{"id":63578,"date":"1972-09-18T00:00:00","date_gmt":"1972-09-17T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/sales-tax-officer-ganjam-anr-vs-ms-uttareswari-rice-mills-on-18-september-1972"},"modified":"2016-12-30T00:26:15","modified_gmt":"2016-12-29T18:56:15","slug":"sales-tax-officer-ganjam-anr-vs-ms-uttareswari-rice-mills-on-18-september-1972","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/sales-tax-officer-ganjam-anr-vs-ms-uttareswari-rice-mills-on-18-september-1972","title":{"rendered":"Sales Tax Officer, Ganjam & Anr vs M\/S. Uttareswari Rice Mills on 18 September, 1972"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Sales Tax Officer, Ganjam & Anr vs M\/S. Uttareswari Rice Mills on 18 September, 1972<\/div>\n
Equivalent citations: 1972 AIR 2617, \t\t 1973 SCR (2) 310<\/div>\n
Author: H R Khanna<\/div>\n
Bench: Khanna, Hans Raj<\/div>\n
           PETITIONER:\nSALES TAX OFFICER, GANJAM & ANR.\n\n\tVs.\n\nRESPONDENT:\nM\/S.  UTTARESWARI RICE MILLS\n\nDATE OF JUDGMENT18\/09\/1972\n\nBENCH:\nKHANNA, HANS RAJ\nBENCH:\nKHANNA, HANS RAJ\nREDDY, P. JAGANMOHAN\n\nCITATION:\n 1972 AIR 2617\t\t  1973 SCR  (2) 310\n\n\nACT:\nOrissa\tSales Tax Act, 1947, s. 12(8)-Notice for  assessment\nof escaped turnover-If should indicate reasons for reopening\nassessment.\n\n\n\nHEADNOTE:\nOn  receipt  of certain information, and,, as  a  result  of\ninformation   disclosed\t  in  documents\t seized\t  from\t the\nrespondent, the appellant issued a notice under s. 12 (8) of\nthe Orissa Sales Tax Act. 1947, in the Form prescribed under\nr.  23 made under the Act, for reassessing the\tturnover  of\nthe  respondent.  The High Court, quashed the notice on\t the\nground\tthat the appellant had not indicated any reason\t for\nissuing the notice.\nAllowing the appeal to this\nHELD:\t  (1) Although the opening words used in the section\nare \"if for any reason\" and not \"if the sales tax  authority\nhas  reason to believe\" the difference in  phraseology\tdoes\nnot  make any difference.  A reason cannot exist in  vacuum,\nand  in\t the context, it should be the\tsales-tax  authority\nissuing\t the notice who should have reason to  believe\tthat\nthe turnover of a dealer has escaped assessment or has\tbeen\nunder assessed.\t The words used in the prescribed Form\talso\nare \"whereas I have reason to believe that your turnover has\nescaped\t assessment.......  Any view which  would  make\t the\nopening\t words of the section unworkable should be  avoided.\n[317 C-E]\n(2)  The  ingredients of s. 12 (8) of the  Orissa  Sales-tax\nAct, 1947, are:\t    (i)\t there\tmust exist  reason  for\t the\nbelief that, (a) the turnover of, a dealer for any period to\nwhich  the  Act applies has escaped assessment or  has\tbeen\nunder-assessed;\t or,  (b) the tax has been  compounded\twhen\ncomposition  is not permissible under the Act and the  rules\nmade  thereunder;  (ii) in cases mentioned in  cl.  (i)\t the\nsales;-tax  authority may at any time within 36 months\tfrom\nthe  expiry of the year to which the above mentioned  period\nrelates call for a return under s. 11 (1) of the Act;  (iii)\nafter taking the steps mentioned in cls. (i) and (ii) above,\nthe sales tax authority may proceed to assess the amount  of\nthe  tax due from the dealer in the manner  laid down in  s.\n12  (5)\t of the Act; (iv) the sales tax authority  may\talso\ndirect\tin  cases where escapement  or\tunder-assessment  or\ncomposition   is   due\tto  the\t dealer\t  having   concealed\nparticulars  of\t his turnover or having\t without  sufficient\ncause  furnished  incorrect  particulars  thereof  that\t the\ndealer\tshall pay penalty in addition to the  tax  assessed;\nand  (v) such penalty shall not exceed one and a half  times\nthe amount of the tax so assessed. [316 F-H; 317 A-C]\nThe  proceedings for assessment or re-assessment  under\t the\nsection\t start\twith the issue of a notice and\tit  is\tonly\nafter  the  service of the notice that\tthe  assessee  whose\nturnover  is sought to be assessed or re-assessed becomes  a\nparty to the proceedings.  Therefore, it is not necessary to\nintimate   to  the  assessee  the  nature  of  the   alleged\nescapement  in the notice issued to him under  the  section.