STATE OF ANDHRA PRADESH ETC.

A r

l'. ;

HYDERABAD ASBESTOS CEMENT

PRODUCTION LTD. ETC. ETC.

APRIL 28, 1994 B

(M.M. PUNCHHI AND B.P. JEEVAN REDDY, JJ.]

-,\

Cemral Sales Tax Act, 1957/Central Sales Tax ( Registratio11 and Tumover) Rules, 1957: c Ss.8( I), 8(4), Proviso/r .. 12(7) Proviso-Sale of goods to Govemment or to registered deale~Sa/es Tax on-Declaration in Jann

1C' to avail benefii under s.8(1 )-Power of appellate auth01ity to receive declaration fonns in appeal--He/d1 1nere use of words "the first assessing autho1ity" does not niean that appellate autho1ity does not have power to receive Jann 'C' in ap- D peal-Power to be exercised only where sufficient cause is shown by dealer for not fili11g the fonns upto the time of assessment before first assessing authority.

Under sub-section (1) of s.8 of Central Sales Tax Act, 1957, sales tax at a lesser rate of 4% was required to be paid in case of sale of any goods to E the Government or sale of goods prescribed in s.8(3) of the Act to any registered dealer. Subsection (4) of s.8 provided that the provisions of s. 8(1) would not apply to any sale unles. the dealer selling the goods furnished to the prescribed authority a declaration duly signed by the authorised officer of the Government or the dealer to whon1 the goods wre

~ sold. By Amendment Act 61 of 1972, a proviso each was added to sub-section F

(4) of Section 8 of the Act and to subrule (i) of Rule 12 of the Central Sales Tax (Registration and Turnover) Rule 1957, inter a/ia, to the effect that the declaration in Form-C should be furnished to the prescribed authority (who was also the assessing authority) upto the time of assessn1ent by the first assessing authority or upto such tinie as may be allowed by that authority.

In the appeals tiled by the revenue against the judgments of the High Courts of Andhra Pradesh and Tamil Nadu, it was contended by the Revenue before this Court that since the proviso to sub-rule (7) of Rule 12 specifically required that Form-C should be furnished "up to the time of assessment by the first assessing authority" and also vested the power to H 785

A extend the time in the assessing authority, the appellate authority had no power to receive Form-C in appeal and grant relief; and that in vie"· of sub-section ( 4) of Section 8 and sub-rule (7) of Rule 12 providing for a benefit i.e., partial exemption from tax liability, the dealer desiring to avail the benefit should comply with the relevant provisions strictly and fully.

B Dismissing the appeals, this Court

HELD : 1.1. Mere use of the words "the first assessing authority" in sub-rule (7) of Rule.12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 cannot and does not mean, in the context and scheme of the enactments concerned that the appellate authorities did not have the power to receive Forn1-C in appeal. This po"'er can of course be exercised only where sufficient cause is shown by the dealer for not filing the forms upto the time of assessment before the first assessing authority.

(798-H, 799-A] D 1.2. Receipt of declaration forms mentioned under R.12(7), in appeal cannot be a matter of course; it should be allowed only where sufficient cause is established by the dealer for not producing them before the first assessing authority as contemplated by Rule 12(7). The requirement of the said sub-rule cannot be excluded from consideration by the appellate court while judging the sufficiency of the cause shown. It must E be remembered that that is the primary obligation of the dealer and his failure to abide by it must be properly explained. If a dealer obtains further time from the first assessing authority and yet fails to produce the forms before him, it is obvious that the appellate authority would adopt a stiffer standard in judging the sufficient cause shown by the dealer for not producing them earlier. (799-A-C] F

C.!.T v . . Macmilan, 33 I.T.R. 182, relied on.

Sratc of Tamil Nad11 v. Amlnrnnigan & Co., 51 S.T.C. 381 and Rajeshwmi, Stone Polishers v. State of A.P., 52 S.T.C. 268, approved.

G Nannndas Manordass v. Conunissioner of Inconie Tax, 31 I.T.R. 381 909, referred to.

Sales Tax Officer v. Abraham, 20 S.T.C. 367, cited.

The State of Tamil Nadu v. Chellaram Garments (P) Ltd., 44 S.T.C.

