Case: Sales Tax Officer, Ganjam &amp; Anr Vs. M/S. Uttareswari Rice Mills

2. For sake of convenience we may give the facts giving rise to appeal No. 1190 of 1969 as it is the common case of the parties that the decision in that appeal would govern the other appeal also. The respondent in appeal No. 1190 is a dealer registered under the Act. The matter relates to the assessment for 1963-64. The date of the order of assessment is not on file but it is stated that it was made sometime in the later part of 1964. On March 30, 1967 the Sales Tax Officer, Intelligence Wing, Vigilance, Berhampur made a search of the business premises of the respondent and seized several account books. On the following day further search was made and some additional account books were taken into possession. Later on that day, viz., March 31, 1967 the Sales Tax Officer issued the following notice under Section 12 (8) of the Act to the respondent:"Notice to a dealer under Section 12 (8) of the Orissa Sales Tax Act*Whereas I have reason to believe that your turnover for the quarter ending 1963-64 on which Sales Tax was payable under the Orissa Sales Tax Act, 1947 has escaped assessment/has been under-assessedYou are hereby required to submit within one calendar month from the date of receipt of this notice a return in Form IV (enclosed) showing the particulars of your turnover for the year ending 1963-64*You are also hereby required to attend in person or by agent at my office at Berhampur on 11-5-67 at 11 A. M. and thereto produce or cause to be produced the accounts and documents specified on the reverse and also to show cause why in addition to the amount of tax that may be assessed on you a penalty not exceeding one and a half time that amount should not be imposed on you under sub-sec. (5) of S. 12 of the ActIn the event of your failure to comply with all the terms of this notice I shall proceed to assess you under Section 12 of the Act to the best of my judgment without further reference to youSales Tax OfficerPlace - Berhampur. "Date - 31-3-67The notice was received by an employee of the respondent. Appearance was thereafter put in on behalf of the respondent before theSales Tax Officerand a copy of the old return which had been earlier filed in accordance with Section 11 of the Act was again filed before theSales Tax. According to the respondent, appearance was put in on its behalf on several occasions with a view to know the reason for the issue of the above notice, but the respondent was not informed of that reason. It is further stated that theSales TaxOfficerrecorded the statements of a number of witnesses behind the back of the respondent with the intention of making reassessment under Section 12 of the Act. Request was made on behalf of the respondent to theSales TaxOfficerfor being furnished with copies of those statements so that the respondent might be in a position to know the reason for the issue of the notice. Copies of those statements were, however, not supplied and the application filed by the respondent for obtaining copies of the statements was rejected by theSales Tax. It was mentioned by theSales TaxOfficerthat the question of grant of copies of the statements would be considered if the statements were used against the respondent. The respondent filed a revision petition against the order rejecting that application, but the revision petition too was dismissed. The respondent thereafter filed petition under Articles 226 and 227 of the Constitution in the High Court on December 26, 19673. The High Court accepted the writ petition on the ground that theSales TaxOfficerhad not indicated any reason for issuing notice under Section 12 (8) of the Act. This fact, in the opinion of the High Court, was sufficient to warrant quashing of the notice. The High Court in this context relied upon its earlier decision in the case of B. Patnaik Mines (P) Ltd. v. N. K. MohantySales Tax, reported in ILR (1967) Cut 446. It was held in the earlier case that theSales TaxOfficerhad no jurisdiction under Sec. 12 (8) of the Act to issue notice for making a fishing enquiry without indicating therein the reason for the alleged under-assessment.

Court's reasoning:
12. There is nothing in the language of Section 12 (8) of the Act which either expressly or by necessary implication postulates the recording of reasons in the notice which is issued to the dealer under the above provision of law. To hold that reasons which led to the issue of the said notice should be incorporated in the notice and that failure to do so would invalidate the notice, would be tantamount to reading something in the statute which, in fact, is not there. We are consequently unable to accede to the contention that the notice under the above provision of law should be quashed if the reasons which led to the issue of the notice are not mentioned in the notice. At the same time, we would like to make it clear that if the sales tax officer is in possession of material which he proposes to use against the dealer in proceedings for reassessment, the said officer must before using that material bring it to the notice of the dealer and give him adequate opportunity to explain and answer the case on the basis of that material13. Mr. Gobind Das has also argued that the existence of a reason that the turnover of a dealer has escaped assessment or has been under-assessed (in cases not dealing with composition) is a condition precedent to the issue of a notice under Section 12 (8) of the Act. It is urged that such reason is not shown to have existed in the present case. Although we agree with the learned counsel that the existence of the reason that the turnover of a dealer has escaped assessment or has been under-assessed is a sine qua non for the issue of the notice, we are unable to accept the contention that the said reason has been shown to be non-existent in the present case. Although the High Court did not go into this aspect of the matter, we find that the respondent has brought material on the record to indicate that there did exist such reasons. Affidavit of Shri Prakash Chandra Mohanty,Sales Tax, Intelligence Circle was filed in opposition to the petition. Shri. Mohanty is the successor of Shri Patnaik who had issued the notice under Section 12 (8) of the Act to the respondent. According to the affidavit of Shri Mohanty, the material on record indicates that Shri Patnaik issued the impugned notice after he had obtained information about certain clandestine dealings of the respondent. It was further stated that the seized documents disclosed prima facie material to hold that the respondent had failed to disclose his entire turnover. It was also mentioned that the details of the material which led to the initiation of proceedings under Section 12 (8) of the Act had been recorded in the relevant case file. The said file, it would appear from the affidavit of Shri Mohanty, was kept available for reference by the High Court at the time of hearing. No reference, it would seem, was however made to that file because the High Court did not feel the necessity of doing so14. In our opinion the view taken by the High Court in the judgment under appeal as well as in the earlier case of ILR (1967) Cut 446 (supra) was not correct.