Writ Petition Nos
3589 3594  12587 of 1983
Under Article 32 of the Constitution of India
Raja Ram Aggarwal and Vineet Kumar for the Petitioners in WP
3589 94 of 1983
Harish N Salve and Vineet Kumar for the Petitioners in WP
No 12587 of 1983
Harbans Lal Ms IS Goel and CV Subba Rao for the Respondents
The Judgment of the Court was delivered by RANGANATH MISRA J
These are applications under Article 32 of the Constitution and challenge in these proceedings is to the validity of notice issued by the Excise and Taxation Officer Cum Assessing Authority Respondent No 2 under the Haryana General Sales Tax Act 1973 hereinafter referred to as the Haryana Act 
Such notice is said to have been issued on 18th of December 1980
The relevant periods are 1968 69 to 1974 75 and each of the writ petitions relates to one of these years
As common questions of fact and law arise in these petitions and a common set of arguments has been advanced at the Bar we proceed to dispose of all these writ petitions by a common judgment
898 The petitioner No 1 a Public Limited Company has its factory at Ganaur within the District of Sonepat in Haryana State and petitioner No 2 is its General Manager Legal and duly constituted Attorney
Petitioner No 1 a manufacturer of electric resistence welded steel tubes and pipes is a dealer registered under the Haryana Act as also under the Central Sales Tax Act
It filed returns for all the quarters covered within the period indicated above as prescribed by the Punjab General Sales Tax Act 1948 hereinafter referred to as the Punjab Act  till 3131973 and under the Haryana Act for the quarters of the remained years in question as the Haryana Act came into force with effect from 5th May 1973
On the receipt of notice relating to assessment years 1968 69 1969 70 1970 71 1971 72 1972 73 and 1973 74 in the prescribed form ST XIV under section 142 of the Punjab General Sales Tax Act and in the prescribed form ST 25 under section 282 of the Act relating to year 1974 75 the petitioner company appeared before the respondent No 2 and complied with the requirements of such notice by production of documents books and other papers
While the matter was thus proceeding the second respondent again issued a notice on 2491982 requiring the petitioner company to produce certain further records and documents
The petitioner has challenged that notice as also the vires of section 28A of the Haryana Act
Section 11 of the Punjab Act lays down the procedure of assessment which broadly corresponds to section 28 of the Haryana Act
Though a major part of the period involved in these proceedings would be covered by the Punjab Act it would be sufficient to refer for convenience to the corresponding provisions of the Haryana Act
Section 25 of the Haryana Act obliges every registered dealer to furnish its return in the manner prescribed and the relevant rules require returns to be submitted on quarterly basis
Sub section 1 of section 28 entitles the assessing authority to accept the returns and assess the amount of tax due from the dealer on the basis of such returns when he is satisfied without requiring the presence of the dealer or the production by him of any evidence that the returns furnished are correct and complete
Sub section 2 requires the assessing authority where he is not satisfied without requiring the presence of the dealer or production of evidence in support of the return to serve on such dealer a notice in the prescribed manner requiring him to attend in person or to produce or cause to be produced such evidence as he may rely upon in support of the return
Under sub section 3 where the dealer responds to the notice under sub section 2 the assessing authority after hearing such evidence as the dealer may produce and such other evidence as the 899 assessing authority may require on specified points has to assess the tax
Sub section 4 authorises the assessing authority in the event of default of compliance with the terms of notice issued under sub section 2 to proceed to assess to the best of his judgment the amount of tax due from the dealer
Sub section 5 deals with the situation where returns are not furnished and provides a period of five years after the expiry of such period to which the returns if filed would be related as the outer limit for completing the assessment to the best of the assessing authority s judgment
The five sub sections of section 28 thus deal with four different situations Sub section1 authorises the making of assessment on the basis of returning without anything more Sub sections 2 and 3 deal with one particular situation namely when the assessing authority looks for evidence and supporting material he calls upon the dealer to appear and produce his accounts and on the basis of such material he is to complete the assessment Sub section 4 deals with the situation where there is failure of compliance with the notice under sub section 2 and this provision enjoins upon the assessing authority to complete the assessment according to the best of his judgment within a period of five years Sub section 5 deals with the situation where no return is filed
For each of these years under consideration that is either under section 112 of the Punjab Act or under section 282 of the Haryana Act notice has been issued by the assessing officer
The assessing officer in his affidavit has made it clear that assessments for these years were intended to be completed following the procedure in sub sections 2 and 3 of either of the sections in the two Acts
It has therefore been contended relying on judgments of this Court that there is no prescribed limitation for completing such assessments
In course of argument learned counsel for the State has further indicated that action under section 28A of the Haryana Act was not intended to be taken
In that view of the matter it is indeed unnecessary to refer to the provisions of section 28A of the Haryana Act and deal with several contentions advanced at the Bar with reference to that provision
Equally unnecessary would be to find out the exact meaning of proceed to assess to the best of his judgment appearing in sub section 4 of section 28 of the Haryana Act
