Case: Deputy Commissioner of Commercial Taxes Vs. H.R. Sri Ramulu

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 assessed 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. 2, 10, 542 was deducted and the net taxable turnover was determined to be Rs. 25, 989. For the year 1960-61 a sum of Rs. 3, 98, 350 was deducted and the net taxable turnover was determined to be Rs. 26, 657The 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 respondent certain amounts which had escaped assessment under the original assessment orders dated March 21, 1963. The deduction 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 Marc h 21, 1963On June 28, 1967 the appellant, i.e., the Deputy Commissioner of Commercial Taxes, made two orders revising the orders dated June 8, 1966. In the said orders the appellant disallowed the deduct ion 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. v. Deputy Commissioner Raichur ([1967] 1 S.C.R. 548.) 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 turnover of the respondent for the two years in question was accordingly enhanced.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 21(3) 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 appeals 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 petitions and quashed orders dated June 28, 1 967. 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.

Reasoning:
After giving the matter our consideration, we are of the view that the contention advanced on behalf of the appellant 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 turnoverIn 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 we re made.So far as this question is concerned, we are of the opinion that the period of four years should be calculated from June 8, 1966, i.e., 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 ma de under section 12A of the Act and not the initial assessment ordersAlthough 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 assessmentBefore we conclude, we may observe that according to section 33B of the Indian Income-tax Act, 1922 the Commissioner cannot revise an order of reassessment made under the provisions of section 34 of the Act. Likewise, sub-section (2) of section 263 ofthe Income tax 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. No such prohibition brought to our notice. which we are concerned has, however, been brought to our noticeSo far as this question is concerned, we are of the opinion that the period of four years should be calculated from June 8, 1966, i.e., 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 ma de under section 12A of the Act and not the initial assessment