of Sales Tax & Ors Vs. M/S Subhash & Company  Insc 92 (17 February 2003)
V. Patil & Arijit Pasayat
Out of S.L.P. (C) No. 389/2002) ARIJIT PASAYAT,J.
controversy involved in the present case lies with a very narrow compass and,
therefore, a brief reference to the factual aspects would suffice.
Kimtee (hereinafter referred to as assessee) was the proprietor of a concern
known as M/s Subhash and Company. He was registered as a dealer under the M.P.
General Sales Tax Act, 1958 (hereinafter referred to as 'the Act') w.e.f.
28.5.1973. The registration continued to be operative till 22.10.1987. The
assessment periods to which the dispute relates are
27.10.1981 to 15.11.1982,
to 4.11.1983 and
5.11.1983 to 24.10.1984.
assessments were originally completed for the assessment years 1981-82, 1982-83
and 1983-84 vide orders dated 12.9.1984, 29.8.1985 and 29.8.1985 respectively.
Respondent applied cancellation of the certificate of registration on
14.12.1987 and the same was cancelled w.e.f. 23.10.1987. The Assessing Officer
initiated proceedings for re-assessment under Section 19(1) of the Act on the
basis of information that the respondent had purchased iron and steel from M/s
Steel Terro, Indore and had enjoined certain benefits
by issuing declaration forms in Form XII-J. The Assessing Officer was of the
view that the benefits were not permissible in law and, therefore, there was
short levy of tax and escapement of assessment.
notices were issued for re-assessment in respect of the three years. The
notices were issued on the address as indicated in the certificate of
registration. It was indicated in the notices that the same may be pasted if
the respondent-assessee was not available or he refused to accept the notice.
Since it was learnt that the respondent- assessee was not residing at the
address given, service by affixture was resorted to. Vide orders dated
13.12.1990, 13.12.1990 and 31.12.1990, re-assessments were done under Section
19(1) of the Act. On 23.4.1992, respondent-assessee challenged the orders of
re-assessment by filing revision petition before the revisional authority at Indore under Section 39(1)(b) of the Act
on the ground that the notices and the orders of re-assessment as well as the
original assessment orders were not served on him, rendering the re- assessment
proceedings illegal. The revisional authority vide 3 separate but common order
dated 23.4.1993 dismissed the revision petition recording a finding that
service in both the original assessments as well as re-assessment proceedings
had been duly effected by affixture and the orders were valid.
noted that respondent's certificate of registration remained in force till he
applied for cancellation on 14.12.1987. As the notices were issued for service
at the address given in the registration certificate, there was nothing
filed a writ petition under Articles 226 and 227 of the Constitution of India,
1950 (in short 'the Constitution')in the High Court of Madhya Pradesh, at Indore
Bench on the ground that the procedure prescribed for service of notice as
contemplated under Rule 63 of the M.P. General Sales Tax Rules, 1959 (in short
'the Rules') has not been followed. Accordingly, the principles of natural
justice were violated. He took a stand that after closure of business in
October 1980, he was appointed as a clerk, Grade II in Reserve Bank of India in November, 1980.
contested the writ petition by filing a counter affidavit specifically stating
that service had been duly effected at the last known address as per the
registration certificate. There was a duty enjoined on the dealer under Section
32 of the Act to provide necessary information regarding change of address
which has not been done by the respondent-assessee who continued to enjoy the
benefits by issuing declaration forms by virtue of the certificate of
registration up to 23.10.1987.
Single Judge with reference to Rule 63 held that the service was effected
properly inasmuch as the Assessing Officer had failed to record the reasons for
his satisfaction that the assessing was evading service or that the service was
not possible in any other manner before resorting to service by affixture as
prescribed under Rule 63.
writ petition was allowed with a direction that the re-assessments were to be
done de novo in accordance with law after hearing the respondent-assessee
within a period of 6 months from the date of order and no further notice was
required as the respondent-dealer was already appearing in the matter.
was made by the respondent-assessee before a Division Bench on the ground that
after having held that there was no valid service of notice, the direction for
de novo assessment was untenable. It was further contended that challenge on
the question of limitation was precluded by the direction.
