PETITIONER: STATE OF PUNJAB & ORS. Vs. RESPONDENT: M/S. TARA CHAND LAJPAT RAI DATE OF JUDGMENT: 28/02/1967 BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. MITTER, G.K. CITATION: 1967 AIR 1408 1967 SCR (3) 10 CITATOR INFO : R 1970 SC 311 (3) R 1977 SC 540 (12) ACT: Punjab General Sales Tax Act (46 of 1948), s. 11(2) and (4)- Return by assessee-Notice under s. 11(2) within the prescribed period--Compliance with notice by assessee-Order by Assessing Authority on the basis of best judgment-Order passed after prescribed period-Order, if falls tinder s. 11 (4)--Order, if barred by limitation. HEADNOTE: The respondent firm, was a registered dealer and furnished quarterly returns of its turnover as required by the Rules under the Punjab General Sales Tax Act, 1948. The Assessing Authority was not satisfied with the returns and issued a notice, under s. 11(2) of the Act asking the firm to produce evidence to establish that the returns were full and corn- plete. The notice was served on the firm before the expiry of three years from the respective dates for furnishing the returns. A partner of the firm complied with the notice by appearing and producing its account books. The officer held an enquiry, and passed an order stating that he was assessing the firm to the best of his judgment. The order was passed after the expiry of three years from the dates when the quarterly returns had to be filed. The firm challenged its validity by a writ petition, and the High Court hold that the order fell -Linder s. 11(4) of the Act and that it was barred by limitation. In appeal to this Court, HELD : The impugned order could not be said to be under s. 11(4) ,even though it was stated that the assessment was made to the best of the officer's jud-ment, because, the condition precedent under that subsection is that a registered dealer who has furnished returns should fail to comply with the terms of the notice issued under s. 11(2). But assuming it was made under s. 11(4), the order could not be attacked on the ground of its being beyond limitation. Under s. 11(4), if a re. gistered dealer having furnished returns in respect of a period, fails to comply with the terms of a notice under s. 11(2), the Assessing Authority shall, within three years after the expiry of such period, proceed to assess, to the best of his judgment, the amount of tax due from the dealer. "Such period"., refers to the period mentioned earlier in the sub-section, that is, in the present case, to the quarters in respect of which the firm had to submit returns. The assessment proceedings commence, in the case of a registered dealer, either when be furnishes a return or when a notice is issued to him under s. 11(2), and would be pending from the time they ,ire initiated until they are terminated by a final order of assessment. Therefore, if such proceedings were taken within the prescribed time, though the assessment was made final subse- quently, even after the expiry of the prescribed time, no question of limitation would arise. [14 H; 15 A, F, G; 17 G; 18 E-F] Madan Lal Arora v. Excise and Taxation Officer, Amritsar, [1962] 1 S.C.R., 823 and Ghanshyam Das v. Regional Assistant Commissioner of Sales Tax, Nagpur, [1964] 4 S.C.R. 436, followed. A 11 JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1080 of
1965.
Dipak Dutta Chaudhuri and R. N. Sachthey, for the
appellants.
C. D. Garg, for the respondent.
The Judgment of the Court was delivered by
Shelat, J. This appeal by certificate granted by the Punjab
High Court raises the following question :-
“Where the sales tax authority is not
satisfied with the returns filed by a
registered dealer and issues a notice under s.
11 (2) of the Punjab General Sales Tax Act,
1948 before the expiry of three years from the
termination of the period for furnishing
returns but finalises the assessment order
after three years from the aforesaid date,
whether such an assessment order can be said
to be time barred and, therefore, without
jurisdiction”.
A few facts for understanding this question may first be.
stated. The respondent is a partnership firm registered
under the Act and was at the material time carrying on
business in vegetable ghee, sugar and other commodities.
The assessment year in question commenced from April 1, 1955
and. ended on March 31, 1956. The dealer furnished four
quarterly returns as required by the Rules framed under the
Act. viz,., for the period April to June, 1954 on October 1,
1954; July to September, 1954 on December 16, 1954; October
to December, 1954 on March 12, 1955 and for January to
March, 1955 on June 16, 1956. Though these returns were not
filed within 30 days after expiry of each of the quarters as
required by the Rules, no objection was taken by the
Assessing Authority. The firm deposited three sums at the
time of filing the returns aggregating to Rs. 10,649-4-0.
Subsequently, it paid a further sum of Rs. 14,477 on the
basis of those returns.