\nTo hold that the, reasons which led to the issue of the said\nnotice\tshould\tbe incorporated in the notice and  that\t the\nfailure to do so invalidated the notice would be  tantamount\nto reading something into the statute which, in fact, is not\nthere.\tHowever, if the sales-tax officer is in\n311\npossession of material which he proposes to use against\t the\ndealer\tin  proceedings for re-assessment the  said  officer\nmust, before using that material, bring it to the notice  of\nthe  dealer and give him an adequate opportunity to  explain\nand  answer the case on the basis of that material. [319  B;\n320 C; 321 F-H]\nB.   Patnaik  Mines  (P)  Ltd. v. N  K.\t Mohanty  Sales\t Tax\nOfficer, I.L.R.<\/a> [1967] Cuttack 446, overruled.\nCommissioner  of  Income  Tax, Bengal  v.  Messrs  Mahaliram\nRamjidas<\/a> [1940] 8 I.T.R. 442, (P.C.) applied.\nK.   S.\t Rashid\t and Son v. Income Tax\tOfficer,  [1964]  52\nI.T.R.\t 355.  (S.C.)  and  S.\tNarayanappa  and  Ors.,\t  v.\nCommissioner of Income Tax, Bangalore,<\/a> [1967] 63 I.T.R. 219,\n(S.C.) followed.\n(3)  The  fact\tthat  it is mentioned  in  the\tnotice\tthat\npenalty\t may also, be imposed would not make any  difference\nto  the validity of the notice.\t The question of  imposition\nof penalty will only arise at the time of making.. an  order\nfor  re-assessment.   At that stage, the  sales-tax  officer\nwould go. into the question whether the escapement or under-\nassessment  has\t been  due  to\tthe  fact  that\t the  dealer\nconcealed particulars of his turnover or without  sufficient\ncause furnished incorrect particulars.\tIn such an event  he\nwould  have  to give an opportunity to the  dealer  to\tshow\ncause  why  penalty, in addition to the tax  should  not  be\nimposed. [320 A; 321 A-C]\n(4)  The  existence of the reason that the turnover  of\t the\ndealer\thad,  escaped assessment or has been under-as  is  a\nsine  qua non for the issue of the notice.  In\tthe  present\ncase,  the  appellant  had brought  material  on  record  to\nindicate that there did exist such reasons. [322 B]\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos. 1190\t and
\n1191 of 1969.\n<\/p>\n
Appeal\tby special leave from the judgment and\torder  dated
\nJune 24, 1968 of the Orissa High Court at Cuttack in  O.J.C.
\nNos.. 464 and 463 of 1967.\n<\/p>\n
T.   A.\t Ramchandran,  S. P. Nayar, B. D. Sharma and  R.  N.
\nSachthey, for the appellants (in both the appeals).
\nGobind\tDas  and B. Parthasarathi, for the  respondents\t (in
\nboth the appeals).\n<\/p>\n
The Judgment of the Court was delivered by
\nKHANNA, J. Whether notice issued under section 12(8) of\t the
\nOrissa\tSales  Tax Act, 1947 (Act 14 of\t 1947)\t(hereinafter
\nreferred to as the Act) should be quashed on the ground that
\nit does not mention the reasons for the issue of the  notice
\nis the main question which arises for determination in these
\ntwo  appeals,  Nos. 1190 and 1191 of 1969, which  have\tbeen
\nfile&  by special leave against the common judgment  of\t the
\nOrissa\tHigh  Court  allowing writ petitions  filed  by\t the
\nrespondents against the appellants.\n<\/p>\n
312<\/span><\/p>\n
For sake of convenience we may give the facts giving rise to
\nappeal\tNo.  1190 of 1969 as it is the common  case  of\t the
\nparties\t that the decision in that appeal would\t govern\t the
\nother  appeal also.  The respondent in appeal No. 1190 is  a
\ndealer registered under the Act.  The matter relates to\t the
\nassessment for 1963-64.\t The date of the order of assessment
\nis not on file but it is stated that it was made sometime in
\nthe  later  part of 1964.  On March 30, 1967 the  Sales\t Tax
\nOfficer,  Intelligence\tWing, Vigilance,  Berhampur  made  a
\nsearch of the business premises of the respondent and seized
\nseveral account books.\tOn the following, day further search
\nwas  made and some additional account books were taken\tinto
\npossession.   Later  on that day, viz, March  31,  1967\t the
\nSales Tax Officer issued the following notice under  section
\n12(8) of the Act to the respondent:\n<\/p>\n
“Notice to a dealer under section 12(8) of the
\n\t Orissa Sales Tax Act
\n      [See rules 22, 23 and 28(2)]
\n  To
\n       M\/s Utteswar Rice Mills (Dealer)
\n       At\/P.O. Berhampur, GA-1 2127-A (Address) ……….
