty in addition to the amount of tax so
assessed, a sum not exceeding that amount.
(2). The assessment or reassessment made
under subs. (1) shall be at the rate at which it would have been made, had
there been no underassessment or escapement.
(3) (a). Nothing in sub-sections (1) and (2)
(i) shall apply to any proceeding (including any notice issued) under Sections
11. or 22A or 22B, and (ii) notwithstanding
any judgment, decree or order 'of a Court or Tribunal, shall be deemed ever to
have been applicable to such proceeding or notice.
(b) The validity of any such proceeding or
notice shall not be called in question merely on the ground that such
proceeding or notice was inconsistent with the provisions of subsections (1)
and (2)." Rule 19 of the rules framed under the Act provides that every
registered dealer should furnish to the appropriate sales tax 670 officer his
quarterly return in the prescribed form within one calendar month from the
expiry of the quarter to which the return relates. Each of such returns
submitted should be accompanied by a treasury challan in the form prescribed in
proof of the fact that he had paid the tax payable on the basis of his return,
The only other rule relevant for Our present purpose is r. 32 in Part VII of
the Rules, which deals with assessment of tax and/ or penalty. That rule
provides that where a registered dealer has rendered himself to a best judgment
assessment as well as penalty by reason of his default in furnishing the
prescribed return or returns in respect of any period by the prescribed date,
the assessing authority shall serve on him a notice in form 12 specifying the
default, escapement or concealment as the case may be and calling upon him to
show cause by such date ordinarily not less than 30 days, from the date of
issue of the notice, as may be fixed in that behalf, why he should not be
assessed or reassessed to tax, or a penalty should not be imposed upon him and
directing him lo produce on the said date his books of account and other
documents which the assessing authority may require or which he may wish to
produce in support of his objection. That rule further provides that no such
notice shall be necessary where the dealer, having appeared before the
assessing authority, waives such notice.
Now we may turn to the questions formulated
for decision.
As mentioned earlier, the main contention
advanced on behalf of the appellants is that sub-s. (3) of s. 11A has brought
about a discrimination between those dealers proceeded against under s.
11(4)(a) and those dealt with under s. 11A.
The contention advanced on behalf of the
appellants is that the turnover of a registered dealer who has failed to submit
his return and also to deposit the tax due from him, has escaped assessment;
the case of such a dealer comes both within s. 1 1 (4) (a) as well as s. 11A;
therefore, he can be dealt with under either of those two provisions. Where s.
11A prescribes a period of limitation for a proceeding under that provision, in
view of sub-s. 3 of s. 11A a proceeding under s. 11(4)(a) can be initiated at
any time;
under those circumstances it is open to the
authorities to proceed against some of the same class of dealers under s.
11(4)(a) and others under s. 11A. It was said
on their behalf that it is well-settled that in its application to legal
proceedings, Art. 14 assures to everyone the same rules of evidence and modes
of procedure; in other words, the same rule must exist for all in similar
circumstances.
On the other hand, it was urged on behalf of
the revenue that s. 11(4)(a) deals only with registered dealers who have
certain advantages under the Act, whereas s. 11A deals with dealers who do not
come either under s. 11(4) or s. 11(5), and therefore the classification of
dealers made under the various provisions is based on real and substantial
distinction bearing a just and reasonable relation to the object sought to be
attained.
671 We have now to see whether the dealers
who come within the mischief of s. 11(4)(a) can also be dealt with under s.
11A.
Before a person can be dealt with under s.
11A, it must be shown that in consequence of any information which has come
into his possession, the Commissioner is satisfied that any turnover of that
dealer during any period has been underassessed or has escaped assessment or
assessed at a lower rate or any deduction has been wrongly made therefrom.
Quite plainly the expression 'dealer' in s.