Division Bench held that the direction for de novo assessment without reserving
any right for the respondent- assessee to raise the plea of limitation was not
support of the appeal, learned counsel for the appellants submitted that the
respondent-assessee cannot take advantage of his own lapses. He was required
under Section 32 of the Act to indicate the change of address.
he did not do so. Merely because at some point of time the departmental
authorities sent letters by redirecting service by post to deposit the arrear
of tax, it does not do away with the statutory requirement to inform the
authorities about the change of address. Further, learned Single Judge had only
found some procedural irregularity which did not invalidate the service of
the direction for de novo assessment was in order.
response, learned counsel for the respondent- assessee submitted that the
learned Single Judge clearly held that there was no proper service of notice
and, therefore, there was no service in the eye of law. That being the
position, the re-assessment proceedings which were to be completed within a
particular period could not have been extended by permitting de novo
service of notice is valid or not is essentially a question of fact. In the
instant case, learned Single Judge found that certain procedures were not
followed while effecting service by affixture. There was no finding recorded
that such service was nonest in the eye of law. In a given case if the assessee
knows about the proceedings and there is some irregularity in the service of
notice, the direction for continuing proceedings cannot be faulted. It would
depend upon the nature of irregularity and its effect and the question of
prejudice which are to be adjudicated in each case on the basis of surrounding
facts. If, however, the service of notice is treated as nonest in the eye of
law, it would not be permissible to direct de novo assessment without
considering the question of limitation.
also the question of prejudice has to be considered.
learned Single Judge and Division Bench have missed to notice that Section
19(1) does not speak of "notice" before re-assessment. It only
prescribes giving of "reasonable opportunity of being heard". It
reads as follows :
an assessment has been made under this Act or any Act repealed by Section 52
and if for any reason any sale or purchase of goods chargeable to tax under
this Act or any Act repealed by Section 52 during any period has been
under-assessed 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 five calendar years from the date of order of assessment, 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 within a period of two calendar years from the commencement of such
proceedings, the tax payable by such dealer and the Commissioner may, where the
omission leading to such reassessment is attributable to the dealer, 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:
that in case of an assessment made under any Act repealed by Section 52, the
period for reassessment on the ground of under-assessment, escapement or wrong
deduction shall be as provided in such Act notwithstanding the repeal thereof :
further that any reassessment proceedings pending on the date of commencement
of the Madhya Pradesh General Sales Tax (Amendment) Act,1978, be completed in
accordance with the provisions in force before the date of such commencement
and within a period of two calendar years from the date of such
commencement." Rule 63 deals with methods of serving notice or summons or
order under the Act or any rules made thereunder.
term "notice" is originated from the Latin word "notifia"
which means "a being known" or a knowing is wide enough in legal
circle to include a plaint filed in a suit. "Notice" has been defined
in various Judicial Dictionaries and Dictionaries as follows :
Judicial Dictionary, Words and Phrases Judicially Interpreted, Second Edn. By
F. Stroud, (p.1299):
is a direct and definite statement of a thing, as distinguished from supplying
materials from which the existence of such thing may be inferred."
Webster's Universal College Dictionary, 1997 Edn. (p.543):
warning or announcement of something impending; notification; to give notice of
one's intentions; a written or printed statement conveying such information or
warning; as for renting or employment, that the agreement will terminate on a
specified date. "She gave her employer two weeks' notice." Oxford Concise Dictionary :
intimation; intelligence, warning" and has the meaning in expression like
"give notice", "have notice" or "formal intimation of
something or instruction to do something" and has the expression like
"notice to quit", "till further notice".
20th Century Dictionary 1993 (p.1154) :
announcement; information; warning; a writing; placard, etc; conveying an
intimation or warning; time allowed for preparation, etc." Chamber's
Dictionary vide Allied Chambers (India) Ltd;
1994, 1995 (p. 1154) :
announcement; a formal announcement made by one of the parties to a contract of
his or her intention to terminate that contract; information, especially about
a future event; warning; a writing; placard, board, etc. conveying an
intimation or warning; time allowed for preparation; cognizance; observation;
heed; mention; a dramatic or artistic review; civility or respectful treatment;
a notion, etc." Law Lexicon Dictionary A Legal Dictionary of Legal Terms
and Phrases Judicially Defined. Fourth Edition, Vol.II, 1989(P.226):
person is said to have notice' of a fact, when he actually knows that fact, or
when, but for wilful abstention from an enquiry or search which he ought to
have made, or gross negligence, he would have known it.' The Law Lexicon
Dictionary, Second Edition, 1997 (p. 1322):
Intimation; a writing; placard, board, etc. conveying an intimation or warning
(section 154, IPC and Article 61(2)(a), Constitution of India);
Knowledge or cognizance (Section 56, Indian Evidence Act).