H 239; Deputy Commissioner (Commercial Taxes), Coimbator Division, Coim-

STATE OF A.P. , .. ASBESTOS CEME1'TPROD:\. LTD. [JEEVAI\ REDDY . .1.1 787

batore v. Parekulli Hajee Sons, 13 S.T.C. 680 and Deputy Commissioner of A Cun11nercia/ Taxes, Madras Division v. Manohar Brothe1:\·, 13 S.T.C. 686, disapproved.

CIVIL APPELLATE JURISDICTION : Civil Appeal 'fo. 7360 of 1993 etc. etc.

From the Judgment and Order dated 25.7.85 of the Andhra Pradesh High Court in T.R. Case No. 160 of 1985.

C. Sitharamiah, T.V.S.N. Chari, Nikhil Nayyar and Ms. Promila Choudhary for the Appellants in State of AP.

A. Mariarputham and Ms. Aruna Mathur for Mis Arputham, Aruna & Co. for the Appellant for the State of Tamil Nadu.

Harish N. Salve Vivek Kohli, Ms. Meenakshi Grover Suman Khaitan, Raj Chaterji for Mis. Khaitan & Co. for the Appellant in C.A No. 7360i93.

D A.T.M. Sampath, P.N. Ramalingam, T.N. Banerjee, for Mr. H.K.

Dutt, Joseph Pookkatt, for the Mr. Raju Ramachandran, Sunil K. Jain for Mis Jain Hansaria & Co. for the Respondents.

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Rates of tax on sales effected in the course of inter-state trade or commerce are prescribed by Section 8 of the Central Sales Tax Act, 1956. The rates prescribed vary depending upon the person to whom the goods are sold as well as the nature of the goods. A reading of sub-sections (1) and (2) yields the following position:

(1) In the case of sale to government of any goods, the rate is 4% (Section 8(1)(a))

(2) On sale of gomb of the description referred to in subsection

(3) to a registered dealer other than the government @ 4% [Section G 8(1)(b)J

(3) In the case of sales not falling under sub-section (1) of Section 8, the tax on turnover shall be calculated at twice the rate applicable to the sale or purchase such goods inside the appropriate State, if they are declared goods. [Section 8(2)(a)] H

A ( 4) In the case of sale of goods other than declared goods and nol

falling under sub-section (I), tax shall be levied at the rate of 10% or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher. !Section 8(2)(b)J

Sub-section (2-A) provides for a lo\ver rate of tax, or exemption from tax, as the case 1nay be, in certain situations which it is not necessary to notice here. Sub-section (3) specifics the goods for the purpose of Section 8(1)(b); it is also not necessary lo notice the nature of these goods.

Sub-section (4), which is the main provision relevant for our purpose, reads thus:

"( 4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner-

(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or

(b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government :

Provided that the declaration referred to in clause (1) is furnished within the prescrbied time or within such further time as thal authority may, for sufficient cause, permit.

(The proviso to sub-section( 4) was added by the Central Sales Tax (Amendment) Act (Act 61of1972) with effect from !st April, 1973.)

Sub-section (4) thus prescrils a condition for applicability of sub- G section(l) of Section 8. It says that if a dealer wishes lo avail of the lower rate of lax prescribed by sub-section (l), he has to comply with the

' requirements prescribed by it. If the sale is to the government [Section 8(.I)(a)] the selling dealer must produce before the prescribed authority (assessing authority) a certificate in the prescribed form duly filled and signed by a duly aurhorised. officer of the government. The Rules made H under the Act have prescribed the form of the certificate contemplated by

STATE OF A.P. ''ASBESTOS CE~IENT PRODN. I:rD [JEEVAN REDDY. J.l 789

the clause - it is called 'Form-D'. Similarly, if the selling dealer says that A he has sold the goods of the description referred to in sub-section (3) to a registered dealer r (Section S(l)(b) I he shall have to produce a declaration duly filled and signed by a registered dealer to whom the goods are sold containing the prescribed particulars in the prescribed form obtained from the prescribed authority. The Rules made under the Act have prescribed the form in which such a declaration has to be issued by the purchasing dealer - it is called 'Form-C'. In case Form-Dor Form-C is produced, the assessing authoritywuuld levy tax on inter-state sales @4% only; otherwise the sales will attract the higher rate of tax prescribed in sub-section (2).