IIA(1) includes both registered and unregistered dealers. In this case we are
concerned with the escapement of assessment. Therefore the first question that
arises for decision is whether it can be said that the appellants' turnovers
for the period 15-52 to 30-10-55 had escaped assessment. There is no dispute
that those turnovers had not been assessed. From the fact that those turnovers
had not been assessed, can it be said that they had escaped assessment? In
Maharaj Kumar Kamal Singh v. Commissioner of Income Tax, Bihar and Orissa,(1),
this Court laid down that the expression "has escaped assessment" in
s. 34(1)(b) of the Indian Income Tax Act, 1922 is applicable not only where the
income has not been assessed owing to inadvertence or oversight or owing to the
fact that no return has been submitted, but also where a return has been
submitted but the income tax officer erroneously failed to tax a part of
assessable income. In Commissioner of Income Tax, Bombay City v. M/s. Narsee Nagsee
and Co., Bombay(2) interpreting the words "profits escaping
assessment" in s. 14 of the Business Profits Tax Act, 1947, this Court
held that those words apply equally to cases where a notice was received by the
assessee but resulted in no assessment, under-assessment or excessive relief
and to cases where due to any reason no notice was issued to the assessee and
there was no assessment of his income. Kapur, J. speaking for the majority of
Judges in that case, observed (at p. 993 of the report) that it is well-settled
that an income escapes assessment when the process of assessment has not been
initiated as also in a case where it has resulted in no assessment after the
completion of the process of assessment. The true scope of the expression
"escaped assessment" in s. 11A came up for consideration before this
Court in Ghanshyam Das v. Regional Assistant Commissioner of Sales Tax,
Nagpur(3). This is what Subba Rao, J. (as he then was) who delivered the
judgment of the majority of the Judges, observed in that regard:
"In Commissioner of Income Tax, Bombay
v.
Pirojbai N. Contractor (5 I.T.R. 338) the
words 'escaped assessment' in the Indian Income-tax Act were defined. It was
held therein that the said words were wide enough to include cases where no notice
under s.22(2) of the Income tax Act had been issued to the assessee and
therefore his income had not been assessed at all under s. 23 thereof.
(1) [1959] Supp.1 S.C,R. 10.
(2) [1960] 3 S.C.R. 988.
(3) [1964] 4 S.C.R. 436.
672 The said view has been assumed to be
correct by this Court in Maharaj Kumar Kamal Singh v. Commissioner of Income
Tax, Bihar and Orissa [1959] Supp. 1 S.C.R. 10 and Maharajadhiraj Sir Kameshwar
Singh v. State of Bihar ([1960] 1 S.C.R. 322) and extended to cover a, case
where the first assessment was made in due course but a part of the income
escaped therefrom. This Court, in Commissioner of Income tax, Bombay v. Narsee
Nagsee and Co. ([1960] 3 S.C.R. 988), construing the provisions of s. 14 of the
Business Profits Tax Act, 1947, reviewed the law on the subject and came to the
following conclusion:
All these cases show that the words
"escaping assessment" apply equally to cases where a notice was
received by the assessee but resulted in no assessment at all and to cases
where due to any reason no notice was issued to the assessee, and, therefore,
there was no assessment of his income.' It is true that the said decisions were
given with reference to either s. 34(1) of the Income Tax Act or s. 14 of the
Business Profits Tax Act but so far as the present enquiry is concerned the
said sections are in pari materia with s. 11A of the Act. In construing the
meaning of the expression 'escaped assessment' in s. 11A of the Act there is no
reason why the said expression should bear a more limited meaning than what it
bears under the said two Acts. All the three Acts are taxing statutes and the
three relevent sections therein are intended to gather the revenue which has
improperly escaped. A division Bench of the Madras High Court in the State of
Madras v. Balu Chettiar (7 S.T.C. 519) following the decision of a Full Bench
of that Court, held that where an assessee did not tile at any time a return of
his turnover for a year and, therefore, there was no assessment made, the
turnover escaped assessment. It was observed therein:
'Whether it was a case of omission or of
deliberate concealment on the part of the assessee, he did not submit any
return. It was his default that led to the escape of the turnover for 1951-52
from assessment to the tax lawfully due. It was the whole of the turnover for
that year that escaped assessment.' It is not necessary to multiply citations.
We, therefore, hold that the expression 'escaped assessment' in s. 11A of the
Act includes that of a turnover which has not been assessed at all, because for
one reason or other no assessment proceedings were initiated and therefore no
assessment was made in respect thereof." In one of the appeals dealt with
in that judgment, i.e. C.A.
No. 102 of 1901, this Court had to consider
whether a case under 673 (a) also comes under s. 11A. The Court answered that
question in the affirmative.
seen earlier it was the duty of the
appellants not only to submit their quarterly returns but send along with those
returns the treasury challans in proof of the payment of the tax admittedly due
from them. As they have failed to do so within the prescribed period, it
follows that the turnovers in question had escaped assessment.