Not satisfied with these returns, the Assessing Authority
issued a notice under S. 1 1 (2) in form S.T. XIV which is a
comprehensive form and which admittedly was served on the
dealer on January 11, 1957, i.e.. before three years expired
from each of the respective dates for filing of the said
returns. This is clear from the fact that the date for
filing the first return would be July 30, 1954 and the date
for filing the last return would be April 30, 1955. On July
5, 1960, the Assessing Authority examined Tara Chand, a
partner in the firm but did not finalise the
12
assessment order on that day as he wanted to make further
enquiries and passed the assessment order impugned in this
appeal on August 11, 1960. The Assessing Authority
disbelieved the accounts produced by Tara Chand and added
sales of Rs. 4,00,000 in the gross turnover shown in the
returns and assessed the firm on the turnover of Rs.
16,92,148-1-0 to a tax of Rs. 33,127-1-6. After giving
credit of the said two sums deposited by the dealer the
balance of Rs. 8,000 and odd remained payable by the firm.
The firm filed a writ petition in the High Court challenging
the validity of the assessment order on the ground that as
it was made after three years from the dates when the said
returns had to be furnished, it was without jurisdiction.
The department on the other hand urged (1) that the order
was made under S. 11 (3) which provided no limitation and
(2) that assuming that the order was passed under S. 11(4)
or S. 11(5) proceedings in respect thereof having commenced
on the issuance of the said notice dated January 11, 1957
which was within time, no question of the order being time
barred would arise. These were the only contentions raised
before the High Court and as no contention regarding the
merits of the order was raised, the High Court did not enter
into that question. We need not also go into the merits of
the assessment and we will consider only the question
whether the order was invalid on the ground taken by the
dealer in the High Court. The High Court following its
earlier decision in Mis. Rameshwar Lai Sarup Chand v. The
Excise and Taxation Officer(1), held that the order was an
assessment on best judgment basis under S. 11 (4) and as it
was made after three years after the close of the assessment
year it was without jurisdiction.
For the reasons which we shall presently set out, the
question whether the assessment order was passed under s.
11(3) or s. 11 (4) or (5) does not need any answer as it
makes no difference so far as this case is concerned whether
it was made under one or the other sub-section. However,
the mere fact that the Assessing Authority mentioned that he
made the order on the best judgement. basis cannot be
conclusive, for, by merely calling it as the best judgment
assessment, the order does not become one.
Section 10 of the Act provides that the tax payable shall be
paid in the manner thereinafter provided and at such
intervals as may be prescribed. Rule 20 of the Punjab
General Sales Tax Rules, 1949 provides that every registered
dealer, other than those referred to in rules 17, 18 and 19
(with whom we are not presently concerned) shall furnish
returns quarterly within 30 days from the expiry of each
quarter. Rule 25 provides that all returns which are
required to be furnished under these rules,
(1) [1963] P.L.R. 768.
13
shall be signed by the registered dealer or his agent and
shall be sent to the appropriate Assessing Authority
together with the Treasury or the Bank receipt as proof of
the payment of the tax due. Rule 40 provides that a dealer
and his partner or partners shall be jointly and severally
responsible for payment of the tax, and that every dealer
liable to pay the tax shall pay it quarterly unless directed
otherwise by the appropriate Assessing Authority. Sub-rule
(3) provides that the tax due for any quarter shall be paid
before furnishing the return for that quarter. Rule 32
provides that every assessment order shall be recorded in
writing and, where the Assessing Authority determines the
turnover of a dealer at a figure different from that shown
in the return submitted under the provisions of these rules,
the order shall state briefly the reasons therefore. Rule
33 provides that when it appears to the appropriate
Assessing Authority to be necessary to make an assessment
under s. 1 1 in respect of a dealer, he shall serve a notice
in form S.T. XIV on him calling upon him to produce books of
accounts and other documents and stating the period or the
return period or periods in respect of which assessment is
proposed. He shall fix a date ordinarily not less than
after 10 days from the date of the notice for considering
any objection which the dealer may prefer. Section 11(1)
provides that if the Assessing Authority is satisfied
without requiring the presence of the registered dealer or
the production by him of any evidence that the returns
furnished in respect of any period are correct and complete,
he shall assess the amount of tax due from the dealer on the
basis of such returns. Sub-section (2) provides that if the
Assessing Authority is not satisfied without requiring the
presence of the registered dealer who furnished the returns
or production of evidence that the returns furnished in
respect of any period are correct or complete, he shall
serve on such dealer a notice in the prescribed manner
requiring him at a date and at place specified thereunder
either to attend in person or to produce or to cause to be
produced any evidence on which such dealer may rely in
support of such returns. Sub-section (3) provides that on
the day specified in the notice or as soon afterwards as may
be, the Assessing Authority shall, after hearing such
evidence as the Assessing Authority may require on specified
points assess the amount of tax due from the dealer. Sub-
section (4) provides that if a registered dealer having
furnished returns in respect of a period, fails to comply
with the terms of a notice issued under sub-section (2), the
Assessing Authority shall within three years after the
expiry of such period, proceed to assess to the best of his
judgment the amount of the tax due from the dealer. Sub-
section (5) provides that if a registered dealer does not
furnish returns in respect of any period by the prescribed
date, the Assessing Authority shall within three years after
the expiry of such period, after giving the dealer a
reasonable opportunity of being heard,
14
proceed to assess to the best of his judgement amount of
tax, if any, due from the dealer. Sub-section (6) deals
with a case where a dealer has failed to apply for
registration, in which case the Assessing Authority is
empowered within the prescribed period to assess such a
dealer to the best of his judgment. Since the firm in the
instant case was duly registered, the question of appli-
cation of sub-section (6) does not arise.
