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 section Bindra P C Chatterjee section P Nayar for RH Dhebar the respondents in all the appeals
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 section 114a 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 section 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 sections 103 and 114a on account of their failure to furnish the return for the period 1153 to 311253
Similar notices were issued to them on October 27 1955 for the period 1154 to 311254 and on July 7 1956 for the period 1155 to 311255
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 respon dent 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 article 226 from which these appeals arise
In these apneals the questions arising for decision are whether section 11 4a or section 11 A3 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 HR 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 section 114a or under 11A1
He urged that as a case coming under section 114a also falls under section 11 A as the law now stands the persons proceeded against under section 11A1 will have the benefit of the period of limitation prescribed therein while the said benefit is not available for those proceeded under section 114a
According to the learned counsel for the revenue sections 114a 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 section 11A3 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 vs State of Bombay1 the question arose whether a notice under section 112 initiates a fresh proceeding and if that is so whether the limitation prescribed under s11A1 is attracted to that proceeding
A Full Bench of the Bombay High Court speaking through Chagla C J held that a notice under section 112 initiates a fresh proceeding and to such a proceeding the limitation prescribed in section 11A is attracted
From the ratio of that decision it followed that the limitation prescribed under section 11 A also governed proceedings under s114a
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 S11A and the reason for that amendment as stated in the statement of objects and reasons is as follows In its judgment in Bisesar House vs Commissioner of Sales Tax Nagpur the Bombay High Court has held that the period of limitation laid down in SIIA 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 assess ments 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 BLR 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 turn overs does not apply to original assessment and suo motu revisions
 In Ghanshyam Das vs Regional Assistant Commissioner of Sales Tax Nagpur1 this Court did not agree with that decision so far as the scope of s112 is concerned
Therein it was held that a notice under section 112 does not initiate a fresh proceeding and to that proceeding the limitation prescribed in section 11A does not apply
Though in view of that decision s11A3 became superfluous in respect of a proceeding in which a notice under section 11 2 is given it undoubtedly changed the law in respect of proceedings under s114a
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 section 2c 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 section 2f as meaning a dealer registered under the Act
Section 2j 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 therefrom his turnover during that period in respect of the sale of goods declared tax free under section 6 The definition of the term year  as provided in section 21 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
Section 8A provides for voluntary registration of a dealer
Sub s3 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 section4 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 section2 of that section is not necessary for our present purpose
Sub section3 of that section reads 3 it a dealer fails to comply with the requirement of a notice issued under sub section 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 section 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 111If 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 section2 and such further evidence as the Commissioner may be require the Commissioner shall assess him to tax
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 Sub sections 5 and 6 are not necessary for our present purpose
Section 11A provides 1If 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 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 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
The assessment or reassessment made under sub section 1 shall be at the rate at which it would have been made had there been no under assessment or escapement
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 sub sections 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 re turns 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 pro vides 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 section3 of section 11A has brought about a discrimination between those dealers proceeded against under section 114a and those dealt with under section 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 section 1 1 4 a as well as section 11A therefore he can be dealt with under either of those two provisions
Where section 11A prescribes a period of limitation for a proceeding under that provision in view of sub section 3 of section 11A a proceeding under section 114a 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 section 114a and others under section 11A
It was said on their behalf that it is well settled that in its application to legal proceedings article 14 assures to every one 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 section 114a deals only with registered dealers who have certain advantages under the Act whereas section 11A deals with dealers who do not come either under section 114 or section 115 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 section 114a can also be dealt with under section 11A
Before a person can be dealt with under section 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 under assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made therefrom
