Case: Additional Assistant Commissioner of Sales Tax, Indore Region, Indore Vs. Firm Jagmohandas Vijay Kumar

RAMASWAMI, J.1. This appeal is brought, by special leave, from the judgment of the Madhya Pradesh High Court dated March 31, 1964, in Miscellaneous Petition No. 37 of 1963 whereby the High Court quashed the notice dated March 16, 1963, and the proceedings for assessment to sales tax initiated by the respondent for the year 1955-56.2. The respondent is a partnership firm which has been carrying on the business of a draper at Indore. The firm was registered as a "dealer" under the Madhya Bharat Sales Tax Act, 1950, hereinafter referred to as "the Act". For the year 1955-56 the respondent failed to submit its return whereupon the Sales Tax Officer, Indore, made an order under section 8(1)(b) of the Act and after determining the turnover of the respondent for the said period to the best of his judgment, made an assessment of the respondent to sales tax on the basis thereof. The respondent took the matter in revision to the Commissioner of Sales Tax, Madhya Pradesh. By his order dated October 12, 1958, the Commissioner of Sales Tax held that the assessment order dated August 13, 1956, passed by the Sales Tax Officer should be set aside since the respondent was not afforded an opportunity of being heard. The Commissioner of Sales Tax accordingly remanded the case for fresh assessment to the Sales Tax Officer after giving a fresh notice under section 8(1)(b) of the Act. Thereafter the Sales Tax Officer served upon the respondent a fresh notice on November 29, 1958. It appears that the proceedings remained pending and no action was taken against the respondent and the Sales Tax Officer issued another notice to the respondent on February 11, 1963. The respondent then raised an objection that the Sales Tax Officer had no jurisdiction to proceed to tax the sales made in the year 1955-56 because the period of three years contemplated by section 10 of the Act for making the assessment had expired. The objection was overruled by the Sales Tax Officer by his order dated July 18, 1963, on the ground that section 10 of the Act did not apply to the respondent as it was not a case of escaped assessment. Thereafter the respondent moved the Madhya Pradesh High Court for grant of a writ to quash the proceedings pending before the sales tax authorities for assessment to sales tax relating to the year 1955-56. The writ petition was allowed by the High Court by its judgment dated March 31, 1964, the order of the Sales Tax Officer dated July 18, 1963, was set aside and the appellant was directed to forbear from proceeding with the assessment to sales tax for the year 1955-56.It is necessary at this stage to set out the relevant provisions of the Act as they stood at the material time. Section 8(1)(a) and (b) is to the following effect :"8. (1)(a) Assessment of taxable turnover and determination of tax due for any year, shall be made after the returns for all the periods of that year have become due :Provided that in the case of Melas the assessment shall be made as soon as the return of turnover has been received.(b) Notwithstanding anything contained in clause (a), if any dealer fails to submit a return under section 7(1) for the prescribed period within the prescribed time the assessing authority shall, after making such enquiry as he considers necessary and after giving the dealer a reasonable opportunity of being heard, determine the turnover of the dealer for the said period to the best of his judgment and assess the tax on the basis thereof. This assessment, subject to the provisions of section 10 and to such orders as may be passed in appeal or revision, shall be final for the period."3. Section 10 of the Act states :"Assessment of tax and levy of licence fees, or registration fees or exemption fees incorrectly assessed. - If for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to the tax, or if the licence fee, registration fee or exemption fee has escaped levy or has been assessed at too low a rate in any year, the assessing authority at any time within a period of three years next succeeding that to which the tax or the licence fee, registration fee or the exemption fee relates, assess the tax payable on the turnover which has escaped assessment or levy the correct amount of licence fee, registration fee or exemption fee, after issuing a notice to the dealer and after making such inquiry as he considers necessary."It was argued on behalf of the appellant that the High Court erred in taking the view that the limitation provided under section 10 of the Act has to be imported in all the assessments made under section 8 of the Act and the High Court failed to appreciate that section 10 provided a period of three years for "escaped turnover" and no turnover could be said to have escaped when once proceedings were properly initiated and were pending. It was contended for the appellant that the sales tax authorities had jurisdiction to assess the respondent to sales tax for the year 1955-56 and the High Court was not right in holding that the assessment for that period was barred by time. In our opinion, the argument put forward on behalf of the appellant is well-founded and must be accepted as correct. It is not disputed in the present case that the respondent was a registered dealer under the Act and on August 13, 1956, the Sales Tax Officer, Indore, made an order of assessment under section 8(1)(b) of the Act to the best of his judgment on the ground that the respondent had failed to submit a return under section 7(1) for the prescribed period. It is true that the assessment was set aside in revision on October 12, 1958, by the Commissioner of Sales tax on the ground that the respondent had not been afforded an opportunity for being heard. But the Commissioner of Sales Tax made a specific order of remand of the case to the Sales Tax Officer who was directed to make assessment after hearing the respondent afresh. Thereafter the Sales Tax Officer served on the respondent a fresh notice on November 29, 1958, under section 8(1)(b) of the Act and the proceedings remained pending till the Sales Tax Officer again issued a notice in February 11, 1963. In these circumstances it is manifest that the proceedings for assessment had started by the issue of the notice on August 13, 1956, when the Sales Tax Officer made an assessment under section 8(1)(b) of the Act and the same proceedings remained pending after the Commissioner of Sales Tax quashed the assessment and remanded the matter to the Sales Tax Officer for giving a fresh notice to the respondent which in fact was given