Kerala High Court
Sales Tax Officer And Two Ors. vs V.V. Pathrose on 16 October, 1978
Equivalent citations: [1979]44STC223(KER)
JUDGMENT V.P. Gopalan Nambiyar, C.J.
1. The Sales Tax Officer, Perumbavoor, the District Collector, Ernakulam, and the Tahsildar, Kunnathunad Taluk, are the appellants in this appeal. They challenge the decision of a learned Judge of this Court who held that the proceedings taken for reassessment under Section 19 of the Sales Tax Act are barred by limitation as provided in the section. The learned Judge upheld the objection to that effect and allowed the writ petition of the assessee.
2. The assessment years with which we are concerned are 1963-64 to 1966-67. The orders of reassessment for these years (exhibits P3 to P6) are all dated 31st January, 1975. The orders of assessment of the Sales Tax Officer for these years are dated 6th January, 1968, and 10th January, 1968. There was an appeal against these orders of assessment to the Appellate Assistant Commissioner, who, by exhibit P1 order dated 4th August, 1969, set aside the assessment orders and directed the Sales Tax Officer to make a fresh assessment in accordance with law and with the appellate order passed by that authority. In pursuance of this direction, exhibit P2 notice dated 4th July, 1974, was issued, which resulted in the impugned orders exhibits P3 to P6.
3. Section 19 of the General Sales Tax Act, 1963, in so far as it is material, reads:
19. Assessment of escaped turnover.--(1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable, or any deduction has been wrongly made therefrom, the assessing authority may, at any time within four years from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such turnover after issuing a notice on the dealer and after making such enquiry as it may consider necessary:
Provided that before making an assessment under this sub-section the dealer shall be given a reasonable opportunity of being heard...
It will be noticed that, on the language of the section itself, the bar of four years operates only to "proceed to determine the turnover" and not to the actual determination thereof. That is to say, once there has been a commencement of the proceedings for determining the turnover, a continuation thereof would not be hit by the bar of limitation prescribed by the section. We are also of the view that, once the assessment proceedings have been carried up in appeal to the appellate authority and remanded back to the Sales Tax Officer for fresh assessment, the resultant proceedings are only a continuation of those originally started, and not a recommencement of fresh proceedings. Indeed, once the assessment proceedings are started, they run their course to their final termination by way of appeal, revision or otherwise.
4. This position has been now well-settled by the judicial decisions. In Sales Tax Officer v. Sudarsanam Iyengar & Sons 1969 K.L.T. 783 at 785 the Supreme Court was dealing with Rule 33 of the Rules framed under the Kerala General Sales Tax Act, 1125 M.E. After quoting the rule, the Supreme Court observed:
Now in view of the previous decisions the principle is firmly established that the assessment proceedings under the Sales Tax Act must be held to be pending from the time the proceedings are initiated until they are terminated by a final order of assessment. The distinguishing feature on which emphasis has been laid by the counsel for the respondent is that the language employed in Rule 33 is such as to lead to only one conclusion that the final determination of the turnover which has escaped assessment and the assessment of the tax have to be done within three years. It is pointed out that in the other sales tax provisions which came up for consideration in the cases mentioned above the words employed were 'proceed to assess', e. g., Sub-sections (4) and (5) of Section 11 of the Punjab General Sales Tax Act. Our attention has been invited to the appropriate dictionary meaning of the word 'determine', which is 'to settle or decide'--to come to a judicial decision (Shorter Oxford English Dictionary). It is suggested that the word 'determine' was employed in Rule 33 with a definite intention to set the limit within which the final order in the matter of assessment should be made, the limit being three years. We find it difficult to accept that in the context of sales tax legislation the use of the words 'proceed to assess' and 'determine' would lead to different consequences or results. In this connection the words which follow the word 'determine' in Rule 33 must be accorded their due signification. The words 'assess the tax payable' cannot be ignored and it is clearly meant that the assessment has to be made within the period prescribed. Assessment is a comprehensive word and can denote the entirety of proceedings which are taken with regard to it. It cannot and does not mean a final order of assessment alone unless there is something in the context of a particular provision which compels such a meaning being attributed to it. In our judgment despite the phraseology employed in Rule 33 the principle which has been laid in other cases relating to analogous provisions in sales tax statute must be followed as otherwise the purpose of a provision like Rule 33 can be completely defeated by taking certain collateral proceedings and obtaining a stay order as was done in the present case or by unduly delaying assessment proceedings beyond a period of three years.