Quite plainly the expression dealer  in section IIA1 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 1 5 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 vs Commissioner of Income Tax Bihar and Orissa1 this Court laid down that the expression has escaped assessment in section 341b 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 vs Ms Narsee Nagsee and Co Bombay2 interpreting the words profits escaping assessment in section 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 section 11A came up for consideration before this Court in Ghanshyam Das vs Regional Assistant Commissioner of Sales Tax Nagpur3
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 vs Pirojbai N Contractor 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 s222 of the Income tax Act had been issued to the assessee and therefore his income had not been assessed at all under section 23 thereof
The said view has been assumed to be correct by this Court in Maharaj Kumar Kamal Singh vs Commissioner of Income Tax Bihar and Orissa 1959 Supp 1 SCR 10 and Maharajadhiraj Sir Kameshwar Singh vs State of Bihar 1960 1 SCR 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 vs Narsee Nagsee and Co 1960 3 SCR 988 construing the provisions of section 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 section 341 of the Income Tax Act or section 14 of the Business Profits Tax Act but so far as the present enquiry is concerned the said sections are in pari materia with section 11A of the Act
In construing the meaning of the expression escaped assessment  in section 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 vs Balu Chettiar 7 STC 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 section 11A of the Act includes that of a turnover which has not been assessed at all because for one reason or other no assess ment proceedings were initiated and therefore no assessment was made in respect thereof
In one of the appeals dealt with in that judgment ie CA No 102 of 1901 this Court had to consider whether a case under 673 a also comes under section 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 s11A 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 vs Commissioner of Income Tax Bihar and Orissa this Court held that the word information  in section 341b 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 section 341b of the Income Tax Act 1922 really means knowledge
In Salem Provident Fund Society Ltd vs Commissioner of Income Tax madras1 a division bench of the Madras High Court interpreting the scope of the words information which has come into his possession  found in section 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 1 674 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 Officer himself 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 informa tion leads to a discovery or belief that there has been an escape of assessment or under assessment
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 vs Commissioner of Income Tax Kerala1
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 section 341 ofthe 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
1 675 From the above conclusions it follows that the appellants  case falls both under section 114a and section 11A1
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 section 114a they cannot have the benefit of the period of limitation prescribed under section 11 A1
Hence it must be held that the present case falls within the rule laid down by this Court in Suraj Mail Mohta and Co vs A V Visvanatha Sastri  another1
On the facts found it follows that section 1 4a has become a discriminatory provision in view of section 11 A3
Hence the same is liable to be struck down under article 14
But for the inclusion of sub section 3 in section 11A there would have been no discrimination between those dealt with under section 114a and those under section 11A1
The period of limitation prescribed in section 11A1 would have attracted itself to proceedings under section 114a as held by this Court in Ghanshyam Das s case2
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 section 114a and section 11A1 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 case1 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 section 114a is liable to he struck down as being discriminatory in view of section 11A3
Section 114a is separable from the rest of the sub section
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 in stance 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   2  LPN7SCI 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 4519STN 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 section 103 section 114 a section 11A and sub section1 of section 22C of the Act calling upon the petitioners to show cause why action should not be taken against them under section 103 and section 114 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 4519STN dated 13 9 55 readsNotice for 1 1 53 to 31 12 53 dated 13 9 55No 4519 STND13 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 101 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 31 12 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 11B1 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 AM 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 vs Ms Chakobhai Chelabhai and Company1 this Court held that the issue of one notice under section 125 of the Orissa Sales Tax Act 1947 which section is similar to section 114a 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 section 101 or under section 114
The notice says that the appellants had failed to furnish the return as required by a notice in that behalf served on them under section 101 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 section 114 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 section 101 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 case1 referred to earlier that such a mistake does not vitiate the notice issued