Before we deal with the provision to sub-section ( 4), it would be appropriate to refer to the Rule relevant in this behalf. It is Rule 12. It is a lengthy rule containing as many as ten sub-rules, Sub-rule (1) says that

the certificate and the declaration referred to in clauses (a) and (b) of sub-section ( 4) of Section 8 shall be in Form-D and C respectively. The other provisions in sub-rule (J) and sub-rules (2) to (6) deal with various aspects relating to the said forms which it is not necessary to refer to for D the purpose of this case. Sub-rule (7) reads as follows :

11(7) The declaration in Form 'Ci or _Form 'F' or the certifiCate in Form 'E-1' or Form 'E-11' shall be furnished to the prescribed authority up to the time of assessment by the first assessing authority : E

Provided that if the prescribed authority is satisfied that the person concerned was prevented by .sufficient cause from furnishing such declaration or certificate \vithin the aforesaid time, that authority may allow such declaration or certificate to be furnished within such further time as that authority may permit."

(It may be noted that proviso to sub-rule (7) was added in the year 1972 with effect from 1st April, 1972, i.e., the date on and from which the proviso to sub-section ( 4) of Section 8 was added by the

Amendment Act 61 of 1972)." G

Sub-rule (7), it is evident, deal with Form-C and certain other Forms.

It does not deal with Form-D. The main limb of sub-rule says that the declaration in Form-C shall be furnished to the prescribed authority (which means the assessing authority) upto the time of assessment by the first assessing authority.

At this stage, we may consider the reasons for which the proviso to sub-section (4) was added by the Amending Act 61 of 1972 and the proviso to sub-rule (7) of Rule 12 was inserted. In Sales Tax Officer v. Abraham,

(20) S.T.C. 367), it was held by this court that the phrase "in the prescribed manner" occurring in Section 8( 4) of the Act confers upon the Rule-making authority the power to prescrible a Rule stating the particulars to be mentioned in the prescribed form, the nature and the value of the goods sold, the parties to whom they are sold and to which authority the form is to be furnished but that it docs not authorise the Rule-making authority tci prescribe the time limit within which the declaration is to be filed by the registered dealer. With a view to remedy the lacuna pointed out by this court, the Parliament enacted the aforesaid (Amendment) Act 61 of 1972.

The proviso empowers the Rule-making authority lo prescribe the time within which Form-C, i.e., the declaration referred lo in clause (a) of sub-section (4) is to be furnished. The proviso not only empowers the Rule-making authority to prescribed such time but also to provide that for D sufficient reasons, the assessing authority may permit the said forms to be filed within the time prescribed. Pursuant to the said proviso, the Rulemaking authority introduced the proviso to sub-rule (7). While the main limb of sub-rule (7) says that Form-C can be furnished "upto the time of the assessment by the first assessing authority 1 \ the proviso says that if the prescribed authority is satisfied that the dealer was prevented by sufficient E cause from furnishing such certificate

11within the aforesaid time limit 11 he may allow such certificate to be furnished within such further time as he may permit. Reading sub-rule (7) as a whole it follows that Form-C shall be furnished upto the time of assessment by the first assessing authority but in a proper case the prescribed authority (which means in the context F the assessing authority) may permit such forms to be filed within such further time as he may permit. This necessarily means that the assessing authority will complete the assessment but al the same time permit the dealer to file Form-C within the time specified by him. In case the dealer files the Form-C within the time specified, it is obvious, the assessing authority \vill revise the order of assessment granting the requisite relief.

Having noticed the relevant provisions of law, we may now turn to the question arising in these matter. It is this : where a dealer does not furnish Form-C before the first assessing authority upto the time of assessment, can he be permitted to file the said Forms in the appeal preferred H by him, i.e., before the first or the second appellate authority? In other

STATE OF AP., .. ASBESTOS CEMENTPRODi\. L'IU. IJEEVAN REDDY J.J 791

words, the question is whether the appellate authority, whether the first or A the second appellate authority has the power to receive Form-C in appeal and to grant relief, in cas~ the dealer satisfies the appellate authority that he had sufficient cause for not producing the said certificate before the first assessing authority? The 'Revenue says that the appellate authorities have no such power inasmuch as Rule 12 expressly provides that such Forms shall be furnished "upto the time of assessment by the fim assessing authority" and also because power to extend the time for filing these forms is vested by the proviso to sub-rule only in the assessing authority. The contention is that sub-section ( 4) of Section 8 read with sub-rule (7) of Rule 12 provides for a benefit, for a partial exemption from the tax liability. If any dealer wishes to avail of such benefit or partial exemption, he has to comply with the relevant provisions strictly and fully. The benefit