This takes us to, the next question whether
in the instant case the assessing authority can be said to have been satisfied
about the escapement of the assessment as a consequence of any information
which had come into his possession. From the notices issued in 1955 as well as
later on, it is clear that the assessing authorities were satisfied about the
escapement of the assessment due from the appellants. But the real question is
whether they were so satisfied "in consequence of any information which
had come into their possession". The assessing authorities knew that the appellants
had neither submitted their returns nor treasury challans in proof of the
payment of the tax due from them. From that circumstance it is reasonable to,
hold that in consequence of the information that the appellants had not
submitted their returns as well as the treasury challans the assessing
authority should have been stisfied about the escapement of the assessment. It
was urged on behalf of the revenue that 'information' contemplated by s.11A
should be from some outside source and not something that could be gathered by
the assessing authority from his own records. According to the revenue in the
instant case there was no information from any outside source, therefore, it
cannot be said that the assessing authority was satisfied about the escapement
of tax in consequence of any information which has come into its possession. In
our view, this contention is untenable. In Maharaj Kumar Kamal Singh v.
Commissioner of Income Tax, Bihar and Orissa, this Court held that the word
'information' in s. 34(1)(b) of the Income Tax Act, 1922, includes information
as to the true and correct state of the law and so would cover information as
to the relevant judicial decisions. It was laid down therein that that
information need not be about any fact; it may be even as to the legal
position. In other words, the term 'information' in s. 34(1)(b) of the Income
Tax Act 1922 really means knowledge. In Salem Provident Fund Society Ltd. v.
Commissioner of Income Tax madras(1) a division bench of the Madras High Court
interpreting the scope of the words 'information which has come into his
possession' found in s. 34 of the Indian Income Tax Act, observed thus:
"We are unable to accept the extreme
proposition that nothing that can be found in the record of the (1) 42 I.T.R.
547.
674 assessment which itself would show escape
of assessment or under-assessment, can be viewed as information which led to
the belief that there has been escape from assessment or under-assessment.
Suppose a mistake in the original order of assessment is not discovered by the
Income Tax Officerhimself on further scrutiny but it is brought to his notice
by another assessee or even by a subordinate or a superior officer, that would
appear to be information disclosed to the Income Tax Officer. If the mistake
itself is not extraneous to the record and the informant gathered the
information from the record, the immediate source of information to the Income,
Tax Officer in such circumstances is in one sense extraneous to the record. It
is difficult to accept the position that while what is seen by another in the
record is 'information' what is seen by the Income Tax officer himself is not
information to him. In the latter case he just informs himself. It will be
information in his possession within the meaning of section 34. In such cases
of obvious mistakes apparent on the face of the record of assessment, that
record itself can be a source of information, if that information leads to a
discovery or belief that there has been an escape of assessment or underassessment."
The meaning of the word 'information' came up again for consideration before a
division bench of the Kerala High Court in United Mercantile Co. Ltd. v.
Commissioner of Income Tax Kerala(1). Their Lordships held that to 'inform'
means to 'impart knowledge' and a detail available to the Income Tax Officer in
the papers filed before him does not by its mere availability become an item of
'information'.
It is transmuted into an item of information
in his possession only if and when its existence is realised and its
implications recognized. Applying that test to the facts of the case before
them. the Court held that the awareness of the Income Tax Officer for the first
time after the assessment order of November 19, 1957, that the bonus shares
were issued not out of Premiums received in cash and the consequent result in
the light of the Finance Act. 1957, was information within the meaning of that
expression as used in s. 34(1) of the Indian Income Tax Act, 1922, and
consequently. the reopening of the assessment under that provision was not
illegal.
In our judgment, the knowledge of the fact
that the appellants had not submitted their quarterly returns as well as the
treasury challans. constituted In information to the assessing authority from
which it could be satisfied and in fact it was satisfied that the turnovers
with which we are concerned in this case bad escaped assessment.
(1) 64 I.T.R. 218.
675 From the above conclusions it follows
that the appellants' case falls both under s. 11(4)(a) and s. 11A(1).
Therefore, it was open to the assessing authority to proceed against them under
any one of those two sections. But as they were proceeded against under s.
11(4)(a) they cannot have the benefit of the period of limitation prescribed under
s. 11 A(1). Hence, it must be held that the present case falls within the rule
laid down by this Court in Suraj Mail Mohta and Co. v. A. V. Visvanatha Sastri
& another(1). On the facts found it follows that s. 1 (4)(a) has become a
discriminatory provision in view of s. 11 A(3). Hence the same is liable to be
struck down under Art. 14. But for the inclusion of sub-s. 3 in s. 11A, there
would have been no discrimination between those dealt with under s. 11(4)(a)
and those under s. 11A(1). The period of limitation prescribed in s. 11A(1)
would have attracted itself to proceedings under s. 11(4)(a) as held by this
Court in Ghanshyam Das's case(2).