Section 11 envisages the following cases
(a) Where the dealer duly files returns and
the Authority is satisfied with such returns
and accepts them and formally passes an order
of assessment which means no more than that he
appropriates the amount deposited by the
dealer towards the tax.
(b) Where the Authority is not Satisfied
with the returns, and issues a notice calling
upon the dealer to appear and produce evidence
in support of the returns, the Authority holds
an enquiry under subsection (3) and then makes
an order of assessment.
(c) Where the registered dealer having
furnished returns fails to comply with the
terms of the notice issued under sub-section
(2) the Assessing Authority is empowered
within three years after the expiry of the
period in respect of which the returns are
filed to proceed to assess to the best of his
judgment the tax due from the dealer.
(d) Where the registered dealer has failed
to furnish returns in respect of any period by
the prescribed date, the Assessing Authority
is empowered to assess to the best of his
judgment within three years after the expiry
of the period in respect of which the returns
have not been filed, and
(e) Where the dealer has failed to apply for
registration in respect of the period for
which he is liable to pay tax, the Assessing
Authority is empowered within three years
after the expiry of such period to as
sess him
to the best of his judgment.
Sub-sections (4), (5) and (6) lay down the conditions
precedent which must be satisfied before the power to make
an assessment to the best of his judgment can be exercised.
Under sub-section (4) the condition is that though the
registered dealer has furnished returns he fails to comply
with the terms of the notice issued under sub-section (2).
Under sub-section (5) the condition is that the registered
dealer has failed ‘to furnish returns and under subsection
(6) the condition is that the dealer has failed to apply
15
for registration. Prima facie, none of these conditions
existed in the present case and therefore though the
Assessing Authority states that he had to assess the firm to
the best of his judgment, the impugned order cannot be said
to be either under sub-section (4) or sub-section (5) or
sub-section (6). But as we have stated earlier this
question need not be -One into in the present case and we do
not, therefore, have to decide whether the order was one
under subsection (3) or sub-sectioa (4) or sub-section (5).
The question that falls for determination is whether it was
one under sub-section (3) or sub-section (4), is it one
which can be said to be time barred? So far as sub-section
(4) is concerned the question as to when an assessment order
thereunder becomes bar-red arose in Madan Lal Arora v.
Excise and Taxation Officer, Amritsar(1). The petitioner, a
registered dealer, filed his returns for the four quarters
of the financial year ending on March 31, 1955, and
likewise, for the four quarters of the financial year ending
on March 31, 1956. In respect of each year the Sales Tax
Assessing Authority served three successive notices on him
on March 7, 1958, April 4, 1958 and August 18, 1959,
requiring him to attend with the documents and other
evidence in support of his returns. It was, however, only
in the last of the said notices that he stated that on
failure to produce the documents and other evidence
mentioned therein, the case would be decided on “best
judgment assessment basis”. The petitioner did not comply
with any of the notices, but on receiving the last notice he
filed a writ petition in this Court challenging the right of
the Authority to make the best judgment assessment. Sarkar,
J. (as he then was) who spoke for the Court, posing the
question as how to compute the three years mentioned in sub-
section (4) observed : ‘The sub-section says “within three
years after the expiry of such period” So the three years
have to be counted from the expiry of the period mentioned.
What then is that period ? The period referred, therefore,
is the period mentioned earlier in the subsection, and that
is the period in respect of which returns had been furnished
by the dealer’. After considering s. 11(1) and Rule 20 of
the Rules, he further observed : ‘It would, therefore,
appear that when sub-section (4) of s. 11 talks of “returns
in respect of a period” that refers in the case of the,
petitioner to the quarters in respect of which he submitted
the returns. We then come to this that the three years
within which the authority could proceed to make the best
judgment assessment had to be counted from the end of each
quarter in respect of which returns had been filed’. The
Court held that the last of the quarters in respect of which
the petitioner filed his returns having ended on March 31,
1956 the Assessing Authority could not proceed
(1) (1962] 1 S.C.R. 823.