of the said provisions can be extended only if the relevant conditions are satisfied and in the manner prescribed by the Act and the Rule and in no other manner. The requirements prescribed by Rule 12(7) have to be followed in letter and spirit. No equities are involved in such a matter non D can the concept of substantial compliance be invoked in such a case. On the other hand, the dealers' case is that the power of the appellate authority is coextensive with that of the first assessing authority and, therefore, \vhat can be done hy the first assessing authority can equally be done by the appellate authority, whether first or the second appellate authority. It is pointed out that the power of appeal under the State Sales Tax enactments concerned herein (which have to be read into the Central Sales Tax Act by virtue of Section (9)) is different in character and scope from an appeal under the Code of Civil Procedure. An appellate authority under the Tamil Nadu and Andhra Pradesh sales tax enactments has the power not only to confirm, reduce or annul the orders under appeal but also to enhance the tax liability even though the appeal is preferred by the dealer. In short, the appeal - in particular the first appeal - is in the nature of a re-assessment where the whole assessment is open even though the dealer may have filed

the appeal confined to certain aspects. The learned counsel for the dealers point out that no particular sanctity attaches to the use of. the appdlatiun G "first assessing authority" in suh-rule (7) of Rule 12. They also point out that the Andhra Pradesh Sales Tax Appellate Tribunal is expressly empowered by the Regulations made under the Act to receive additional evidence which too indicates the power of the Tribunal lo receive FormC by way of additional evidence. Almost all the High Courts except the H

A Madhya Pradesh High Court have upheld the contention,; urged by the dealers. In Madras High C0urt, a Bench had taken the view in The State of Tamil Nadu v. Chellaram Gannents (P) Ltd., 44 S.T.C. 239, that the

appella_te authority has no such power and that the only course open to it in such a case is to sent the matter back to the assessing authority for the

B purpose of considering the entertainability of Form-C. (Indeed, this appears to be the view taken by the Madras High Court in two earlier decisions, viz., Deputy Commissioner (Commercial Taxes), Coimbatore Division, Coimbatore v. Parekutti Hajee Sons, 13 S.T.C. 680 and Deputy Commissioner of Commercial Taxes, Madras Division v. Manohar Brothers, 13 S.T.C. 686. Later on, however, a Full Bench of that court held in State C of Tamil Nadu v. Arnlmurngan & Co., 51 S.T.C. 381 that the appellate authorities do have such po, vcrs, disagreeing with the earlier judgment in Chellaram Garments.

The matters before us are from two States, Tamil Nadu and Andhra D Pradesh. Sub-section (1) of Section 9 of the Central Sales Tax Act provides that the tax under the Act shall be levied and collected by the Government of India in accordance with the provisions of sub-section (2). Sub-section

(2) says that the machinery under the respective State Sales Tax enactment shall be the machinery for assessing, re-assessing and calculating the

Central Sales Tax Act on behalf of the Government of India. The authorities under the State enactment can exercise all or any of the powers conferred upon them by the relevant State enactment for the purposes of assessing, re-assessing and calculating the Central Sales Tax. All the provisions of the State enactments relating to asscssn1cnt, appeals, revisions, reviews and other proceedings are made equally applicable for the said purpose. In view of this, it would be relevant to notice the nature and character of the appellate power under the aforesaid two State enactments. Section 31 of the Tamil Nadu General Sales Tax Act, 1959 provides for an appeal to the Appellate Assistant Commissioner against the orders passed by the appropriate authority under the sections specified therein.

Sub-section (3) of Section 31 provides that in an appeal against an order G of assessment, the Appellate Assistant Commissioner shall have the power to

11confirm, reduce, enhance or annul the assessment or the penalty or both 11 1 to set aside the assessment and direct the assessing authority to make a fresh assessment after such further enquiry as may be directed, as also to pass such other orders as he may think fit. Similar powers are available H even where the appeal is ag<iinst an order other than an order of assess-

STATE OF A.P. 'ASBESTOS CEMENT PRODN.LfD. [JEEVAN REDDY, J.J 793

ment. Section 31-A provides for an appeal to the Deputy Commissioner A against the orders specified therein. Subsection (3) of Section 31-A confers powers_ upon the Deputy Commissioner similar to those conferred by Section 31(3). Section 36 provides for an appeal to the Appellate Tribunal against the orders of the Appellate Assistant Commissioner as well as the Deputy Commissioner. Sub-section (3) of Section 36 again is in the same terms as sub-section (3) of Section 31 and sub section (3) of section 31-A. The position under the Andhra Pradesh General Sales tax Act is no different. Section 19 provides for an appeal to the specified authority. Sub-section (3) of Section 19 (which corresponds to sub-section