Mr. Bindra, learned counsel for the revenue,
contended that a registered dealer has certain advantages over an unregistered
dealer; therefore the classification made under the Act is a reasonable
classification. To be a valid classification, the same must not only be founded
on an intelligible differentia which distinguishes persons and things that are
grouped together from others left out of the group but that differentia must
have a reasonable relation to the object sought to he achieved. Both s.
11(4)(a) and s. 11A(1) concern themselves with escaped assessments. The
classification suggested has no nexus with that object.
That much is established by the decision of
this Court in Ghanshyam Das's case(1) which is binding on us. It is true the
State can by classification determine who should be regarded as a class for the
purpose of legislation and in relation to a law enacted on a particular
subject, but the classification must be based on some real and substantial
distinction bearing a just and reasonable relation to the object sought to be
attained and cannot be made arbitrarily and without any substantial basis. Judged
from the object sought to be achieved by the Act, we are of the opinion that
the classification made between the registered and unregistered dealers is not
a reasonable classification.
From this conclusion it follows that s.
11(4)(a) is liable to he struck down as being discriminatory in view of s.
11A(3).
Section 11(4)(a) is separable from the rest
of the subsection. Its separation from that sub-section does not affect the
implementation of the other provisions of the Act.
This takes us to the question which was
debated at our instance whether the notices issued by the assessing authority
in 1955 were valid notices. The High Court had not considered this question,
though it appears that the same was presented to it for decision (1) [1955] 1
S.C.R, 448, (2) [1964] 4 S.C.R. 436.
L/P(N)7SCI-4 676 by the parties. In the
course of its judgment, the High Court observed:
"In this view (in view of its earlier
findings) of the matter it is not necessary to consider whether the earlier
notices of the year 1955 are good and valid notices or whether they stood
superseded by subsequent notices of 1958 and 1959".
For convenience we shall take up for
consideration notice No. 4519/STN dated 13-9
55. Our conclusions in respect of that notice
would cover the other notices. The material facts as set out by the High Court,
the correctness of which was not disputed before us, are these:
"On the 3rd September, 1955, the
Assistant Commissioner, Sales Tax, issued a notice under s. 10(3), s. 11(4)
(a), s. 11A and sub-s. (1) of s. 22C of the Act, calling upon the petitioners
to show cause why action should not be taken against them under s. 10(3) and S.
11(4) of the Act on account of their failure to furnish the returns for the
period 1-1-53 to 31-12-53. Similar notices were given on 27th October, 1955 for
the period 1-1-54 to 31-12-54 and on 7th July 1956. for the period 1-1-55 to
31-12-55." From those facts, it is seen that no notice had been issued
within three years in respect of the turnover relating to the period from
1-5-52 to 31-12-52. The assessment in respect of that period is clearly barred
in view of our earlier conclusion. The period 1-1 1-52 to 31-1-53 forms part of
the quarter commencing from 1-11-52. No notice was given in respect of that
quarter. A quarter forms a unit by itself. Therefore, it follows that the
proceeding in respect of that quarter is also barred by limitation.
Now we shall take up the question whether the
notices issued in 1955 in respect of the turnovers relating to other quarters
were in accordance with law. The notice No. 4519/STN dated 13-9-55 reads.
"Notice (for 1-1-53 to 31-12-53) dated
13-9-55. No. 4519/ STN. D/13-9-55.
Form XII (See rule 32) Notice under
sub-section (3) of section 10, sub-section (4) (a) and (5) of section 11,
sub-section (1) of section 11 (A) and sub-section (1) of section 22 of the
Central Provinces and B erar Sales Tax Act, 1947.
Whereas Shri Anandji Haridas and Co., Ltd.,
Nagpur.
You have failed to furnish a return as
required by a 677 notice in that behalf served on you under section 10(1) of
the Central Provinces and Berar Sales Tax Act, 1947.
OR You being a registered dealer have failed
to furnish a return for the periods 1-1-53 to 3112-53 and have thereby rendered
yourself liable under section 11 (4) to be assessed to the best of judgment;
Further, you are hereby directed to attend in
person or by a person authorised by you in writing in that behalf, being a
person specified in section 11B(1) before me and to produce or cause to be
produced your books of accounts and the documents specified in the schedule
hereunder and any evidence on which you rely in support of your objection at
Jabalpur at 11-00 A.M. on 22-9-55.
