Civil Appeal Nos
145 146 1972
Appeals by Special Leave from the Judgment and Order dated 9 12 1970 of the Mysore High Court in Writ Petitions Nos
2042 and 206570
Narayan Nettar for the appellant
RM Mehta for the respondent
The Judgment of the Court was delivered by KHANNA J
These two appeals by special leave are against the common judgment of the Mysore High Court whereby the High Court in two petitions under article 226 of the Constitution of India quashed two orders made by the Deputy Commissioner of Commercial Taxes appellant under section 21 of the Mysore Sales Tax Act 1957 hereinafter referred to as the Act
The respondent is an excise contractor
He was as sessed under the Act for the assessment years 1959 60 and 1960 61 as per orders dated March 21 1963 made by the Commercial Tax Officer Raichur
Under those orders the taxable turnover of the respondent for the two years in question was determined after deducting the shop rent and the tree tax
For the assessment year 1959 60 a sum of Rs 210542 was deducted and the net taxable turnover was determined to be Rs 25989
For the year 1960 61 a sum of Rs 398350 was deducted and the net taxable turnover was determined to be Rs 26657
The Commercial Tax Officer initiated proceedings under section 12A of the Act in respect of the aforesaid years because he was of the view that some items of turnover had escaped assessment
As per orders dated June 8 1966 he made assessment by including in the turnover of the respond ent certain amounts which had escaped assessment under the original assessment orders dated March 21 1963
The deduc tion in respect of shop rent and tree tax was however allowed to the respondent in orders dated June 8 1966 as it had been allowed in initial orders dated March 21 1963
On June 28 1967 the appellant ie the Deputy Commis sioner of Commercial Taxes made two orders revising the orders dated June 8 1966
In the said orders the appel lant disallowed the deduction which had been allowed to the respondent in respect of the shop rent
The appellant in those orders referred to the decision of this Court in Shinde Brother etc
vs Deputy Commissioner Raichur1 and held that the amount of shop rent being not excise duty should not be deducted in computing the turnover of the respondent for the two years in question
The taxable turn over of the respondent for the two years in question was accordingly enhanced
1 595 The respondent made two applications for rectification of the orders of the appellant dated June 28 1967
It was urged on behalf of the respondent that the revision of assessments was barred by limitation under section 213 of the Act and as such there was a mistake apparent on the record
The appellant rejected those applications
The respondent then preferred two appeals to the Sales Tax Appellate Tribunal
The Tribunal too rejected those ap peals on the ground that they were not maintainable
The respondent thereafter filed two petitions in the High Court under article 226 for the issuance of writs in the nature of certiorari for quashing the orders dated June 28 1967
The High Court as already mentioned allowed both the peti tions and quashed orders dated June 28 1967
In the opinion of the High Court orders dated June 28 1967 made by the appellant were without jurisdiction since they had been made beyond the period of four years from the date of the assessment orders dated March 21 1963
Mr Narayan Nettar learned counsel for the appellant has contended in appeal before us that the period of four years mentioned in section 21 3 of the Act should be computed from the orders dated June 8 1966 made under section 12A of the Act and not from the initial orders of assessment dated March 21 1963
The above stand has been controverted by Mr Mehta who argued the case amicus curiae as no one appeared on behalf of the respondent
After giving the matter our consideration we are of the view that the contention advanced on behalf of the appel lant is well founded
Before however dealing with the matter we consider it appropriate to reproduce the relevant provisions of the Act
Section 12A of the Act relates to assessement of escaped turnover
Sub section 1 of that section at the relevant time read as under 1 Where for any reason the whole or any part of the turnover of a dealer has escaped assessment to tax or licence fee or has been assessed at a lower rate than the rate at which it is assessable the assessing authority may subject to the provisions of sub section 2 at any time within a period of five years from the expiry of the year to which the tax or licence fee relates assess to the best of its judgment the tax or li cence fee payable on the turnover referred to after issuing a notice to the dealer and after making such enquiry as it considers necessary
 Section 21 of the Act deals inter alia with revisional powers of the Deputy Commis sioner
Sub section 2 and 3 of that section read as under 2 The Deputy Commissioner may of his own motion call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by a Commercial Tax Officer subordinate to him and against which no appeal has been preferred to him under section 20 for the purpose of satisfying himself as to the legality or propriety of such order or as to the regularity of such proceeding and pass such order with respect thereto as he thinks fit
4 112SCI76 596 3 In relation to an order of assessment passed under this Act the power under sub sections 1 and 2 shall be exercisable only within a period of four years from the date on which the order was passed
 The short question which arises for determination in these appeals is that in the event of an order having been made under section 12A of the Act what is the starting point for computing the period of four years mentioned in section 21 3 for the exercise of the powers under section 212
Is it the initial assessment order or is it the order made under section 12A  In the context of the present case the question to be answered is as to whether the period of four years is to be calculated from March 21 1963 when the initial assessment orders were made or from June 8 1966 when the orders under section 12A of the Act were made
So far as this question is concerned we are of the opinion that the period of four years should be calcu lated from June 8 1966 ie the date on which orders under section 12A of the Act were made
The reason for that is that once an assessment is reopened the initial order for assessment ceases to be operative
The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment
The initial order for reassessment cannot be said to survive even partially although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order
The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment
As it is we find that in the present case the assessment orders made under section 12A were comprehensive orders and were not confined merely to matters which had escaped assessment earlier
In the circumstances the only orders which could be the subject matter of revision by the appellant were the orders made under section 12A of the Act and not the initial assessment orders