\n\t  ……….\n<\/p>\n
\t      “Whereas\tI have reason to believe  that\tyour
\n\t      turnover\tfor  the quarter ending\t 1963-64  on
\n\t      which  Sales Tax was payable under the  Orissa
\n\t      Sales    Tax    Act,   1947    has    escaped;\n<\/p><\/blockquote>\n
\t      assessment\/has been under assessed.
\n\t      You  are hereby required to submit within\t one
\n\t      calendar\tmonth  from the date of\t receipt  of
\n\t      this  notice  a return in Form  IV  (enclosed)
\n\t      showing  the particulars of your turnover\t for
\n\t      the year ending 1963-64.\n<\/p><\/blockquote>\n
\t      “You  are\t also hereby required to  attend  in
\n\t      person  or by agent at my office at  Berhampur
\n\t      on 11-5-67 at 1 1 A.M. and thereto produce  or
\n\t      cause   to  be  produced\tthe   accounts\t and
\n\t      documents specified on the reverse and also to
\n\t      show  cause why in addition to the  amount  of
\n\t      tax that may be assessed on you a penalty\t not
\n\t      exceeding\t one  and a half  time\tthat  amount
\n\t      should not be imposed on you under sub-section
\n\t      (5) of section 12 of the Act.\n<\/p><\/blockquote>\n
\t      In  the event of your failure to\tcomply\twith
\n\t      all the terms of this notice I shall  proceed
\n\t      to assess you under
\n\t      313<\/span>
\n\t      section  12  of  the Act to  the\tbest  of  my
\n\t      judgment without further reference to you.\n<\/p><\/blockquote>\n
\t\t\t\t\t     Sd\/- Illegible
\n\t\t\t\t\t     Signature
\n\t\t\t\t\t  Sales Tax Officer
\n\t\t\t       Intelligence Wing, Vigilance
\n\t\t\t\t\t\t Berhampur”\n<\/p><\/blockquote>\n
Place-Berhampur
\nDate-31-3-67.\n<\/p>\n
The  notice was received by an employee of  the\t respondent.
\nAppearance was thereafter put in on behalf of the respondent
\nbefore\tthe Sales Tax Officer and a copy of the\t old  return
\nwhich  had been earlier filed in accordance with section  11
\nof  the\t Act was again filed before the Sales  Tax  Officer.
\nAccording  to the respondent, appearance was put in  on\t its
\nbehalf\ton several occasions with a view to know the  reason
\nfor  the issue of the above notice, but the  respondent\t was
\nnot informed of that reason.  It is further stated that\t the
\nSales  Tax  Officer recorded the statements of a  number  of
\nwitnesses  behind  the\tback  of  the  respondent  with\t the
\nintention  of  making reassessment under section 12  of\t the
\nAct.   Request was made on behalf of the respondent  to\t the
\nSales Tax Officer for being furnished with co-pies of  those
\nstatements so that the respondent might be in a position to
\nknow  the  reason for the issue of the\tnotice.\t  Copies  of
\nthose statements were, however, not supplied and the  appli-
\ncation\tfiled by the respondent for obtaining copies of\t the
\nstatements  was rejected by the Sales Tax Officer.   It\t was
\nmentioned  by  the Sales Tax Officer that  the\tquestion  of
\ngrant of copies of the statements would be considered if the
\nstatements were used against the respondent.  The respondent
\nfiled  a revision petition against the order rejecting\tthat
\napplication,  but the revision petition too  was  dismissed.