Sd/Asstt. Commissioner of Sales Tax Nagpur
Region, Nagpur." It is true that it is not a notice in respect of any
particular quarter, it is a notice in respect of the period 1-1-53 to 31-12-53.
In the State of Orissa and another v.
M/s. Chakobhai Chelabhai and Company,(1) this
Court held that the issue of one notice under s. 12(5) of the Orissa Sales Tax
Act, 1947 which section is similar to s. 11(4)(a), for several quarters was not
contrary to law as the section makes reference to a period which might consist
of more than one quarter.
From the notice in question it cannot be made
out whether the assessing authorities wanted to deal with the appellants under
s. 10(1) or under s. 11(4). The notice says that the appellants "had
failed to furnish the return as required by a notice in that behalf served on
them under s. 10(1) of the Act, or that they being registered dealers had
failed to furnish return for the periods mentioned therein and thereby rendered
themselves liable under s. 11(4) to be assessed to the best of judgments Quite
dearly, the first alternative mentioned in the notice did not apply to the
appellants.
They are registered dealers. No notice under
s. 10(1) had been given to them. The assessing authority by mistake had failed
to strike out the first alternative shown in the printed form. That
circumstance could not have prejudiced the appellants. It was held by this
Court in Chakobai Chelabhai's case(1) referred to earlier that such a mistake
does not vitiate the notice issued.
(1) [1961] 1 S.C.R. 719.
L/P(N)7SCI-4 (a) 678 But the more serious
mistake pointed out by Mr. Gokhale in that notice is that the assessment year
mentioned in that notice is not the assessment year of the 'appellants. Their
assessment Years commenced from 1st November. This error according to Mr.
Gokhale vitiated the notices issued. Yet another complaint made by Mr. Gokhale
was that though r. 32 provides that ordinarily not less than 30 days notice
should be given to the assessee, only 9 days notice was given. But this defect
was found only in the notice quoted above and not in the other notices issued in,1955.
For the reasons to be mentioned presently, we see no merit in either of these
contentions.
We are unable to accept the contention of Mr.
Gokhale that a notice under s. 11(4)(a) or 11A(1) is a condition precedent for
initiating proceedings under those provisions or that it is the very foundation
for the proceedings to be taken under those provisions. The notice contemplated
under r. 32 is not similar to a notice to be issued under S. 34(1)(b) of the
Income Tax Act, 1922. All that ss. 11(4) and 11A(1) prescribe is that before
taking proceedings against an assessee under those provisions, he should be
given a reasonable opportunity of being heard. In fact, those sections do not
speak of any notice. But r. 32 prescribes the manner in which the reasonable
opportunity contemplated by those provisions should be afforded to the
assessee. The period of 30 days prescribed in r. 32 is not mandatory. The rule
itself says that 'ordinarily' not less than 30 days notice should be given.
Therefore, the only question to be decided is whether the defects noticed in
those notices had prejudiced the appellants. It may be noted that when the
assessees received the notices in question, they appeared before the assessing
authority, but they did not object to the validity of those notices. They asked
for time for submitting their explanation. The time asked for was given.
Therefore, the fact that only nine days were
given to them for submitting explanation could not have in any manner
prejudiced them. St) far as the mistake in the notice as regards the assessment
year is concerned, the assessees kept silent about that circumstance till 1958.
It was only when they were sure that the period of limitation prescribed by S.
11A had expired hey brought that fact to the notice of the assessing authority.
It is clear that the appellants were merely trying to take advantage of the
mistakes that had crept into the notices. They cannot be permitted to do so. We
fail to see why those notices are not valid in respect of the periods commencing
from February 1, 1953 till 31 10-55. We are unable to agree with Mr. Gokhale's
contention that each one of those notices should, be read separately and that
we should not consider them together.
If those notices are read together as we
'think they should be, then it is clear that those notices give the. appellants
the reasonable opportunity contemplated by ss. 11(4) '(a) and 11A(1). In
Chatturain and Others v. Commissioner Pt 'Income Tax, Bihar,(1) the:
(1) 15 I. T. R. 302 679 Federal Court held
that any irregularity in issuing a notice under s. 22 of the Income Tax Act,
1922 does not vitiate the proceeding that the income tax assessment proceedings
commence with the issue of the notice, but the issue or receipt of the notice
is, however, not the foundation of the jurisdiction of the Income Tax Officer
to make the assessment or of the liability of the assessee to pay the tax. The
liability to pay the tax is :founded on ss. 3 and 4 of the Income Tax Act which
are the charging sections.