(3) of Section 31 in the Tamil Nadu Act) reads :

"(3) The appellate authority may, after giving the appellant an opportunity of being heard and sabject to such rules of procedure as may be prescribed :

(a) confirm, reduce, enhance or annul the assessment or the penalty, or both; or

(b) set aside the assessment or penalty, or both, and direct the assessing authority to pass a fn.::sh ofder after such further enquiry as may be directed ; or

(c) pass such other orders as it may think fit."

Sub-section (4) says that before passing orders under sub-section (3), the appellate authority may make such enquiry as it thinks fit or remand the case to any subordinate officer or authority for inquiry and report on any specified point or points. Section 21 provides for a second appeal to

F the Appellate Tribunal and sub-section ( 4) of Section 21 is again in the same terms as Section 19(3). In exercise of the power conferred upon it by sub-section (3) of the Andhra Pradesh Act, the Sales tax Appellate Tribunal has made certain Regulations regulating its procedure and disposal of its business. Regulation 11 empo\vcrs the Tribunal inter a/ia to G receive additional evidence. Sub-regulation (1) is practically in the same terms as Rule 27 of Order 41 of the Code of Civil Procedure. Regulation 11(1) reads as below :

"11. Fresh evidence and witnesses: (1) The party or the respondent shall not be entitled to produce additional evidence, whether oral H

or documentary, before the Tribuno.;, but

(a) If the authority from whose order the appeal is preferred has refused to admit evidence which ought to have been admitted, or

(b) if the party or the respondent seeking to adduce additional evidence satisfies the Appellant Tribunal that such evidence, notwithstanding the exercise of due diligence, was not \Vithin his knowledge or could not be produced by him at or before the time when the order under appeal was passed, or

(c) if the Tribunal requires any documents to be produced or any witnesses to be examined to enable it to pass orders, or

( d) for any other sufficient reason the Tribunal may allow such evidence or documents to be produced or witnesses examined :

Provided that the other party shall, in such cases, be entitled to produce rebutting evidence, if any."

It appears that the Tamil Nadu and Andhra Pradesh enactments have generally adopted the provisio9s relating to appeals in the Indian Income Tax Act, 1922/Incomc Tax Act, 1961. Sub-section (3) of Section 31 of the Indian Income Tax Act, 1922 provided that "in disposing of an appeal, the Appellate Assista1, t Commissioner may, in the case of an order of assessment,-.(a) confirm, reduce, enhance or annul the assessment, or

(b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner may direct, and F the Income-tax Officer shall thereupon proceed to make such fresh assessment, and determine where necessary the amount of tax payable on the basis of such fresh assessment." construing the said provision, it was held by Chagla, C.J., (speaking for the Bench comprising himself and Tendnlkar, .T.) in Na17011das Manordass v. Conunissioner of Inconie Tax, (31 G I.T.R. 909) that :

" ........ in giving the power of enhancing that assessment, the legislature has strikingly deviated from the ordinary principles that govern the court of appeal. Although the Department cannot appeal against the order of the Income-tax Officer and although the appeal is only by the assessee, even so the Legislature confers

STATE OF A.P. 'ASBESTOS CEMENTPRODN.LTD. !JEEVAN REDDY, J.J 795

upon the Appellate Assistant Commissioner the power to make an A order which is obviously to the prejudice of the appellant. Therefore, although the appellant may only complain of particular points in the assessment and he may be satisfied with regard to the rest of the assessment, the Appellate Assistant Commissioner's powers are not confined to consider only these points about which the assessee has a grievance but he may consider those points about which the assessee is satisfied and order the enhancement of the assessment. Now, it is clear that going by the plain words used by the Legislature there are no words of limitation or qualification upon the power of the Appellate Assistant Commissioner in enhancing the assessment or setting aside the assessment and direct- C ing a fresh assessment to be made by the Income-tax Officer ...... .