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 in1955
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 section 114a or 11A1 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 section 341b of the Income Tax Act 1922
All that sections 114 and 11A1 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 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 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 sections 114 a and 11A1
In Chatturain and Others vs Commissioner Pt Income Tax Bihar1 the 1 679 Federal Court held that any irregularity in issuing a notice under section 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 31 10 55
In view of our conclusion that every escapement of assessment coming within the scope of section 114a is also an escapement of assessment under section 11 A1 a notice issued under section 11 4a would be a vaild notice in respect of a proceeding under section 11A1
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 section 11A
We further hold that section 114a is void as it is violative of article 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 114 115 and 11 A of the CP and Berar Sales Tax Act 1947 are as follows 114 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 ex piry 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 periodsand 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 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 inquiry as he considers necessary proceed in such manner as may be prescribed to re assess 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 ad dition 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 section 11A 3a 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 10 1955
The Sales Tax Officer Non resident Circle Nagpur issued four notices to the appellant initiating proceedings under sections 103 114 11A1 and 22C1 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 section 22C1 can be issued only in course of any proceedings under the Act
As no proceedings were pending against the appellant no notice under section 22C1 could be issued to it
We shall presently show that no notice can be issued to a registered dealer under section 11A1 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 sections 22C1 and 11A1 may be treated as surplusage and rejected
Under section 103 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 section 11
If no assessment can be made under section 11 no penalty can be levied under section 103
Therefore the point for determination is whether the impugned notices so far as they were issued under section 114 are valid
The contention of the appellant is that the notices under section 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 114 does not prescribe a period of limitation for the issue of a notice under it
In Ghanshyam Das vs Regional Assistant Commissioner of Sales Tax Nagpur1 the Court by a majority decided with reference to section 114 and section 11A as it stood before its amendment by the Bombay Sales Tax Laws Validating Provisions and Amendment Act 1959 that a notice under section 114 initiates new proceedings and it also decided or to be more accurate assumed that the period of limitation prescribed by section 11A1 should be imported into section 114
The case was decided without reference to section 11A3 inserted by the Amending Act and is no authority on the interpretation of that sub section
Section 11A3 now expressly provides that nothing in section 11A1 shall apply to any proceeding including any notice issued under section 11
The section is retrospective in operation
It follows that the period of 1  682 limitation prescribed by section 11A1 cannot be applied to a proceeding or a notice issued under section 114
There is no period of limitation prescribed for a notice or a proceeding initiated under section 114
Consequently the impugned notices issued under section 11 4 are not barred by limitation and are not invalid
The argument then is that section 114a offends article 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 section 114a or under section IIA1 against a registered dealer for his failure to file returns and the principle of Shree Meenakshi Mills Ltd vs Sri A V Viswanatha Sastri and Another1 is invoked
We find no merit in this contention
Section 114a specially pro vides 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 section 114a the sales tax authorities must proceed against the registered dealer under section 114a and not under section IIA1
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 sections 114a and 11A1 together we should therefore hold that the cases falling within section 114a are excluded from the purview of section 11 A1
The point that there is no over lapping of sections 114a and 11A1 is made clearer by s11A3
The decisions under section 341b of the Indian Income tax Act 1922 such as Maharaj Kumar Kamai Singh vs Commissioner of Incometax Bihar and Orissa2 and under section 14 of the Business Profits Tax Act 1947 such as Commissioner of Income Tax vs Narsee Nagsee  Co2 are distinguishable
In those Acts there was no special provision corresponding to section 114 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 case3 none of the notices in question was issued under section 11A and the Court did not say that a registered dealer could be proceeded against under section 11 A for not filing a return
Nor did the Court consider the effect of section 11 A3
It is true that the majority decision held that the phrase escaped assessment in section 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 section 114 read with section 11A3 the power under section 11 A1 as interpreted in Ghanshyam Das s case4 to assess turnover which escaped assessment by reason of non filing of returns must be confined to cases of 1 2 1959 Supp 1 SCR 10
3  4  683 unregistered dealers
As pointed out already cases of registered dealers falling within section 114 are excluded from the purview of section 11A1
It is next said that section 11 4 offends article 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 sections IIAL and 115