Section 22 and others are the machinery
sections to determine the amount of tax. The ratio of that decision applies to
the facts of the present case. In our opinion, the notices issued in the year
1955 are valid notices so far as they relate to the period commencing from February
1, 1953 to 31-10-55.
In view of our conclusion that every
escapement of assessment coming within the scope of s. 11(4)(a)is also an
escapement of assessment under s. 11 A(1), a notice issued under s. 11 (4)(a)
would be a vaild notice in respect of a proceeding under s. 11A(1).
In the result, we hold that the assessing
authority has no competence to assess the turnovers of the appellants in
respect of the quarters commencing from 1-5-52 and ending with January 31, 1953
as the same is barred by time under s. 11A. We further hold that s. 11(4)(a) is
void as it is:
violative of Art. 14. We accordingly issue a
direction to the respondents to refrain from assessing the appellants in
respect of those turn overs. In other respects, the appeals fail and they are
dismissed. In the circumstances of these cases, we make no order as to costs.
Bachawat, J. Sections, 11(4), 11(5) and 11-A
of the C.P. and Berar Sales Tax Act, 1947 are as follows:
"11(4) If a registered dealer(a) does
not furnish returns in respect of any period by the prescribed date, or (b)
having furnished such ;return fails to comply with any of the terms of a notice
issued under subsection (2), or (c) has not regularly employed any method of
accounting, or if the method employed is such that, in the opinion of the
Commissioner, assessment cannot properly be made on the basis thereof, the
Commissioner shall in the, prescribed manner assess the dealer to the best of
his judgment:
Provided that he shall not so assess him in
respect of the default specified in clause (a) unless the dealer has been first
given a reasonable opportunity of being beard.
680 (5) If upon information which has come
into his possession, the Commissioner is satisfied that any dealer has been
liable to pay tax under this Act in respect of any period and has nevertheless
wailfully failed to apply for registration, the Commissioner shall, at any time
within three calendar years from the expiry of such period, after giving the
dealer a reasonable opportunity of being heard, proceed in such manner as may
he prescribed to assess to the best of his judgment the amount of tax due from
the dealer in respect of such period and all subsequent periods and the
Commissioner may direct that the dealer shall pay by way of penalty in addition
to the amount of tax so assessed a sum not exceeding one and a half times that
amount.
11-A. (1) If in consequence of any
information which has come into his possession, the Commissioner is satisfied
that any turnover of a dealer during any period has been under assessed or has
escaped assessment or assessed at a lower rate or any deduction has been
wrongly made there from the. Commissioner may, at any time within three
calendar years from the expiry of such period, after giving the dealer a reasonable
opportunity of being heard and after making such inquiry as he considers
necessary, proceed in such manner as may be prescribed to re-assessor. assess,
as the case may be, the tax payable on any such turnover; and the Commissioner
may direct that the dealer shall pay, by way of penalty in addition to the
amount of tax so assessed, a sum not exceeding that amount.
(2) The assessment or reassessment made under
subsection (1) shall be at the rate at which it would have been made, had there
been no under-assessment or escapement." The Bombay Sales Tax Laws,
(Validating Provisions and Amendment) Act, 1959 inserted the following
sub-section (3) in s. 11A:
"(3)(a) Nothing in sub-sections (1) and
(2)(i) shall apply to any proceeding (including any notice issued) under
section 11, or 22A or 22B, and (ii) notwithstanding any judgment, decree or
order of a court or Tribunal, shall be deemed ever to have been applicable to
such proceeding or notice.
(b) The validity of any such proceeding or
notice shall not be called in question merely on the ground that such
proceeding or notice was inconsistent with the provisions of subsections (1)
and (2)." 681 The appellant is a registered dealer. It failed to file
returns for the periods 1-5-1952 to 31-10-1952, 1-11-1952 to 31-10-1953,
1-11-1953 to 31-10-1954 and 1-11-1954 to 31-101955. The Sales Tax Officer,
Non-resident Circle, Nagpur issued four notices to the appellant initiating
proceedings under ss. 10(3), 11(4), 11A(1) and 22C(1) of the Act. The appellant
filed a writ petition in the High Court challenging the notices and asking for
an order restraining the respondents from taking steps under the notices and
making assessments or levying penalties in respect of the aforesaid periods.