It is clear that the Appellate Assistant Commissioner has been constituted a revising authority against the decisions of the Incometax Officer; a revising authority not in the narrow sense of r::!vising those matters about which the assessee makes a grievance, but a D revising authority in the sense that once the appeal is before him he can revise not only the ultimate computation arrived at by the Income-tax Officer but he can revise every process which led to the ultimate computation or assessment. In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise the various decisions given by the E Income-tax Officer in the course of the assessment and also the various incomes or deductions which came in for consideration of the Income-tax Officer."

The said view was affirmed by this court in C.I. T. v Macmillan (33 p l.T.R. 182).

Clearly, therefore, the power of appeal under the said two enactments is altogether different from the power of the appellate courts under the Code of Civil Procedure. Even if the appeal by the dealer is confined G to a particular aspect of assessment, it is open to the appellate authorities to enhance the assessment. They can also annul the order of assessment and order a fresh assessment. /> s held by Chagla, C.J., the appellate authorities under the said enactments are in the nature of the revising authorities "not in the narrow sense of revising those matters about which the assessee has a grievance, but a revising authority in the sense that once H .

A lhc appeal is before him: he can re\ise not only the uhin1atc computation arriYc<l at by lncnn1c tax ()fficcr. but he can revise crcry process which led to the ultin1ate con1p11tatiu11 or a.1sesn1cnt." In such a situation, it is idle to conlenJ Lhal because of the language of Ruic 12(7), the appellate authorities cannot do \vhat the first assessing authority could do.

We arc unable to agree \Vith the Revenue's contention that because Rule 12(7) speaks of ''upto the Lime of assessment by the first assessing authority" - or for that n1attcr the proviso to the said sub-rule-it excludes1 by necessary implication, the appellate authorities. The decision in Macntillan furnishes a complete ans\ver to this contention. We may elaborate Sectioo 13 of the Indian Income Tax Act, 1922 (correc.ponding to Section 145 of the present Act) read as follows :

"13. Income, profits and gains shall be computed, for the purposes of Ss. 10 and 12, in accordance with the method of accounting regularly employed by the assessee :

Provided that, if no method of accounting has been regularly employed, or if the method employed is such that, in the opinion of the Income-tax Officer, the Income, profits and gains cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Incometax Officer may determine."

Relying upon the words "in the opinion of the Income Tax Officer" occurring in the proviso to Section 13, it was contended by the asses.see that the power or duty of rejecting the method of 2Ccounting on the ground that income, !Jrofits and gains cannot be properly deduced therefrom is given to the Jncome Tax Officer alone and not to any other authority in the hcirarchy of authorities mentioned in Section 5 of the Aot. On the other hand, the contention of the Revenue was that reading Section 13 together with Section 31(3), it should be held lhat the Appellate Assistant Commissioner has the same jurisdiction as that of the Income Tax (Jfficer in the said matter. Re_iecting the contention put forward by the asses.see, this court made the following observations, which deserve to be quoted at length in view of their relevance to the contention urged by the Revenue before us :

"We arc unable to accept this line of argument as correct, and our reasons are these. Firstly, \Ve think that learned counsel is reading

, '

STATE OF A.I'., .. ASBESTOS CEME1'TPRODN. LTD. [JEEVANREDDY.J.] 797

more into the expression "in the opinion of the Income-tax Officern A occurring in the proviso to S..13 than what is warranted by the language used. Whether the method of accounting is regularly employed or not ; s undoubtedly a matter which the Appellate Assistant Commissioner can go into when he has siezin of the appeal. It is not challenged that if the Income-tax Officer decides against the assessee and determines that the income, profits and gain:- ;., annot properly be deduced from the assessee'~ method of accounting, the determination is liable to be set aside on appeal

by the assessee. What then is the reason for holding that a subjective determination of a named authority (whatever expression may c he used) is inviolate in one case but not so in the other? We have carefully examined the other sections of the Act to which learned counsel for the respondent has referred; but we are unable to agree with him that the language used therein supports the very subtle distincition that he has drawn. Let us take, for example, S.23 which deals with assessment. Under sub-s (3), the Income-tax Officer D assesses the total income of the asessee and determines the sum payable on the basis of such assessment; under sub-s.(4) the Income-tax Officer makes the assessment to the "best of his judgrnent'1 - an expression much stronger than "in the opinion of the Income-tax Officer". It is not disputed that in an appeal from an assessment under S.23, the Appellate Assistant Commissioner can E interfere with the determination or judgment of the Income-tax Officer, and in such an appeal the Appellate Assistant Commissioner can make his own assessment and exercise the power which the Income-tax Officer could exercise. Since 1989 an appeal lies from a "best of judgment" assessment made under sub-s.( 4) of S.23, F but the right is restricted to "the amount of income assessed or the amount of tax determined." Why can he not then interfere with the opinion of the Income-tax Officer under the proviso to S.13? It is contended that hoth sub-Ss.(3) and (4) ofS.23 prescribed objective conditions for the exercise of the power referred to therein. It is true that under both sub-sections the assessment must be a fair G and honest estimate and not arbitrary or capricious. Apart from that howeve1, we do not see what other distinctive, objective conditions there are which put those sub-sections in a different category.

