Case: M/S. Jaipuria Brothers Co Vs. State Of Uttar Pradesh A Others

1. The appellant- a public limited Company having its registered office at Calcutta, was with effect from October 5, 1946, appointed sole agent for sale of goods manufactured by the Swadeshi Cotton Mills Company Ltd. On March 20, 1952, the Sales Tax Officer, Kanpur, issued a notice under S. 21 of the U. P. Sales Tax Act, 1948 calling upon the appellant Company to file a return of its turnover for the assessment year 1948-49 on the ground that the turnover had escaped assessment. On March 31, 1952, the Sales Tax Officer made a "best judgment" assessment and determined the taxable turnover of the appellant Company at Rs. 50 lakhs for the year 1948-49 and determined the appropriate tax liability.2. In appeal to the Judge (Appeals) Sales Tax the order passed by the Sales Tax Officer was set aside, that authority holding that the appellant Company was not a dealer within the meaning of S. 2 (c) of the Act. But the order of the appellate authority was set aside by the Judge (Revisions) Sales Tax by order dated March 28, 1955 and the case was remanded to the Sales Tax Officer for "fresh assessment". In the view of the Judge (Revisions) Sales Tax it was necessary to determine "the ownership of the goods at the time of their sale".3. The Sales Tax Officer then issued a notice calling upon the appellant Company to produce its books of account and other relevant documents on July 23, 1955 for the purpose of assessment for the year 1948-49. The appellant Company contended that as the original assessment under S. 21 had been set aside by the Judge (Revisions) Sales Tax, no proceeding in connection with that assessment was pending and re-assessment was barred because more than three years had elapsed since the end of the year of assessment. The Sales Tax Officer rejected the contention of the appellant Company and insisted that the books of account and other documents be produced as directed earlier. The appellant Company then petitioned on September 2, 1955 to the High Court of Allahabad under Art. .226 of the Constitution for a writ in the nature of prohibition restraining the Sales Tax Officer, Kanpur, from proceeding with the assessment of the appellant Company for the assessment year 1948-49 and for a writ of certiorari quashing the order dated September 2, 1955 of the Sales Tax Officer, Kanpur, and the proceeding taken for re-assessment in pursuance thereof Chaturvedi, J., held that assessment sought to be made by the Sales Tax Officer pursuant to the order of the Judge (Revisions) Sales Tax "was clearly barred by the law of limitation", prescribed in that behalf by S. 21 of the U. P. Sales lax Act. It was in the view of the learned Judge immaterial whether assessment was being made by the Sales Tax Officer suo motu or under the direction of a superior- authority if at the time of making the re-assessment the period prescribed by S. 21 had expired. The order passed by Chaturvedi, J., was reversed in appeal by a Division Bench of the High Court. The High Court held that the Sales Tax Officer was competent in view of the order of remand which directed "fresh assessment" to commence fresh assessment proceedings against the appellant Company and in commencing and continuing those proceedings he was acting in compliance with the directions given under Ss. 9 and 10 of the Act which he was bound to carry out and to such assessment proceedings the period of limitation prescribed by S. 21 of the Act did not apply. Against the order passed by the High Court reversing the order passed by Chaturvedi, J., this appeal has been preferred with special leave.

Reasoning: In the view of the High Court S. 21 which imposed upon the Assessing Authority duty to exercise his power to assess turnover which escaped assessment within three years from the end of the year of assessment applied only to the order which the Assessing authority made suo motu; where, he was directed to proceed by an order of the appellate or revisional authority under Ss. 9 and 10 of the Act to reassess, the period of limitation has no application.5. In our view the High Court was in error in so limiting the operation of S. 21. That section imposes a restriction upon the power of the Sales Tax Officer : that officer is competent within three years next succeeding the date to which the tax relates to assess tax payable on the turnover which has escaped assessment. But the section does not provide, expressly, nor is there any implication, that the period within which re-assessment may be made applies only to those cases where the Sales Tax Officer acts on his own initiative and not pursuant to the directions of the appellate or the revisional authority. In our view the principle of the judgment of the Privy Council in Commr. of Income-tax, Bombay Presidency and Aden v. Khemchand Ramdas, 65 Ind App 236 : (AIR 1938 PC 175  ), applies to this case. In Khemchands case, 65 Ind App 236 : (AIR 1938 PC 175  ), the tax-payer was assessed as a registered form to income-tax by order dated January 17, 1927 for the year 1926-27 under S. 23 (4) of the Income-tax Act. Under the Act as it then stood a registered firm was not liable to pay super-tax and was liable to income-tax at the maximum rate. On January 9, 1928 the Commissioner of Income-tax in exercise of powers of revision under S. 33 of the Act issued a notice to the assessee requiring him to show cause why the order of the Income-tax Officer granting registration of the firm and assessing it on that footing should not be set aside, and by order dated February 13, 1928, ordered cancellation of registration and directed the Income-tax Officer to take necessary action thereupon. On May 4, 1929, the Income-tax Officer assessed to super-tax the assessee on the footing that its registration was cancelled. The authority of the Income-tax Officer to assess was challenged. It was held by the Judicial Committee that as the Income-tax Officer had made the order imposing super-tax on the assessee more than one year after the earlier demand in respect of income tax, the order was without jurisdiction. The Judicial Committee pointed out that once a final assessment has been made, it cannot be reopened by the Income-tax Officer on his own motion, or at the direction of the Commissioner exercising his powers under S. 33 of the Indian Income-tax Act, 1922, except in the circumstances and within the time prescribed by Ss. 34 and 35 of the Act. They observed that Ss. 34 and 35 were exhaustive, and prescribed the only circumstances in which, and the only time in which, such fresh assessments could be made and fresh notices of demand could be issued. As