The High Court dismissed the application. From this order, the appellant has
preferred the present appeals.
Notices under s. 22C(1) can be issued only in
course of any proceedings under the Act. As no proceedings were pending against
the appellant, no notice under s. 22C(1) could be issued to it. We shall
presently show that no notice can be issued to a registered dealer under s.
11A(1) for assessing the turnover which has escaped assessment by reason of his
not filing a return. The impugned notices so far as they were issued under ss.
22C(1) and 11A(1) may be treated as surplus age and rejected.
Under s. 10(3), if a registered dealer fails
to furnish his return for any period within the prescribed time without any
sufficient cause, the Commissioner may after giving him reasonable opportunity
of being heard direct him to pay by way of penalty a sum not exceeding
one-fourth of the amount which may be assessed on him under s. 11. If no
assessment can be made under s. 11, no penalty can be levied under s. 10(3).
Therefore, the point for determination is whether the impugned notices so far
as they were issued under s. 11(4) are valid.
The contention of the appellant is that the
notices under s. 11 (4) are invalid as they were not issued within three years
from the expiry of the aforesaid periods. We see no force in this contention.
Section 11(4) does not prescribe a period of limitation for the issue of a
notice under it.
In Ghanshyam Das v. Regional Assistant
Commissioner of Sales Tax, Nagpur(1), the Court by a majority decided with reference
to s. 11.(4) and s. 11A, as it stood before its amendment by the Bombay Sales
Tax Laws (Validating Provisions and Amendment) Act, 1959, that a notice under
s.
11(4) initiates new proceedings and it also
decided or to be more accurate, assumed that the period of limitation
prescribed by s. 11A(1) should be imported into s. 11(4).
The case was decided without reference to s.
11A(3) inserted by the Amending Act and is no authority on the interpretation
of that sub-section. Section 11A(3) now expressly provides that nothing in s.
11A(1) shall apply to any proceeding including any notice issued under s. 11.
The section is retrospective in operation. It follows that the period of (1)
[1964] S.C.R. 436, 682 limitation prescribed by s. 11A(1) cannot be applied to
a proceeding or a notice issued under s. 11(4). There is no period of
limitation prescribed for a notice or a proceeding initiated under s. 11(4).
Consequently, the impugned notices issued under s. 11 (4) are not barred by
limitation and are not invalid.
The argument then is that s. 11(4)(a) offends
Art. 14 of the Constitution in two ways. Firstly, it is said that it is open to
the sales tax authorities to proceed at their sweet will either under s.
11(4)(a) or under s. IIA(1) against a registered dealer for his failure to file
returns and the principle of Shree Meenakshi Mills Ltd. v. Sri A. V. Viswanatha
Sastri and Another(1) is invoked. We find no merit in this contention. Section
11(4)(a) specially provides for the initiation of proceedings against a
registered dealer who has not furnished returns in respect of any period by the
prescribed date. Having made this special provision, the legislature must be
taken to have intended that in a case falling under s. 11(4)(a) the sales tax
authorities must proceed against the registered dealer under S. 11(4)(a) and
not under s. IIA(1). The special provision must be taken silently to exclude
all cases failing within it from the purview of the more general provision.
Moreover. if a statute is capable of two
constructions, that construction should be given which will uphold it rather
than the one which will invalidate it. Construing ss. 11(4)(a) and 11A(1)
together we should, therefore, hold that the cases falling within s. 11(4)(a)
are excluded from the purview of s. 11 A(1). The point that there is no overlapping
of ss. 11(4)(a) and 11A(1) is made clearer by s.11A(3). The decisions under s.
34(1)(b) of the Indian Income-tax Act, 1922 such as Maharaj Kumar Kamai Singh
v. Commissioner of Incometax, Bihar and Orissa(2) and under s. 14 of the
Business Profits Tax Act, 1947 such as Commissioner of Income Tax v. Narsee
Nagsee & Co.(2) are distinguishable. In those Acts, there was no special
provision corresponding to s. 11(4) for proceeding against registered dealers
who have not filed returns, and the question how far the special provisions
would exclude cases within it from the purview of the more general provision
could not arise. In Ghanshyam Das's case(3), none of the notices in question
was issued under s. 11A, and the Court did not say that a registered dealer
could be proceeded against under s. 11 A for not filing a return.
Nor did the Court consider the effect of s.