16
to make the best judgment assessment in respect of that
quarter after March 31, 1959. In the case of the earlier
quarters the three years had expired even prior to that
date. There was no dispute that the Assessing Officer had
not proceeded to make any assessment on the petitioner at
the date of any of the notices. The notices given on August
18, 1959 that best judgment assessment would be made in
respect of the quarters constituting the financial years
1955 and 1956 the last of which expired on March 31, 1956,
were futile as no such assessment could be made in respect
of any of the quarters after March 31, 1959. The question
as to the effect of the two earlier notices was not
canvassed. What this decision laid down was that the notice
dated August 18, 1959 under which the authority proposed to
proceed under s. II (4) having been served after expiry of
three years from the respective dates when the said returns
had to be furnished, the notice was futile and the authority
not having proceeded to assess within time any action taken
by him would be without jurisdiction.
The question as to the legal effect of such a notice was
considered in Ghanshyam Das v. Regional Assistant
Commissioner of Sales Tax, Nagpur(1). The points which fell
for determination there were : (1) when can a proceeding be
said to commence and (2) if a proceeding has commenced
within 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.
Tile appellant there was a registered dealer. For the year
1949-50 he submitted only one return for one quarter and
defaulted in respect of the other quarters. A notice was
served on him on August 13, 1954 under s. 11 (1) and (2) of
the C.P. and Berar Sales Tax Act, 1947 in respect of the
turnover of the firm 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
returns at all and was served with a notice on October 15,
1954 under s. 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. He also filed
another writ petition for a similar relief in respect of
that year. The contention was that whatever may be said in
the case 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. This Court held 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 assess-
(1) [1964] 4 S.C.R.436.
17
ment. It was then stated 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 s. 11 (2), but does not
finalise the assessment; (3) the registered dealer does not
submit a return, the Commissioner issues a notice under s.
10(3) and s. II (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. The
Court held 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 s. 10(3) or under s. 11(2) of the Act. Since the
proceedings commenced after the return was submitted and
continued till a final order of assessment was made in
regard to the return, the Tribunal had no jurisdiction to
issue a notice under s. 1 1 -A with respect to the quarters
other than that covered by the return made by the appellant.
As regards the second case it held that the Commissioner had
jurisdiction to assess the turnover in respect of the entire
fourth quarter. At page 450, 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. Even in a case where no return has been
made, but the Commissioner initiates proceedings by issuing
the notice either under s. 10(3) or under s. 11(4), the
proceedings would be pending till the final assessment is
made. But where no return has been made and the
Commissioner has not issued any notice under the Act, it
cannot be held that any proceedings are pending before the
Commissioner. 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 though an
assessment order is finalised after the expiry of such
period. This decision is, therefore, a clear authority for
the proposition that assessment proceedings commence in the
case of a registered dealer either taken he furnishes a
return or when a notice is issued to him under s.11 (2) of
the present Act, and that if such proceeding 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.
In the instant case the dealer filed returns. Though they
were led after the expiry of 30 days from the relevant date,
they were
18
not rejected by the department on that ground. In fact the
notice dated January 11, 1957 issued under s. 11 (2) was on
the footing that returns were filed, but the Assessing
Authority was not satisfied with them and desired evidence
to establish that the returns were full and complete. It is
also an admitted fact that the dealer appeared and produced
books of accounts in answer to the said notice and thereupon
the Officer held an enquiry. The notice dated January 11,
1957 was within time though the assessment order was made
much after the expiry of three years from the respective
dates when the returns had to be filed. But on the
authority of Ghanshyam Das’s case(1), the assessment
proceedings commenced either when the respondent firm filed
the returns or in any event from the date of the said
notice. Both the events, therefore, were within prescribed
time.
Reliance, however, was placed on two decisions of the High
Court of Punjab: M/s. Rameshwar Lal Sarup Chand v. Excise
and Taxation Officer(2) and Jagat Ram Om Parkash v. Excise
and Taxation Officer, Assessing Authority, Amritsar(3).
Neither of these decisions would be of assistance as the
question which was canvassed in Ghanshyam Das’s case (1)
regarding assessment proceedings having commenced within
time and then remaining pending did not come up for
consideration. Since the said notice dated January 11, 1957
was served on the respondent firm before the expiry of three
years from the respective dates for furnishing the returns,
the assessment proceedings must be held to have commenced
from that date which was within time and thus the assessment
proceedings remained pending until they were terminated by
the assessment order. Though that order was finalised after
the expiry of three years from the said period, it could not
be attacked on the ground of its being beyond limitation and
therefore without jurisdiction. The order passed by the
High Court allowing the respondent’s writ petition has,
therefore, to be set aside. The appeal succeeds and the
writ petition is dismissed. In the circumstances of the
case, however, we do not propose to pass any order as to
costs.
V.P.S. Appeal allowed.
(1) [1964] 4 S. C. R. 436.
(3) [1965] 16 P.L.R. 107.
(2) [1963] P.L.R. 768.
19