The words

1'in the opinion of the Income-tax ()fficer" are not to be construed in the sense of a mere discretionary po\ver; but in the context of the words used in the proviso to S.13 they impose a statutory duty on the Income-tax Officer to examine in every case the method of accounting and to see (i) whether or not it is regularly employed and (ii) to determine whether the income, profits and gains can properly be deduced therefrom. Section 30 of the Act gives the assessee a right of appeal in respect of certain orders including an Oider of assessment made under S.23. Section 31 deals with the hearing of an appeal and powers of the Appellate Assistant Commissioner. Before disposing of the appeal, the Appellate Assistant Commissioner may, if he thinks fit, make a further equiry himself or cause it to be made by the Income-tax Officer, and in disposing of the appeal he may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; he may set it aside and order a fresh assessment. There is nothing in the language of S.31 of the Act which imposes any restriction on the powers of an Appellate Assistant Commissioner so as to prevent him from exercising the power under the proviso to S.13.

The restriction, if any, must be inferred from the language of the proviso itself. It is contended that the use of the words " in the opinion of the Income-tax Officer" in the second part of the proviso to S.13 suggests a complete elimination of the Appellate Assistant Commissioner's jurisdiction to decide for the first time that the method of accounting is such that the income, profits and gains cannot be properly deduced therefrom. It is true that the decision as to the method of accounting is to be arrived at first by the Iucometax Officer after a careful scrutiny of the accounts whether they are simple of complicated, and the power is to be reasonably and judicially exercised, which excludes any subjective or arbitrary decision by the Income-tax Officer. It cannot, however, be said that a power so exercised is clothes with finality and would be excluded from review by the Appellate Assistant Commissioner; and in reviewing the order the appellate authority can exercise the same powers which the Income-tax Officer could exercise."

The aforesaid observations show that the mere use of the words "the first assessing authority" in sub-rule (7) of Rule 12 cannot and does not H mean, in the context and scheme of the enactments concerned herein, that '

STA1EOF A.P. v. ASBESTOS CEMENf PRODN. LTD. !JEEVAN REDDY, J.] 799

... the appellate authorities do not have the power to receive Form-C in A appeal. This power can of course be exercised only where sufficient cause is shown by the dealer for not filing them upto the time of assessment before the first assessing authority. If in a given case, a dealer had obtained further time from the first assessing authority and yet failed to produce them before him, it is obvious that the appellate authority would B adopt a stiffer standard in judging the sufficient cause shown by the dealer for not producing them earlier. It is necessary to reiterate that receipt of those forms in appeal cannot be a matter of course; it should be allowed only where sufficient cause is established by the dealer for not producing them before the first assessing authority as contemplated by Rule 12(7).

The requirement of the said sub-rule cannot be excluded from considerac tion by the appellate court, while judging the sufficiency of the cause shown. It must be remembered that that is the primary obligation of the dealer and his failure to abide by it must be properly explained. Insofar as the.Sales Tax Appellate Tribunal under the Andhra Pradesh Act is concerned, it is governed by Regulation 11(1) referred to hereinabove which D again is nothing but a reiteration of the very same power.

The reasoning in the decision of the Full Bench of the Madras High Court in Aru/murugan & Co. is practically on the same lines as indicated above. We are in agreement with the said view. It is also brought to our notice that the Andhra Pradesh High Court has taken the same view in E Rajeshwari Stone Polishers v. State of Andhra Pradesh, (52 S.T.C. 268).

For the a.hove reasons, the appeals (all of them preferred by the States of Tamil Nadu and Andhra Pradesh) are dismissed. There shall be no order as to costs. ' F

R.P.

Appeal allowed.