11 A(3). It is true that the majority decision held that the phrase
"escaped assessment" in s. 11A includes that of a turnover which has
not been assessed at all because no assessment proceedings were initiated. But
having regard to the special provisions of s. 11(4) read with S. 11A(3), the
power under s. 11 A(1) as interpreted in Ghanshyam Das's case(4) to assess
turnover which escaped assessment by reason of non-filing of returns must be
confined to cases of (1) [1955] 1 S.C.R. 787. (2) [1959] Supp. 1 S.C.R. 10.
(3) [1960] 3 S.C.R. 988, (4) [1964] 4 S.C.R.
436.
683 unregistered dealers. As pointed out
already, cases of registered dealers falling within s. 11(4) are excluded from
the purview of s. 11A(1).
It is next said that s. 11 (4) offends Art.
14 of the Constitution because no period of limitation is prescribed for a
notice under it, whereas periods of limitation are prescribed for notices under
ss. IIA(L) and 11(5). We see no merit in this contention. The Act 'deals with
registered and unregistered dealers differently in many ways. The
classification and differential treatment of registered and unregistered
dealers are based on substantial differences having reasonable relation to the
object of the Act. A registered dealer unlike an unregistered dealer is under a
statutory obligation to file returns without any notice being served upon him
and to pay the full amount of tax due from him before furnishing the return
(ss. 10 and 12). A dealer who has registered himself under the Act admits his
liability to furnish returns whereas a dealer who has not registered himself
makes no such admission. A registered dealer has certain advantages under the
Act which are denied to an unregistered dealer. Section 2(1)(a)(ii) exempts
from tax sales of a registered dealer of goods specified in his certificate of
registration as being intended for use by him as raw materials in the
manufacture of goods for sale by actual delivery in the State for consumption
therein. An unregistered dealer cannot get the benefit of this exemption.
Moreover, s. 2(j) (a)(ii) exempts from tax sales to a registered dealer of
goods declared by him in the prescribed form as being intended for resale by
him by actual delivery-in the State for consumption therein. The sales to an
unregistered dealer are not so exempt. Consequently, a registered dealer call
buy his goods from the producer or the wholesaler at a cheaper price and has
thus ail economic advantage over an unregistered dealer. In the matter of
penalties, ss. 10(3) and 22C(1) treat the two classes of dealers on the same
footing, but ss. 11 (4), 11(5) and 11 A(1) treat them differently. No penalty
can be levied on a registered dealer under s. 11(4) but heavy penalties may be
levied on an unregistered dealer under ss. 11(5) and 11A(1). While prescribing
periods of limitation for proceedings against an unregistered dealer under ss.
11(5) and 11A(1), the legislature has wisely not prescribed a period of
limitation for a proceeding initiated under s. 11(4)(a) against a registered
dealer considering that (1) the registered dealer is under a statutory
obligation to file the return, (2) no penalty is leviable under s. 11(4). and
(3) the registered dealer is given many advantages under the Act which are
denied to an unregistered dealer. The bar of limitation in the case (if an
unregistered dealer and the absence of such a bar in the case of a registered
dealer cannot be regarded as unjust or discriminatory. Questions of policy are
not to be debated in this Court. There is no compulsion on the legislature to
prescribe a period of limitation in every case. In taxing statutes the
legislature has a large measure of discretion. We cannot strike 684 down s.
11(4)(a) because of some preconceived notion that the same period of limitation
should be prescribed for proceedings against both registered and unregistered
dealers. In Ghanshyam Das's case(1), Raghubar Dayal, J. at p. 459 clearly held
that s. 11(4) is not violative of Art.
14. The majority did not dissent from this
opinion. We hold that s. 11 (4) is not violative of Art. 14 and we uphold it.
It follows that the notices issued on July 8,
1959 under s. 11(4) are valid in respect of the entire period from 1-11 1952 to
31-10-1955. As regards the alternative contention of the respondent, that the
notices issued in 1955 validly initiated, proceedings under s. 11(4) for the
period from 12-1953 to 31-10-1955 we are glad to find that the majority has
accepted this contention. The irregularities, if any, in the notices do not
invalidate them. However, for the reasons already mentioned, we are of opinion
that the impugned notices issued on July 8, 1959 are valid.
In the result, the appeals are dismissed with
costs.
ORDER In accordance with the opinion of the
majority these appeals are partly allowed with respect to turn-over from
1-5-1952 to 31-1-1953. In other respects the appeals are dismissed.
No order as to costs.
V.P.S.
(1) [1964] 4 S.C.R. 436.
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