In Ghanshyamdas vs Regional Assistant Commissioner of Sales Tax Nagpur  Ors 14 STC 976 a five Judge bench of this Court was 900 actually dealing with a case of assessment of escaped turn over and for that purpose had to find out whether there was any escapement of tax if proceedings in respect of the first assessment itself was still pending and no final order of assessment had been made
Dealing with this aspect this Court held It is manifest that in the case of a registered dealer the proceedings before the Commissioner start factually when a return is made or when a notice is issued to him either under section 103 or under section 112 of the Act
The acceptance of the contention that statutory obligation to file a return initiates the proceeding is to invoke a fiction not sanctioned by the Act
The obligation can be enforced by taking a suitable action under the Act
Taking of such an action may have the effect of initiating proceedings against the defaulter
The default may be the occasion for initiating the proceedings but the default itself proprio vigore cannot initiate proceedings
Proceedings in respect of the assessment of the turn over for the relevant period cannot therefore be said to be pending before the Commissioner 
For the foregoing reasons we hold that a statutory obligation to make a return within a prescribed time does not proprio vigore initiate the assessment proceedings before the Commissioner but the proceedings would commence after the return was submitted and would continue till a final order of assessment is made in regard to the said return
 On the basis of this authority it would follow that notices under sub section 2 of either section 11 or section 28 of the relevant Acts having already issued and final orders of assessment having not been made assessment proceedings are still pending
In Madan Lal Arora vs Excise and Taxation Officer Amritsar 12 STC 387 a five Judge Bench was examining the question of limitation in respect of a best judgment assessment
At that time section 11 of the Punjab Act had a time limit of three years within which the best judgment assessment had to be completed
Now that period of limitation in section 284 is of five years
In view of what we have already noted consideration of the procedure for best judgment assessment is not relevant
Nor are we concerned with the examination of the view taken by 901 the Full Bench of the Punjab and Haryana High Court in Jagat Ram Om Prakash vs Excise and Taxation Officer Amritsar 16 STC 107
Therein the examination was with reference to the provisions in section 114 of the East Punjab General Sales Tax Act 1948 and the question of the time limit for completion of a best judgment asscssment was in issue
The Court pointed out that as to at what point of time the assessing officer did actually proceed to so assess would have to be determined on the facts and circumstances of each case and it is not possible to lay down any definite and clear cut test applicable to all cases
It was however pointed out that there must be some definite act or step taken from which it can be clearly perceptible that from that point of time the assessing officer has proceeded to access to the best of its judgment and the commencement of this process must be within the period of three years as provided in section 114 of that Act
In Indian Aluminium Cables Ltd  Anr
vs Excise and Taxation Officer  Anr
  a three Judge Bench of this Court was considering the procedure of assessment laid down under section 11 of the Punjab Act
This Court observed On a correct interpretation of the provision aforesaid what emerges is as follows iThat the assessing authority shall hear the evidence produced by the dealer on the day specified in the notice issued under sub section 2
iiIt can adjourn the hearing to some other day and hear the evidence produced by the dealer on the adjourned day or days
iiiThe assessing authority may require the dealer to produce further evidence on specified points on the adjourned day or days
ivThe assessing authority should assess the amount of tax due from the dealer that is to say pass the order of assessment on the day on which the hearing of the evidence is completed as soon afterwards as may be
 There can be no opposition to the position as summarised with reference to section 112 and 3 of the Punjab Act corresponding to section 282 and 3 of the Haryana Act
902 The Court proceeded to state Sub section 4 of section 11 is attracted in a case where a dealer having furnished a return in respect of a period fails to comply with the terms of a notice issued under sub section 2
In such a case the assessing authority has to take some effective step such as issuance of a notice to the assessee ntimating to him that he is proceeding to access to the best of his judgment the amount of tax due from the dealer
On failure of a dealer to furnish a return in respect any period by the prescribed date the assessing authority after giving the dealer a reasonable opportunity of being heard can proceed to access to the best of his judgment the amount of tax if any due from the dealer
In such a case also an effective step such as issuance of a notice to the dealer concerned showing that the assessing authority is proceeding to access has got to be taken within five years of the expiry of the period concerned
Sub section 6 is attracted in the case of a dealer who being liable to pay tax under the act has failed to apply for registration
Similar steps as the ones to be taken under sub section 5 are to be taken under sub section 6 within a period of five years after the expiry of the concerned period
But the Legislature advisedly did not fix any period of limitation for taking up of the steps or the passing of the assessment order under any of the sub sections 1 2 or 3
The reason is obvious
Best judgment assessments in the circumstances mentioned in any of the sub sections 4 5 or 6 could not be allowed to be made after the expiry of a certain reasonable time which the Legislature thought was three years previously but made it five years by Punjab Act 28 of 1965
But where a registered dealer has filed the return the assessing authority can pass the assessment order under sub section 1 and accept the return filed by the dealer as correct and complete