on November 29, 1958. We are therefore unable to accept the contention of the respondent that the case is one of escaped assessment and the period of limitation contemplated by section 10 of the Act is applicable to the case. The reason is that once the proceedings for assessment are initiated under section 8(1)(a) or (b) it cannot be said that the turnover has escaped assessment unless the proceedings have come to a close. In the present case, the proceedings were initiated after the respondent failed to submit a return and the Sales Tax Officer made an order of assessment under section 8(1)(b) which was set aside by the Commissioner of Sales Tax in revision and the case was remanded back to the Sales Tax Officer for issuing a fresh notice under section 8(1)(b) and making an assessment after giving an opportunity to the respondent to be heard. The proceedings for assessment have remained pending with the Sales Tax Officer and it is therefore not a case of escaped assessment and the provisions contained in section 10 of the Act have no application to the case. The question has been the subject-matter of consideration by this court in a recent case, Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur ([1963] 14 S.T.C. 976; [1964] 4 S.C.R. 436). The points which arose in that case for determination were : (1) when can a proceeding be said to commence and (2) if a proceeding has commenced with the prescribed period but is pending when such period expires and an order is finalised thereafter, whether such an order is invalid on the ground of its being time-barred. The appellant there was a registered dealer, carrying on business in bidis. For the year 1949-50, i.e., for the period from October 22, 1949, to November 9, 1950, he submitted only one return on October 5, 1950, for one quarter and defaulted in respect of the other quarters. He was served a notice on August 13, 1954, under section 11(1) and (2) of the C.P. and Berar Sales Tax Act, 1947, in respect of the turnover for the said period. He filed the returns subsequently, but contended that the proceedings before the Sales Tax Commissioner were barred by time. He then filed a writ petition in the High Court challenging the said proceedings. For the year 1950-51 he had filed no return at all and was served a notice on October 15, 1954, under section 11(4) of the Act. That notice was within three years from October 16, 1951, which fell within the fourth quarter of the year in question. The appellant later filed his return under protest and contended that the assessment proceedings were barred by limitation under section 11-A of the Act. This plea was rejected and his tax liability was determined. The appellant then filed another writ petition for a similar relief for that year. The contention was that whatever may be said in respect of an unregistered dealer, in the case of a registered dealer the proceedings commence from the date of the registration certificate within which he has a statutory obligation to furnish his returns. It was held by this court that assessment proceedings under the Act must be held to be pending from the time they are initiated until they are terminated by a final order of assessment. It was also held that in the case of a registered dealer there would be four variations in the matter of assessment of his turnover : (1) he submits a return by the date prescribed and pays the tax due in terms of the said return, the Commissioner accepts the correctness of the return and appropriates the amount paid towards the tax due for the period covered by the return; (2) the Commissioner is not satisfied with the correctness of the return, he issues a notice to him under section 11(2), but does not finalise the assessment; (3) the registered dealer does not submit a return, the Commissioner issues a notice under section 10(3) and section 11(4) of the Act; and (4) the registered dealer does not submit any return for any period and the Commissioner issues a notice to him beyond three years. It was held by this court 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 10(3) or under section 11(2) of the Act. It was held in the first case that the Commissioner had no jurisdiction to issue a notice under section 11-A with respect to the quarters other than that covered by the return made by the appellant. In the second case the Commissioner had jurisdiction to assess the turnover in respect of the entire fourth quarter. At page 450 of the report, the court observed that in a case where a return has been made, but the Commissioner has not accepted it and has issued a notice for enquiry, the assessment proceedings would be pending till the final assessment is made. The court proceeded to observe that even in a case where no return has been made, but the Commissioner initiates proceedings by issuing the notice either under section 10(3) or under section 11(4), the proceedings would be pending till the final assessment is made. This decision therefore clearly lays down the principle that in the case of a registered dealer the proceedings before the Commissioner start factually when a return is made or a notice is issued and no question of limitation would arise where such proceedings are taken before the expiry of the prescribed period of three years though an assessment order is finalised after the expiry of such period. In other words, the assessment proceedings commence in the case of a registered dealer either when he furnishes a return or when a notice is issued to him under section 11(4) or section 10(3), and if such proceedings are taken within the prescribed time though the assessment is finalised subsequently even after the expiry of the prescribed period, no question of limitation would arise. The view expressed by this court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur ([1963] 14 S.T.C. 976; [1964] 4 S.C.R. 436), has been followed by the court in two recent cases, Regional Assistant Commissioner of Sales Tax, Indore v. Malwa Vanaspati & Chemical Co. Ltd. ([1968] 21 S.T.C. 431) and State of Punjab v. Murlidhar Mahabir Parshad ([1968] 21 S.T.C. 29) in which the material facts are almost parallel to those in the present case.4. In view of the principle laid down by these decisions we hold that in the present case the proceedings for assessment to sales tax taken against the respondent for the year 1955-56 by the assessing authorities are legally valid and the respondent has made out no case for grant of a writ under article 226 of the Constitution for quashing those proceedings or for quashing the notice issued on March 16, 1963, or the order of the appellant dated July 18, 1963.