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 re gistered 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 sections 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 21aii 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 section 2j aii exempts from tax sales to a registered dealer of goods de clared 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 sections 103 and 22C1 treat the two classes of dealers on the same footing but sections 11 4 115 and 11 A1 treat them differently
No penalty can be levied on a registered dealer under section 114 but heavy penalties may be levied on an unregistered dealer under sections 115 and 11A1
While prescribing periods of limitation for proceedings against an unregistered dealer under sections 115 and 11A1 the legislature has wisely not prescribed a period of limitation for a proceeding initiated under section 114a 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 section 114and 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 section 114a 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 case1 Raghubar Dayal J at p 459 clearly held that section 114 is not violative of article 14
The majority did not dissent from this opinion
We hold that section 11 4 is not violative of article 14 and we uphold it
It follows that the notices issued on July 8 1959 under section 114 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 section 114 for the period from 1 2 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


Summary:
Under s101 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 r19 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 4a
Under s114 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 s114a
In 1953 s11A was added to the Act
Under s11A1 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 s11A3 was added by which nothing in s11A1 shall apply to any proceeding including any notice under s11 that is the period of limitation of 3 years mentioned in s11A1 shall not apply to a proceeding under s114a 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 s114 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 LPN 7SCI 3a 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 s11A1 but the assessing authority assessed the appellants on best judgment basis under section 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 114 a read with s11A3 contravenes article 14 of the Constitution because a registered dealer who had failed to submit his return could be proceeded against either under s114a or s11A1 but whereas s11A1 provides a 3 year period of limitation a proceeding under section 114a could be initiated at any time in view of s11A3 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 s101 did not apply to the appellants as no notice under s101 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 114 a is void as it is violative of article 14
The expression dealer  in s11A1 includes both registered and unregistered dealers and it cannot be contended that dealers are classified into registered and unregistered dealers the former coming under s114a and the latter under s11A1
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 s114a and section 11A1 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 section 11A1
As the information  contemplated by s11A1 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 s114a or s11A1
But as they were proceeded against under section 114a they could not get the benefit of the limitation prescribed under section 11A1
It follows that section 114a has become a discriminatory provision in view of section 11A3 672 B 674 D E 675 H 676 A G
663 Ghanshyam Das vs Regional Assistant Commissioner of Sales tax Nagpur  and Suraj Mall Mohta  Co vs A V Visvanatha Sastri  Anr   followed
Maharaj Kumar Kamal Singh vs Commissioner of Income tax Bihar  Orissa 1959 Supp 1 SCR 10 Commissioner of Incometax Bombay City vs Ms Narsee Nagsee  Co Bombay Salem Provident Fund Society Ltd vs C I T Madras and United Mercantile Co Ltd vs Commissioner of Income tax Kerala referred to
2 But s114a 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 s11A1
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
vs CIT Bihar   applied
Further a The issue of one notice for several quarters is not contrary to law
678 E
State of Orissa and Anr
vs Ms Chakobhai Chelabhai  Co   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   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 section 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 ss114 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 114 is not violative of article 14
Construing ss114a and 11A1 together it must be held that cases falling within s114a are excluded from the purview of S11A1
Section 114a 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 s114a and not under s11A1
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 section 114a against a registered dealer because i the registered dealer is under a statutory obligation to file a return ii no penalty is leviable under s114 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 discriminatory684 B G H
Ghanshyam Das vs Regional Assistant Commissioner of sales Tax Nagpur 19644 SCR 436 Maharaj Kumar Kamal Sing vs Commissioner of Income tax Bihar  Orissa 1959 Supp 1 SCR 10 and Commissioner of Income tax vs Narsee Nagsee  Co  explained
2 Section 11A3 expressly provides that nothing in section 11 A1 shall apply to any proceeding including any notice under section 11 and the section is retrospective
It follows that the period of limitation provided by s11A1 cannot be applied to a proceeding or notice under section 114
Consequently the impugned notices of 1959 issued under s114 are not barred by limitation and are not invalid 682 H 683 A
Ghanshyam Das s Case   referred to 3 Even the notices issued in 1955 and 1956 initiated proceedings validly under section 114 for the period from 1st February 1953 to 31st October 1955 as the irregularities in the notices did not invalidate them
685 B C