Madhya Pradesh High Court
Milan Supari Stores vs Assistant Commissioner Of Sales Tax And ... on 5 May, 1994
Equivalent citations: [1994]95STC165(MP)
JUDGMENT A.R. Tiwari, J.
1. The petitioner is a registered firm and carries on business at Indore. It is registered as a dealer under the M.P. General Sales Tax Act, 1958 (for short, "the Act"). It was assessed to sales tax for the period from April 1, 1985 to March 31, 1986. The respondent No. 1 issued notice (annexure A) in form XVI under Section 19(1) of the Act to the petitioner on the linchpin of belief that certain transactions, liable to tax of the aforesaid period have escaped assessment rendering it liable to be reassessed and also liable to penalty. This notice (annexure A) is challenged in this petition.
2. The respondents have filed the return supported by affidavit. It is averred that specified authority has investigated the matter, collected details and discovered transactions and accounts indicative of the concealment of purchases and sales in Madhya Pradesh and of consequent evasion of tax. It is asserted that a case of escaped assessment necessitating action under Section 19(1) of the Act is clearly made out on the material on record.
3. I have heard both sides.
4. The learned counsel for the petitioner has placed reliance on [1963] 14 STC 67 (MP) (Firm Janta Hardware Stores v. B.S. Parihar, Assistant Sales Tax Officer) and [1991] 81 STC 269 (MP) ; 1989 MPLJ 422 (Mulay Brothers v. State of M.P.) and contended that notice, as impugned, is based on mere chance of escaped assessment and not on definite material about taxing events. It is submitted that there is no definite material to show that alleged purchases or sales were effected by the petitioner in Madhya Pradesh. The notice is consequently dubbed as being without jurisdiction. The notice is thus, sought to be incinerated.
5. The learned Government Advocate for the respondents has on the other hand, contended that there exists sufficient material to believe that sale and purchase of the goods chargeable to tax during the specified period have escaped assessment. It is urged that the notice, supported by definite material, is valid and legal. It is further urged that the petitioner had the right to show cause and contest the validity of the notice before the authority. The petition, it is submitted, is not tenable against notice. There is no lack of jurisdiction as contended.
6. This Court had directed the respondents to produce relevant record. The record is produced.
7. The relevant portion of Section 19(1) of the Act is reproduced below :
"19. Assessment of turnover escaping assessment.--(1) Whereas an assessment has been made under the Act repealed by Section 52 and if for any reasons 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 5 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."
8. It is noticeable that the aforesaid provision postulates two conditions : (1) The taxing authority must on the basis of material facts on record, prima facie be satisfied that sale or purchase of goods, chargeable to tax, has escaped, assessment. (2) The escapement of tax is on account of omission attributable to the dealer. Both these conditions are conditions precedent to the exercise of jurisdiction under Section 19(1) of the Act.
9. The existence of basic fact, i.e., sale or purchase of goods, exigible to tax, is required to be shown. The procedure is well demarcated. It provides that on prima facie satisfaction about escapement, the authority may, after giving the dealer a reasonable opportunity of being heard and after making such enquiry as it considered necessary, proceed in such manner as may be prescribed to reassess the tax and where omission, leading to reassessment is found attributable to the dealer, to impose penalty not exceeding the amount as taxed.
10. Luculently enough, a reasonable opportunity of being heard is undeniable. In fact proceeding of reassessment has to be preceded by hearing. This being so, the dealer is within his right to contend that conditions, precedent to the exercise of jurisdiction, are non-existent and as such, the authority acquired no jurisdiction to "proceed" to "reassess" and to impose "penalty". As held in 1962 MPLJ 342 (Mahadeo Dairy v. State) the dealer has a right to show cause against reassessment as well as to question the jurisdiction of the taxing authority to proceed under Section 19(1) of the Act.
11. Notice is, however, not the foundation for exercising jurisdiction. It is only the beginning. The requisite conditions can be substantiated even from record. In [1991] 188 ITR 247 (SC) ; AIR 1991 SC 464 (Income-tax Officer v. Biju Patnaik), validity of notice, directing reopening of assessment under Section 148 of the Income-tax Act, was sustained on the basis of record and affidavit even when the notice had not ex facie disclosed or established the factum of due application of mind. This position of law was again reiterated in [1993] 203 ITR 456 (SC) ; AIR 1993 SC 2390 (Phool Chand Bajrang Lal v. Income-tax Officer).