\nThe respondent thereafter filed petition under articles\t 226
\nand  227 of the Constitution in the High Court\ton  December
\n26, 1967.\n<\/p>\n
The High Court accepted the writ petition on the ground that
\nthe  Sales  Tax\t Officer had not indicated  any\t reason\t for
\nissuing notice under section 12(8) of the Act.\tThis  fact,,
\nin the opinion of the High Court, was sufficient to  warrant
\nquashing  of  the notice.  The High Court  in  this  context
\nrelied\tupon its earlier decision in the case of B.  Patnaik
\nMines  (P) Ltd. v. N. K. Mohanty Sales Tax  Officer<\/a>(1).\t  It
\nwas held in the earlier case that the Sales Tax Officer\t had
\nno  jurisdiction  under section 12(8) of the  Act  to  issue
\nnotice for making a fishing equiry
\n(1)   I.L.R. [1967] Cuttack 446.\n<\/p>\n
314<\/span><\/p>\n
without indicating therein the reason for the alleged  under
\nassessment.\n<\/p>\n
In  appeal  before  us Mr. Ramachandran\t on  behalf  of\t the
\nappellants  has referred to the provisions of section  12(8)
\nof  the Act and has argued that it is not essential to\tgive
\nthe reasons in the notice issued under the above  provision
\nof  law.   The\timpugned notice, according  to\tthe  learned
\ncounsel,  cannot be quashed for non-mention of the  reasons.
\nThe  above stand has been controverted by Mr. Gobind Das  on
\nbehalf\tof the respondent and according to him, the  failure
\nof the Sales Tax Officer to mention the reasons which led to
\nthe issue of the impugned notice would vitiate the notice.
\nThere  is, in our opinion, considerable force in  the  stand
\ntaken  in  this\t respect  by the  learned  counsel  for\t the
\nappellants.  Section 12 of the Act deals with assessment  of
\ntax.  Sub-sections (5) and (8) of the above section read  as
\nunder :\n<\/p>\n
\t      “(5)  If upon information which has come\tinto
\n\t      his possession, the Commissioner is  satisfied
\n\t      that  any\t dealer has been liable to  pay\t tax
\n\t      under  this Act in respect of any\t period\t and
\n\t      has  nevertheless\t without  sufficient  causes
\n\t      failed   to   apply  for\t registration,\t the
\n\t      Commissioner  shall, after giving the dealer a
\n\t      reasonable opportunity of being heard, assess,
\n\t      to  the  best of his judgment, the  amount  of
\n\t      tax, if any, due from the dealer in respect of
\n\t      such period and all subsequent periods and the
\n\t      Commissioner may direct that the dealer  shall
\n\t      pay,  by\tway of penalty, in addition  to\t the
\n\t      amount so\t  assessed, a sum not exceeding\t one
\n\t      and a half times that amount:\n<\/p><\/blockquote>\n
\t      Provided that no penalty shall be levied for
\n\t      the  quarter during which the dealer first  or
\n\t      again  becomes  liable to pay tax\t under\tthis
\n\t      Act.\n<\/p><\/blockquote>\n
\t      (8)   If\tfor  any reason the  turnover  of  a
\n\t      dealer  for  any\tperiod\tto  which  this\t Act
\n\t      applies  has  escaped assessment or  has\tbeen
\n\t      under-assessed  or  where\t the  tax  has\tbeen
\n\t      compounded when composition is not permissible
\n\t      under this Act and the rules made\t thereunder,
\n\t      the Commissioner may at any time within thirty
\n\t      six  months  from the expiry of  the  year  to
\n\t      which  that period relates call for  a  return
\n\t      under  sub-section (1) of section 11  and\t may
\n\t      proceed  to assess the amount of tax due\tfrom
\n\t      the  dealer  in the manner laid down  in\tsub-
\n\t      section  (5)  of\tthis section  and  may\talso
\n\t      direct,  in  cases where escapement  or  under
\n\t      assessment or composition is due to the dealer
\n\t      having  concealed particulars of his  turnover
\n\t      or  having without sufficient cause  furnished
\n\t      incorrect particulars thereof, that the dealer
\n\t      shall pay, by way of penalty, in addition
\n\t      315<\/span>
\n\t      to the tax assessed under this sub-section,  a
\n\t      sum not exceeding one and a half times of\t the
\n\t      said tax so assessed.”\n<\/p><\/blockquote>\n
\t      The Orissa Sales Tax Rules, 1947\t(hereinafter
\n\t      referred to as the rules) have been framed  by