In the case of V Jagannathan Rao  ors
vs Commission er of Income tax and Exrcess Profits Tax Andhra Pradesh 1 this Court dealt with section 34 of the Indian Income tax Act 1922 which relates to reassessment in the case of income escaping assessment
It was held by this Court that once assessment is reopened the previous under assessment is set aside and the whole proceedings star afresh
Ramaswami J speaking for the Court observed Section 34 in terms states that once the Income tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 222 and may proceed to assess or reassess such income profits or gains
It is therefore manifest that once assess ment is 1 ITR 373
597 reopened by issuing a notice under sub section 2 of section 22 the previous under assess ment is set aside and the whole assessment proceedings start afresh
When once valid proceedings are started under section 341b the Incometax Officer had not only the juris diction but it was his duty to levy tax on the entire income that had escaped assessment during that year
 In the case of Commissioner of Sales Tax Madhya Pradesh vs HM Esufali HM Abdulali1 this Court dealt with reassessment made under section 19 of the Madhya Pradesh General Sales Tax Act 1958
It was held that when reas sessment is made the former assessment is completely reo pened and in its place fresh assessment is made
Hegde J speaking for the Court observed What is true of the assessment must also be true of reassessment because reas sessment is nothing but a fresh assessment
When reassessment is made under section 19 the former assessment is completely reopened and in its place fresh assessment is made
While reassessing a dealer the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover
While making assessment under section 119 if the assessing authority has no power to make best judgment assessment all that the assessee need do to escape reassessment is to refuse to file a return or refuse to produce his account books
If contention taken on behalf of the assessee is correct the assessee can escape his li ability to be reassessed by adopting an obstructive attitude
It is difficult to conceive that such could be the position in law In International Cotton Corpn
P Ltd vs Commercial Tax Officer HubIi  Ors
2 this Court held that once can assessment order had been rectified and it was sought to make a further rectification of that order the period of limitation for making such further rectification would commence not from the date of the original assessment order but from the date of the earlier rectification order
Alagi riswami J speaking for the Court in this context observed The other attack that the rectification order is beyond the point of time provided in Rule 38 of the Mysore Sales Tax Rules is also without substance
What was sought to be rectified was the assessment order rectified as a consequence of this Court s decision in Yaddalam s case
After such rectification the original assessment order was no longer in force and that was not the order sought to be rectified
It is admitted that all the rectification orders would be within time calculated from the original rectification order
Rule 38 itself speaks of any order  and there is no doubt that the rectified order is also any order  which can be rectified under Rule 38  ITR 271
2 1975 2 SCR 345
598 Although the above case related to an order which had been subsequently rectified the principle laid down therein would in our opinion be also applicable in cases where reassessment is made on the ground that certain amounts of turnover had escaped assessment
Before we conclude we may observe that according to section 33B of the Indian Income tax Act 1922 the Commis sioner cannot revise an order of reassessment made under the provisions of section 34 of the Act
Likewise sub section 2 of section 263 of the Incometax Act 1961 expressly prohibits the revision by the Commissioner of Income tax of an order of reassessment made under section 147 of Act
No such prohibition in the provisions of the Act with that Act
Nosuch prohibition brought to our notice
which we are concerned has however been brought to our notice
We would therefore accept the appeals set aside the judgment of the High Court and dismiss the petitions under article 226 filed by the respondent
Looking to all the facts we leave the parties to bear their own costs in this Court as well as in the High Court


Summary:
In respect of the assessment years 1959 60 and 1960 61 fresh assessments were made under section 12A of the Mysore General Sales Tax Act 1957 by the  Commercial Tax Offi cer
By his order dated June 8 1966 certain amounts which had escaped assessment under the original assessment orders dated March 21 1963 were included in the turnover of the respondent but the deductions in respect of shop rent and tree tax were however allowed as in the initial orders
The appellant in exercise of the powers under section 212 of the Act by his orders dated June 28 1967 revised the orders dated June 8 1966 disallowing the deductions in respect of the shop rent following the decision of this Court in Shinde Brother etc
vs Deputy Commissioner Raichur Two rectification applications and the two appeals therefrom on the ground that the revisions of assessment were barred by limitation under section 213 of the Act and as such there was a mistake apparent on the record were rejected as not maintainable
However the writ petitions filed were allowed by the High Court holding that the orders dated June 28 1967 were without jurisdic tion since they had been made beyond the period of four years from the date of the initial assessment orders dated March 21 1963
On appeals by special leave to this Court HELD The contention advanced on behalf of the appel lants that the period of four years mentioned in section 213 of the Act should be computed from the orders dated June 8 1966 made under S 12A of the Act and not from the ini tial orders of assessment dated March 21 1963 is well founded
595 C D Once an assessment is reopened the initial order for as sessment ceases to be operative
The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment
The initial order for reassessment cannot be said to survive even partially although the justification for dessessment arises because of turnover escaping assess ment in a limited field or only with respect to a part of the matter covered by the initial assessment order
The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment
596 D E In the present case the assessment orders made under section 12A were comprehensive orders and were not confined merely to matters which had escaped assessment earlier and the only orders which could be the subject matter of revision by the appellant were the orders made under section 12A of the Act and not the initial assessment orders
596 E F J Jaganmohan Rao  Ors
vs Commissioner of Income tax and Excess Profits Tax Andhra Pradesh 1970 1 SCR 72675 ITR 373 Commissioner of Sales Tax Madhya Pradesh vs
HM Esufali HM Abdulali ITR 271 followed
International Cotton Corporation P Ltd vs Commercial Tax Officer HubIi  Ors
1975 2 SCR 345 applied