In such a case the formality of passing an order of assessment is to be completed without any further demand of tax from the dealer
For the issuance of a notice under sub section 2 no time limit has been fixed but the assessing authority must remain on its guard of taking the steps and completing the assessment as soon as it may be possible to do so
Otherwise the risk involved may just be pointed out
Take a case where a notice under sub section 2 is issued after the expiry or 903 just on the verge of expiry of the period of five years and the dealer fails to comply with the terms of the notice
In such a case the assessing authority may have to proceed to make the best judgment assessment under sub section 4 attracting the bar of limitation of five years
But of course there may be a case where in spite of the failure of the dealer to comply with the terms of the notice a suit under sub section 2 the assessing authority may be in a position to complete the assessment under sub section 3 treating the alleged failure of the dealer as not a real failure on his part Section 114 of the Punjab Act which has been considered in this case no where requires a notice to be given to the dealer by the assessing authority of the fact that he was going to assess to the best of his judgment
Where it is not possible for the assessing authority to complete the assessment on the basis of the return and a notice under sub section 2 has been issued the assessee appears before the assessing authority and respond to the notice
Once the assessee is before the authority and the documents and evidence produced by the assessee are examined the assessee would certainly know which way the assessment proceeding is heading
It is quite possible that in course of examination of the papers produced by the assessee in answer to the notice the assessing authority would indicate his dissatisfaction with the compliance
It may be that in a given case the original notice under section 112 or a subsequent order requiring production of some more material on specific points is not complied with
Non compliance with the notice under section 112 of the Act leads to a situation where a best judgment assessment can be complied
It is true that this Court in Indian Aluminiuim case supra has indicated that a further notice has to be given
The question that fell for determination before the Court did not require examination as to whether such a notice was necessary
In view of the position as has emerged in the matter before us we also do not think it necessary to finally indicate as to whether such a notice has to be issued and failure to issue such a notice would prevent the assessing officer from making a best judgment assessment
Though we are of the opinion that such a notice is not a statutory prescription we do not intend to say anything more about it as judicial propriety would require a larger bench of the Court to examine the correctness of the view in the Indian Aluminium case
On an appropriate occasion we hope the question as to whether such a notice is a condition precedent to completion of assessment would be examined
904 In Indian Aluminium case supra this Court has approved the earlier decision in Gurbax Singh vs Union of India  The ratio in Gurbax Singh s case is that in the absence of a period provided by statute for completion of assessment an order of assessment made with some delay would not be without jurisdiction
Even in Indian Aluminium case supra where the statute requires assessment to be completed within a reasonable time the Court indicated that the argument of the learned counsel that the assessment had to be completed within a reasonable time in order to be sustainable was not acceptable as a sound one
The short question that really falls for examination in this case is whether an order of assessment under sub section 3 of section 11 of the Punjab Act or section 283 of the Haryana Act can now be completed or would that be barred by limitation
Undoubtedly the assessment proceedings have been very delayed
As the material placed before us shows the assessee had gone before different courts from time to time to ask for injunction against the completion of assessment but that trial appears be have started in December 1980 when a suit was filed and injunction was obtained
Though notices were issued under sections 112 of the Punjab Act or 282 of the Haryana Act within a reasonable period from the filing of returns for the respective quarters in the assessment years under consideration further action has not been taken by the assessing officer to complete the assessments
But as we have said above in the absence of any prescribed period of limitation the assessment has to be completed within a reasonable period
What such reasonable period would be would depend upon facts of each case
One view can be that it should be a period not exceeding five years as the Legislature has fixed the limitation of five years for completing assessments in case of escaped turnover
Unless then be an assessment made soon after the period to which such assessment relates the question of consideration of escapement would indeed become difficult to consider and examine
We are however not inclined to extend into a situation like the one before us a period of limitation for completion of assessments under sections 113 or 283 of the respective Acts
The assessee has made returns for all the quarters and must have paid its admitted tax
Now that the assessing authority intends to complete assessments under section 113 of the Act we see no prejudice to the assessee if the assessing authority is permitted to complete the assessment now
On the other hand if no assessment is made an anomalous situation might arise and even though the assessee has collected the sales tax on its sale turnover it might raise a claim for refund of it in the absence of an assess 905 ment
We do not propose to create such a situation
It would suffice to say that in the situation which has arisen it the matter before us it would be appropriate to call upon the assessing authority to complete all these pending assessments within a total period of four months from today on the basis of available material in the record before him and such other material as the authority may obtain
We however make it clear that such assessment has to be only under section 113 of the Act