in its legal sense, may be defined as information concerning a fact actually
communicated to a party by an authorized person, or actually derived by him
from a proper source, or else presumed by law to have been acquired by him,
which information is regarded as equivalent to knowledge in its legal
309 Tomlin's Law Dictionary Notice is making something known, of what a man was
or might be ignorant of before. And it produces diverse effects, for, by it,
the party who gives the same shall have same benefit, which otherwise he should
not have had; the party to whom the notice is given is made subject to some
action or charge, that otherwise he had not been liable to; and his estate in
danger of prejudice.
is a direct and definite statement of a thing as distinguished from supplying
materials from which the existence of such thing may be inferred." (Per
Parke, B. Burgh v Lege 5 M and W 420: 8 LJ, Ex.258) The Dictionary gives some
other definitions of "Notice" as:
legal instrumentality by which knowledge is conveyed, or by which one is
charged with knowledge.
term "notice" in its full legal sense embraces a knowledge of
circumstances that ought to induce suspicion or belief, as well as direct
information of that fact.
its popular sense, "notice" is equivalent to information
intelligence, or knowledge.
Haridas and Co. (P) Ltd V. S.P.Kasture and Others (AIR 1968 SC 565), it was
observed as follows :
are unable to accept the contention of Mr. Gokhale that a notice under Section
11 (4) (a) or IIA(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.
notice contemplated under Rule 32 is not similar to a notice to be issued under
Section 34 (1) (b) of the Income Tax Act, 1922. All that Sections 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.
fact, those sections do not speak of any notice. But Rule 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 Rule 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. So 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 Section 11A had expired, they
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.
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 given the appellants the reasonable opportunity contemplated
by Sections 11(4) (a) and 11-A (1).
V. Commr. Of Income Tax Bihar, (1947 (15) ITR 302) = (AIR 1947 FC 32), the
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 Sections 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 October 31, 1955." Whenever an order
is struck down as invalid being violation of principles of natural justice, there
is no final decision of the case and, therefore, proceedings are left open. All
that is done is that the order assailed by virtue of its inherent defect is
vacated but the proceedings are not terminated. (See Guduthur Bros. V. Income
Tax Officer, Special
Circle, Bangalore (1960 (40) ITR 298 SC) and
Superintendent (Tech.I) Central Excise,I.D.D. Jabalpur and Ors. v. Pratap Rai
(1978 (114) ITR 231 SC). In Commisioner of Sales Tax, U.P. v. R.P. Dixit Saghidar
( 2001 (9) SCC 324), it was held as follows:
are unable to subscribe to the view of the High Court. The aforementioned
passage quoted from the Tribunal's order shows that the Tribunal was of the
view that once the order is quashed by the Assistant Commissioner, he could not
in law remand the case for a decision afresh. As has been noted, before the
Assistant Commissioner the counsel for the respondent had contended that the ex
parte order should have been set aside because no notice had been received.
When principles of natural justice are stated to have been violated it is open
to the appellate authority, in appropriate cases, to set aside the order and
require the Assessing Officer to decide the cases de novo. This is precisely
what was directed by the Assistant Commissioner and the Tribunal, in our
opinion, was clearly in error in taking a contrary view." The view is
clearly applicable to the facts of the present case.
emerging principles are:-
Non-issue of notice or mistake in the issue of notice or defective service of
notice does not affect the jurisdiction of the assessing officer, if otherwise
reasonable opportunity of being heard has been given;
Issue of notice as prescribed in the Rules constitutes a part of reasonable
opportunity of being heard;
If prejudice has been caused by non-issue or invalid service of notice the
proceeding would be vitiated.
irregular service of notice would not render the proceedings invalid; more so,
if assessee by his conduct has rendered service impracticable or impossible.
In a given case when the principles of natural justice are stated to have been
violated it is open to the appellate authority in appropriate cases to set
aside the order and require the Assessing Officer to decide the case de novo.
instant case, the learned Single Judge and the Division Bench have not
considered the question of prejudice, grant of reasonable opportunity in the
view of what has been stated in R.P.Dixit's case (supra), learned Single Judge
was justified in directing de novo assessment by an order of remand. The
direction was appropriate as the only ground on which the interference was made
related to the violation of principles of natural justice by alleged improper
service of notice. The Division Bench was not justified in upsetting the
direction. The appeal is allowed but in the circumstances without any order as
however make it clear that no opinion has been expressed by us on any aspect
except limitation. It shall be open to the assessee to raise all other issues
before the Assessing Officer which shall be considered in the proper
perspective and in accordance with law.