the Income-tax Officer took no fresh step within one year under the statute, he was "hopelessly out of time whichever of the two sections wasamended section was, therefore, to be deemed to be in operation at all material time since the enactment of the U.P. Sales Tax Act, 15 of 1948. The Legislature has given a clear retrospective operation to the amended section as from the date on which the Principal Act came into operation, and correctness of the order of the Sales Tax Officer holding that there was no bar of limitation to the making of a fresh assessment pursuant to the order of the appellate or revising authority had to be adjudged in the light of S. 21 as amended by Act 19 of 1956. The words used by the Legislature are precise and admit of only one interpretation that proceedings taken for assessment or re-assessment in consequence of, or to give effect to an order of the appellate or revising authority or an order passed by the High Court under S. 11 may be taken notwithstanding the expiry of the period prescribed by sub-s. (2) of S.are two clear answers to this plea, either of which is sufficient to reject it. The revisional authority had under S. 10(3) power to make such order as he thought fit after calling for and examining the record of any order made by an appellate or an assessing authority and after satisfying himself as to the legality or propriety of such order. Even assuming that the revisional authority came to a conclusion which was erroneous in law, it was still an order which he had jurisdiction to make and that order unless set aside in a proper proceeding could not be ignored on the ground of lack of jurisdiction. There was, therefore, a proceeding pending before the Sales Tax Officer in pursuance of the direction given by the Judge (Revisions) Sales Tax who had directed the Sales Tax Officer to make a fresh assessment. Whether in pursuance of this direction, a fresh assessment could be made under S. 21 before it was amended, need not detain us. We are concerned with the jurisdiction on the revising date on which the revising authority passed his order under that amended, and not with the competence of the assessing authority to pass an order for assessment under the statute before it was amended. The other ground is also equally decisive. By S.15 of Act 19 of 1956, S.21 of the Act as amended, must be deemed to have been on the statute book on the date on which the revising authority passed his order, and under that amended provision the power of the assessing authority to assess or re-assess pursuant to an order of the revising authority was not lost when the period prescribed by sub-s. (2) of S. 21 for assessment or re-assessment expired. Under S. 21, before it was amended, there could be no order of assessment or re-assessment either by the Sales Tax Officer suo motu, or pursuant to the direction of the appellate or revising authority after the expiry of the period of three years prescribed by the statute, but under S. 21 as amended, the power may be exercised by the Sales Tax officer suo motu within four years for assessment or reassessment. That power could be exercised under the first proviso within a further period of one year if a notice under sub-s.(2) was served within four years of the end of the year of assessment and without limit of time when it was made in consequence of, or to give effect to, any finding or direction contained in an order of the appellate or revisional authority or under an order of the High Court under S. 11. In initiating proceeding for assessment, pursuant to the direction of the revising authority, the Sales Tax Officer was, by virtue of S. 21 as amended, subject to no restrictions as to the period within which the order of assessment could bethe view of the High Court S. 21 which imposed upon the Assessing Authority duty to exercise his power to assess turnover which escaped assessment within three years from the end of the year of assessment applied only to the order which the Assessing authority made suo motu; where, he was directed to proceed by an order of the appellate or revisional authority under Ss. 9 and 10 of the Act to reassess, the period of limitation has no application.5. In our view the High Court was in error in so limiting the operation of S. 21. That section imposes a restriction upon the power of the Sales Tax Officer : that officer is competent within three years next succeeding the date to which the tax relates to assess tax payable on the turnover which has escaped assessment. But the section does not provide, expressly, nor is there any implication, that the period within whichmay be made applies only to those cases where the Sales Tax Officer acts on his own initiative and not pursuant to the directions of the appellate or the revisional authority. In our view the principle of the judgment of the Privy Council in Commr. ofBombay Presidency and Aden v. Khemchand Ramdas, 65 Ind App 236 : (AIR 1938 PC 175  ), applies to this case. In Khemchands case, 65 Ind App 236 : (AIR 1938 PC 175  ), thewas assessed as a registered form toby order dated January 17, 1927 for the yearunder S. 23 (4) of theAct. Under the Act as it then stood a registered firm was not liable to payand was liable toat the maximum rate. On January 9, 1928 the Commissioner ofin exercise of powers of revision under S. 33 of the Act issued a notice to the assessee requiring him to show cause why the order of theOfficer granting registration of the firm and assessing it on that footing should not be set aside, and by order dated February 13, 1928, ordered cancellation of registration and directed theOfficer to take necessary action thereupon. On May 4, 1929, theOfficer assessed tothe assessee on the footing that its registration was cancelled. The authority of theOfficer to assess was challenged. It was held by the Judicial Committee that as theOfficer had made the order imposingon the assessee more than one year after the earlier demand in respect of income tax, the order was without jurisdiction. The Judicial Committee pointed out that once a final assessment has been made, it cannot be reopened by theOfficer on his own motion, or at the direction of the Commissioner exercising his powers under S. 33 of the IndianAct, 1922, except in the circumstances and within the time prescribed by Ss. 34 and 35 of the Act. They observed that Ss. 34 and 35 were exhaustive, and prescribed the only circumstances in which, and the only time in which, such fresh assessments could be made and fresh notices of demand could be issued. As theOfficer took no fresh step within one year under the statute, he was "hopelessly out of time whichever of the two sections was