In I.T.R. No. 68 of 1976, this Division Bench had occasion to point out that the period of limitation cannot be imported into proceedings for assessment carried out in pursuance of an order of remand directed by the appellate authority. This Court referred to Commissioner of Agricultural Income-tax v. L. Kochuvareed [1976] 103 I.T.R. 799 (S.C.) reversing the decision of this Court in Smt. Lucy Kochuvareed v. Commissioner of Agricultural Income-tax [1971] 82 I.T.R. 845 (F.B.). This Court also referred to the decision of the Supreme Court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax [1963] 14 S.T.C. 976 (S.C.) to the effect that there can be no escapement of income so long as assessment proceedings are pending; and to the decision, again of the Supreme Court, in Additional Assistant Commissioner of Sales Tax v. Firm Jagmohandas Vijay Kumar [1970] 25 S.T.C. 74 at 77 (S.C.) that proceedings by way of fresh assessment in pursuance of an order of remand in appeal are only a continuation of the original proceedings.
5. The learned Judge had placed reliance on the decision in Mathai v. State of Kerala [1964] 15 S.T.C. 710. The decision was reviewed, and the reviewed judgment is reported in Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Mathai [1966] 18 S.T.C. 443. In the light of the Supreme Court's pronouncement in Sudarsanam Iyengar's case, 1969 K.L.T. 783 the principle of the decision can no longer be sustained. On the actual facts, it would be noticed that the first notice for reassessment was itself beyond the period provided by Rule 33(1) of the General Sales Tax Rules. The decision has therefore no application.
6. Counsel for the respondent-assessee placed strong reliance on the decision of the Supreme Court in Jaipuria Brothers Ltd. v. State of U.P., A.I.R. 1965 S.C. 1213 at 1216. If the facts of the case are properly understood, there should be no dispute in appreciating the actual decision or the principle involved. In that case, the Sales Tax Officer issued a notice on 23rd July, 1955, for the purpose of assessment for the year 1948-49. The assessee contended that, as the original assessment under Section 21 of the U.P. Sales Tax Act had been set aside by the Judge (Revisions), Sales Tax, no proceeding in connection with that assessment was pending, and reassessment was barred, as more than three years had elapsed since the end of the year of assessment. The Division Bench of the High Court ultimately took the view that the Sales Tax Officer was competent to revise the order in view of the order of remand which directed the officer to make a fresh assessment against the assessee. The High Court was of the view that the Sales Tax Officer was bound to comply with this direction of the appellate authority, and that assessment proceedings carried out in pursuance of such a direction from the appellate authority could not be governed by the period of limitation prescribed by Section 21 of the Act. It is pertinent to notice that Section 21 of the Act, as it stood at the relevant time, as quoted in the judgment, read as follows:
Where the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax in any year, the assessing authority may, at any time within three years from the expiry of such year, and after issuing notice to the dealer and making such enquiry as may be necessary, assess the tax payable on such turnover.
On appeal, the Supreme Court was of the view that the view taken by the High Court could not be sustained. It was pointed out that the bar imposed under the section was a period of three years from the expiry of the relevant years for assessment mentioned in the section, and the said period was unrelated to the question as to whether the order of assessment was an original order or one falling within the language and the scope of an order of remand from the appellate authority. At the same time, the court noticed that, by the time the order was made, Section 21 had been amended, and the amendment had retrospective operation. The portion of the amended section, which is material for our purpose, is as follows:
21. (2) No order of assessment under Sub-section (1) or under any other provision of this Act shall be made for any assessment year after the expiry of four years from the end of such year:
Provided that where the notice under Sub-section (1) has been served within such four years the assessment or reassessment to be made in pursuance of such notice may be made within one year of the date of the service of the notice even if the period of four years is thereby exceeded:
Provided further that nothing contained in this section limiting the time within which any assessment or reassessment may be made, shall apply to an assessment or reassessment made in consequence of, or to give effect to, any finding or direction contained in an order under Section 9, 10 or 11.