\n\t      the State Government in exercise of the powers
\n\t      conferred by section 29 of the Act.  According
\n\t      to  sub-section  ( 1) of\tthat  section,\t‘the
\n\t      State Government may subject to the  condition
\n\t      of   previous  publication  make\t rules\t for
\n\t      carrying\tout the purposes of the\t Act.\tSub-
\n\t      section  (2)  of\tthat  section  mentions\t the
\n\t      subjects, without prejudice to the  generality
\n\t      of power given by sub-section ( 1 ), regarding
\n\t      which  rules  may\t prescribe.   Section\t29-A
\n\t      requires that all rules made under section 29,
\n\t      and  notifications issued under  section\t3-B,
\n\t      sub-section  (1)\tof section 5 and  section  6
\n\t      shall, as soon as possible after they are made
\n\t      or  published,  as the ,case may be,  be\tlaid
\n\t      before  the  Assembly for a  total  period  of
\n\t      fourteen days which may be comprised in one or
\n\t      more  sessions.\tRule 23\t may  be  reproduced
\n\t      below :\n<\/p><\/blockquote>\n
\t      “23.   Calling  for return when  turnover\t has
\n\t      escaped\t  assessments\t or\thas\tbeen
\n\t      under-assessed-(1)  If  for  any\treason\t the
\n\t      turnover of sales or the turnover of purchases
\n\t      of a dealer has escaped assessment or has been
\n\t      under-assessed or has not been assessed due to
\n\t      the   tax\t  having   been\t  compounded\twhen
\n\t      composition  is not permissible under the\t Act
\n\t      and  those rules and it is proposed to  assess
\n\t      it the Commissioner shall serve on the  dealer
\n\t      a\t notice\t in Form  VI  within  one  calendar
\n\t      month from the date of receipt of such notice.
\n\t      (2)   Such notice may also require the  dealer
\n\t      to  attend  in person or by his agent  at\t the
\n\t      office of the authority issuing the notice  on
\n\t      the  date specified therein and to produce  or
\n\t      cause   to  be  produced\tthe   accounts\t and
\n\t      documents specified in the notice.”<\/p><\/blockquote>\n
\t      The  relevant part of Form VI referred  to  in
\n\t      rule 23 is in the following words
\n\t\t\t      FORM VI
\n\tTo
\n\t    ……………….(dealer)
\n\t    ……………….(Address)
\n\t    ……………….\n<\/p>\n
\t    ………………..\n<\/p>\n
3-L498 Sup CI\/73
\n316<\/span>
\nWhereas I have reason to believe that your turnover of sales
\nand\/or\tpurchases for the quarter\/year ending on  which\t tax
\npayable\t  under\t the  Orissa  Sales  Tax  Act  has   escaped
\nassessment has been under-assessee has not been assessed due
\nto  the tax having been compounded when composition  is\t not
\npermissible.\n<\/p>\n
You are hereby required to submit within one calendar  month
\nfrom the date of. receipt of this notice a return in Form IV
\n(enclosed) showing the particulars of your turnover for\t the
\nquarter ending
\nYou are also hereby required to attend in person or by agent
\nat my office at …. on …. at …. A.M.\/ P.M. and there to
\nproduce\t or cause to be produced the accounts and  documents
\nspecified  on  the  reverse,  and also\tshow  cause  why  in
\naddition to the amount of tax that may be assessed on you  a
\npenalty\t not  exceeding\t one and a half\t times\tthat  amount
\nshould\tnot  be imposed on you\tunder  sub-section  (5)\/sub-
\nsection (8) of section 12 of the Act.\n<\/p>\n
In the event of your failure to comply with all the terms of
\nthis  notice I shall proceed to assess you under section  12
\nof  the\t Act  to the best of  my  judgment  without  further
\nreference to you.\n<\/p>\n
Place...........\t\t      Signature\nDate............\t\t      Designation\n<\/pre>\n
Section\t 12(8) of the Act reproduced above may\tbe  analysed
\nits under :\n<\/p>\n
\t      (i)   There  must exist reason for the  belief
\n\t      that\n<\/p><\/blockquote>\n
\t      (a)   the turnover of a dealer for any  period
\n\t      to  which the Act applies has escaped  assess-
\n\t      ment or has been under-assessed; or\n<\/p><\/blockquote>\n
\t      (b)   the tax has been compounded when  compo-
\n\t      sition  is not permissible under the  Act\t and
\n\t      the rules made thereunder.\n<\/p><\/blockquote>\n