12. The taxing authority empowered under Section 19(1) of the Act is, thus, required to show proper satisfaction about escapement on definite material regarding sale or purchase of goods, chargeable to tax, by the petitioner under the Act. This means that the fulcrum, justifying reopening of assessment, should be sure, not speculative ; positive, not perverse ; conclusive, not conjectural and sound, not mere chance permitting formation of requisite satisfaction and opinion to invoke Section 19(1) of the Act. This omission on the part of the dealer is yet another factor. These facts and features can establish the presence of situation investing the taxing authority with jurisdiction to proceed in the matter.
13. There is sharp controversy between the parties on crucial question of jurisdiction. The expression like "may" in Section 19(1) of the Act is indicative of "discretion" of the taxing authority. Lord Mansfield, in John Wilke's case (1770) 4 Burr 2528, stated in classic terms that discretion meant sound discretion, not whimsical or arbitrary one, guided by law and governed by rules.
14. Shri Chafekar submits that discretion exercised in the instant case is whimsical and arbitrary and is not backed by requisite conditions which alone could confer jurisdiction under Section 19(1) of the Act to proceed. Shri Zelawat refutes this contention and contends that notice is the result of exercise of sound discretion and record contained facts conclusive of escapement and indicative or proper exercise of jurisdiction. Notice, it is urged, is thus, fault-free.
15. As noted above, the petitioner has valuable right of questioning the jurisdiction of taxing authority showing absence of those conditions which provide jurisdiction and of oppugning the reassessment. The authority is thus, under legal obligation to consider and decide-
(a) Jurisdiction,
(b) Reassessment.
16. Normally, the court should permit the scheme of the statute to prevail. In AIR 1992 SC 2279 (Shyam Kishore v. Municipal Corporation of Delhi), it is held that resort to Articles 226 and 227 of the Constitution of India is not proper when a more satisfactory solution is available on the terms of statute itself. In AIR 1994 SC 40 (Indo National Ltd. v. Deputy Commissioner of Commercial Taxes), even while keeping the proceedings in court alive, the dealer of that case was, in matter of impugnment about sales tax, directed to have recourse to alternative remedy of appeal. This Court should then say "no" to the prayer of quashment of notice when the jurisdiction depended not on notice but on requisite material on record.
17. In the welter of agitated controversy about facts and in the face of position of law, the counsel for the petitioner submitted that in case quashment of notice is not considered proper then the taxing authority be directed to hear the petitioner on jurisdictional aspect and to drop the proceedings, initiated on notice, as impugned, if the same turned out to be an exercise on "mere chance of escaped assessment" and not on "actual escapement" as envisaged under the law with liberty to it to proceed to reassess if it was found, on hearing, that material on record was of definite degree as being sine qua non, and justified action in terms of Section 19(1) of the Act.
18. In pursuit of his contention, the Government Advocate, opposed the prayer of quashment of the notice, but did not dispute the right of the petitioner to question the jurisdiction of the taxing authority and to show absence of basic facts and infecundity of the proposed action and responsibility of the authority to answer the same when put in issue. He thus, vetoed the plea of quashment, but voted the contention about direction as claimed. Parties are, thus, one on the point of desirability of issuance of appropriate direction in this behalf so as to safeguard the interests of both sides. In view of this stand, further scrutiny of legal requirement or scheme of law or recording of considered opinion on this topic becomes wholly unnecessary.
19. The controversy is thus made nodus-free and permits its resolution on the basis of undisputed stand.
20. In the circumstances, I deem it proper to dispose of this petition with directions as under :
of this order to file reply to the notice (annexure A) before the taxing authority and is permitted to raise the question of jurisdiction as well, before it as is contended here.
(b) The taxing authority is directed to consider the question of jurisdiction, if raised, depending on satisfaction about existence or non-existence of facts like (i) sale and/or purchase of goods in M.P. by the petitioner, (ii) escapement of assessment and (iii) omission attributable to the dealer and decide the same, after hearing the petitioner, as first point, deferring till then the question of reassessment, by a reasoned order.
(c) The taxing authority shall have freedom to proceed further to reassess, fix tax and penalty in terms of Section 19(1) of the Act, if answer recorded on the question of jurisdiction, is in affirmative.
21. The aforesaid course, intended to subserve the interests of justice, is also in accord with the position of law laid down under order 14, Rule 2 of the Code of Civil Procedure, 1908, which provided that issue relating to jurisdiction when one of law, is triable and determinable as preliminary one leaving the main Us to be dealt with in accordance with the decision on that issue. On the basis of material, as available, the question of jurisdiction was raised before me as an issue of law.
22. The petition is, thus, disposed of finally in terms indicated above with no orders as to costs.