Explanation.--...
It was observed by the Supreme Court: The legislature has given a clear retrospective operation to the amended section as from the date on which the principal Act came into operation, and correctness of the order of the Sales Tax Officer holding that there was no bar of limitation to the making of a fresh assessment pursuant to the order of the appellate or revising authority had to be adjudged in the light of Section 21 as amended by Act 19 of 1956. The words used by the legislature are precise and admit of only one interpretation that proceedings taken for assessment or reassessment in consequence of, or to give effect to, an order of the appellate or revising authority or an order passed by the High Court under Section 11 may be taken notwithstanding the expiry of the period prescribed by Sub-section (2) of Section 21.
The decision is, therefore, quite understandable in the light of the statutory provisions dealt with and considered, but is of no assistance to the counsel for the assessee.
7. We would also refer to the decision of a Division Bench of this Court in Tirur Medical Stores v. State of Kerala, I.L.R. [1978] 2 Ker. 24. That decision referred to the Sudarsanam Iyengar's case [1970] 25 S.T.C. 252 (S.C.) and pointed out:
Once proceedings have commenced within the time stipulated--which in the present case is not disputed--the proceedings can validly continue until a final order is made. The fact that the final order was made after the expiry of the period of limitation does not affect the validity of that order if the proceedings which culminated in the final order commenced within the 4-year period. That this is the correct position can no longer be in dispute in view of the observations of the Supreme Court in Sales Tax Officer, Special Circle, Ernakulam v. Sudarsanam Iyengar & Sons [1970] 25 S.T.C. 252 (S.C.). That case related to Rule 33 of the Travancore-Cochin General Sales Tax Rules, 1950, which was as follows:
'Rule
33. (1) If for any reason the whole or any part of the turnover of business of a dealer or licensee has escaped assessment to tax in any year or if the licence fee has escaped levy in any year, the assessing authority or licensing authority, as the case may be, subject to the provisions of Sub-rule (2) may at any time within three years next succeeding that to which the tax or licence fee relates determine to the best of his judgment the turnover which has escaped assessment and assess the tax payable or levy the licence fee in such turnover after issuing a notice to the dealer or licensee and after making such enquiry as he considers necessary.(2)
...' The Supreme Court in that case rejected the contention of the assessee that State of Punjab v. Murlidhar Mahabir Parshad [1968] 21 S.T.C. 29 (S.C.). Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur [1963] 14 S.T.C. 976 (S.C.) and State of Punjab v. Tara Chand Lajpat Rai [1967] 19 S.T.C. 493 (S.C.) which were cited for the department, had no application to the interpretation of Rule 33(1), as the relevant enactments in those cases used the expression 'proceed to assess', whereas Rule 33(1) used the expression 'assess' and not 'proceed to assess'. It was contended by the assessee in Sales Tax Officer v. Sudarsanam Iyengar & Sons [1970] 25 S.T.C. 252 (S.C.) that the expression 'proceed to assess' was not the same as 'assess' and, therefore, unlike in the cases cited for the department, the assessment under Rule 33(1) had to be completed within the period of limitation. This contention was totally rejected by the Supreme Court. The court said that the expression 'assessment' was comprehensive enough to denote the entirety of the proceedings taken in respect of it. The ambit of that expression could not be limited to a final order of assessment. (para 5)
8. We are of the opinion that, in the light of the decisions to which we have referred, the view taken by the learned Judge cannot be sustained. We allow this writ appeal and set aside the judgment of the learned Judge and direct that O.P. No. 4526 of 1975 will stand dismissed with no order as to costs.