Before we part with the case we would like to indicate that assessment of tax should be completed with expedition
It involves the revenue to the state
In the case of a registered dealer who collects sales tax on behalf of the State there is no justification for him to withhold the payment of the tax so collected
If a timely assessment is completed the dues of the State can be conveniently ascertained and collected
Delay in completion of assessment often creates problems
The assessee would be required to keep up all the evidence in support of his transactions
Where evidence is necessary with the lapse of time there is scope for its being lost
Oral evidence as and when required to be produced by the assessing authority may not be available if a long period intervenes between the transactions and the consideration of the matter by the assessing authority
Long delay thus is not in the interest of either the assessee or the State
In view of the fact that a period of limitation has been prescribed for bringing the escaped turn over into the net of taxation such an eventuality cannot be grappled with appropriately unless timely assessment is completed
In several taxing statutes even in a situation like this where assessment under sections 113 or 283 of the respective Acts is contemplated a period of limitation is provided
Until by statute such a limitation is provided it is proper for the State Governments to require by statutory rules or appropriate instructions to ensure completion of assessments with expedition and reasonable haste but subject to rules of natural justice
We would like to clarify the position that we have not dealt with the vires of section 28A of the Haryana Act nor have we found any necessity to deal with the requirement of notice before the assessing authority proceeds to complete the assessment according to the best of his judgment
These questions are left open
Each of the writ petitions is therefore dismissed
Parties are directed to bear the respective costs
NVK Petitions dismissed


Summary:
This was an appeal by certificate under Section 66Aii of the Indian Income tax Act against the judgment of the Bombay High Court on a reference of the question whether expenditure incurred by the company in the accounting period relevant to the assessment period was allowable as deduction in determining the profits of the company for the assessment year
The assessee respondent had a factory at Shahabad
Under a tripartite agreement between the government the assessee and the Municipality of Shahabad the assessee had undertaken to supply water and electricity to Shahabad and to concrete the road from the factory to the railway station
Under clause 23 in consideration of these amenities to be provided by the assessee company the Government undertook not to include any properties of the company within the limits of Shahabad Municipality etc
for a period of fifteen years from the date of the agreement
According to the assessee certain expenditure was incurred during the year of account under the said agreement on the laying of pipelines installations and accessories of which the Shahabad Municipality had become the owner under the agreement and this amount was claimed as deduction
The Income tax Officer disallowed the amount
On appeal by the Company the Appellate Assistant Commissioner allowed the deduction
The Revenue preferred an appeal to the Incometax Appellate Tribunal which passed an order directing the Incometax Officer to scrutinize the expenditure and allowed the deduction to the extent that it did not result in the company becoming the owner of any asset
The High Court in deciding the reference held that the expenditure in question was revenue expenditure and was liable to be allowed 918 as deduction and answered the question referred in the affirmative and in favour of the assessee
Revenue appealed to this Court against the decision of the High Court
Dismissing the appeal the Court  HELD Water supply lines were laid as a result of the expenditure incurred but these water pipelines were not the assets of the assessee but of the Shahabad Municipality and it was not as if the expenditure resulted in bringing into existence any capital asset for the company
The only advantage derived by the assessee by incurring the expenditure was that it obtained an absolution or immunity under normal conditions from the levy of certain municipal rates taxes and charges922E As observed by this Court in Empire Jute Co Ltd vs Commissioner of Income tax 1980 124 ITR SC p 1 there may be cases where the expenditure even if incurred for obtaining an advantage of enduring benefit may nonetheless be on revenue account and the test of enduring benefit may break down
It is not every advantage of enduring nature acquired by an assessee that brings the case within the principles laid down in this test
What is material is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on application of this test
If the advantage consists merely in facilitating the assessee s trading operations or enabling the management and conduct of the assessee s business to be carried on more effectively or more profitably while leaving the fixed capital untouched the expenditure would be on revenue account even though the advantage may endure for an indefinite future
922H923A C In this case the advantage secured by the assessee by making the expenditure was the securing of absolution or immunity from liability to pay municipal rates and taxes under normal conditions for a period of fifteen years
If these liabilities had to be paid the payments would have been on revenue account and hence the advantage secured was in the field of revenue and not capital
As a result of the expenditure there was no addition to the capital assets of the assessee company and no change in its capital structure
The pipelines which came into existence as a result of the expenditure belonged to the Municipality
The expenditure was liable to be allowed as deductible from the profits under Section 102 xv of the Indian Income tax Act
923F H924A 919 Atherton vs British Insulated and Helsby Cables Ltd 1924 10 Tax Cases 155 192 and Empire Jute Co Ltd vs Commissioner of Income tax 1980 124 ITR SCp 1 referred to