Decision reasoning: 0[ds]In our opinion, the argument put forward on behalf of the appellant isand must be accepted as correct. It is not disputed in the present case that the respondent was a registered dealer under the Act and on August 13, 1956, the Sales Tax Officer, Indore, made an order of assessment under section 8(1)(b) of the Act to the best of his judgment on the ground that the respondent had failed to submit a return under section 7(1) for the prescribed period. It is true that the assessment was set aside in revision on October 12, 1958, by the Commissioner of Sales tax on the ground that the respondent had not been afforded an opportunity for being heard. But the Commissioner of Sales Tax made a specific order of remand of the case to the Sales Tax Officer who was directed to make assessment after hearing the respondent afresh. Thereafter the Sales Tax Officer served on the respondent a fresh notice on November 29, 1958, under section 8(1)(b) of the Act and the proceedings remained pending till the Sales Tax Officer again issued a notice in February 11, 1963. In these circumstances it is manifest that the proceedings for assessment had started by the issue of the notice on August 13, 1956, when the Sales Tax Officer made an assessment under section 8(1)(b) of the Act and the same proceedings remained pending after the Commissioner of Sales Tax quashed the assessment and remanded the matter to the Sales Tax Officer for giving a fresh notice to the respondent which in fact was given on November 29, 1958. We are therefore unable to accept the contention of the respondent that the case is one of escaped assessment and the period of limitation contemplated by section 10 of the Act is applicable to the case. The reason is that once the proceedings for assessment are initiated under section 8(1)(a) or (b) it cannot be said that the turnover has escaped assessment unless the proceedings have come to a close. In the present case, the proceedings were initiated after the respondent failed to submit a return and the Sales Tax Officer made an order of assessment under section 8(1)(b) which was set aside by the Commissioner of Sales Tax in revision and the case was remanded back to the Sales Tax Officer for issuing a fresh notice under section 8(1)(b) and making an assessment after giving an opportunity to the respondent to be heard. The proceedings for assessment have remained pending with the Sales Tax Officer and it is therefore not a case of escaped assessment and the provisions contained in section 10 of the Act have no application to thequestion has been theof consideration by this court in a recent case, Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur ([1963] 14 S.T.C. 976; [1964] 4 S.C.R.court proceeded to observe that even in a case where no return has been made, but the Commissioner initiates proceedings by issuing the notice either under section 10(3) or under section 11(4), the proceedings would be pending till the final assessment is made. This decision therefore clearly lays down the principle that in the case of a registered dealer the proceedings before the Commissioner start factually when a return is made or a notice is issued and no question of limitation would arise where such proceedings are taken before the expiry of the prescribed period of three years though an assessment order is finalised after the expiry of such period. In other words, the assessment proceedings commence in the case of a registered dealer either when he furnishes a return or when a notice is issued to him under section 11(4) or section 10(3), and if such proceedings are taken within the prescribed time though the assessment is finalised subsequently even after the expiry of the prescribed period, no question of limitation would arise. The view expressed by this court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur ([1963] 14 S.T.C. 976; [1964] 4 S.C.R. 436), has been followed by the court in two recent cases, Regional Assistant Commissioner of Sales Tax, Indore v. Malwa Vanaspati & Chemical Co. Ltd. ([1968] 21 S.T.C. 431) and State of Punjab v. Murlidhar Mahabir Parshad ([1968] 21 S.T.C. 29) in which the material facts are almost parallel to those in the present case.4. In view of the principle laid down by these decisions we hold that in the present case the proceedings for assessment to sales tax taken against the respondent for the yearby the assessing authorities are legally valid and the respondent has made out no case for grant of a writ under article 226 of the Constitution for quashing those proceedings or for quashing the notice issued on March 16, 1963, or the order of the appellant dated July 18, 1963.