\t      (ii)  In\tcases  mentioned in clause  (i)\t the
\n\t      sales tax authority may at any time within  36
\n\t      months  from the expiry of the year  to  which
\n\t      the above mentioned period relates call for  a
\n\t      return under section 1 1 ( 1 ) of the Act.\n<\/p><\/blockquote>\n
\t      (iii) After  taking  the\tsteps  mentioned  in
\n\t      clauses  (i) and (ii) above, the\tsales  tax
\n\t      authority may proceed to assess the amount  of
\n\t      the tax due from
\n\t      317<\/span>
\n\t      the dealer in the manner laid down in  section
\n\t      12(5) of the Act..\n<\/p><\/blockquote>\n
\t      (iv)  The sales tax authority may also  direct
\n\t      in cases where escapement or  under-assessment
\n\t      or  composition  is due to the  dealer  having
\n\t      concealed\t particulars  of  his  turnover\t  or
\n\t      having  without  sufficient  cause   furnished
\n\t      incorrect particulars thereof that the  dealer
\n\t      shall  pay  penalty  in addition\tto  the\t tax
\n\t      assessed.\n<\/p><\/blockquote>\n
\t      (v)   Such penalty shall not exceed one and  a
\n\t      half times the amount of the tax so assessed.\n<\/p><\/blockquote>\n
Although the opening words used in section 12(8) are “if for
\nany  reason” and not “if the sales tax authority has  reason
\nto believe”, the difference in phraseology, in our  opinion,
\nshould\tnot make much material difference.  A reason  cannot
\nexist in vacuum.  Somebody must form the belief that  reason
\nexists\tand  looking to the context in which the  words\t are
\nused,  we  are of the view that it should be the  sales\t tax
\nauthority  issuing  the\t notice who should  have  reason  to
\nbelieve that the turnover of a dealer has escaped assessment
\nor has been under-assessed.  The approach in this matter has
\nto be practical and not pedantic.  Any view which would make
\nthe  opening  words of section 12(8) unworkable\t has  to  be
\navoided.   It may be noted in this context that in  Form  VI
\nappended to the rules, which has been prepared in  pursuance
\nof  rule  23, the words used are “whereas I have  reason  to
\nbelieve that your turnover…… has escaped assessment
\nIn the case of Commissioner of Income Tax, Bengal v.  Messrs
\nMahaltram Ramjidas<\/a>(1) the Judicial Committee dealt with\t the
\nprovisions of section 34 of the Indian Income Tax Act,\t1922
\nas it then existed.  The section read as under:\n<\/p>\n
\t      “34,  If\tfor any reason\tincome,\t profits  or
\n\t      gains  chargeable\t to income-tax\thas  escaped
\n\t      assessment in any year or has been assessed at
\n\t      too low a rate, the Income-tax Officer may, at
\n\t      any  time within one year of the end  of\tthat
\n\t      year, serve on the person liable to pay tax on
\n\t      such income, profits, or gains, or in the case
\n\t      of   a  company,\ton  the\t principal   officer
\n\t      thereof, a notice containing all or any of the
\n\t      requirements which may be included in a notice
\n\t      under  sub-section (2) of section 22  and\t may
\n\t      proceed  to  assess or reassess  such  income,
\n\t      profits  or gains, and the provisions of\tthis
\n\t      Act shall so far as may be, apply\t accordingly
\n\t      as  if the notice were a notice  issued  under
\n\t      that sub-section
\n(1)  (1940) 8 I.T.R. 442.\n<\/p><\/blockquote>\n
318<\/span><\/p>\n
\t      Provided that the tax shall be charged at\t the
\n\t      rate  at which it would have been charged\t had
\n\t      the  income,  profits  or\t gains\tnot  escaped
\n\t      assessment or full assessment, as the case may
\n\t      be.”\n<\/p><\/blockquote>\n
The  opening  words of section 34 of the Indian\t Income\t Tax
\nAct,  as  it then existed were similar to those\t of  section
\n12(8) of the Act.  The Judicial Committee while dealing with
\nthe language of section 34 observed :\n<\/p>\n
\t      “Section\t  34   is   unhappily\t and\teven
\n\t      ungrammatically  phrased.\t  It  is   expressed
\n\t      impersonally,  and it fails to state  by\twhom
\n\t      and by what procedure it is to be\t established
\n\t      that  income,  profits or gains  have  escaped
\n\t      assessment or have been assessed at too low  a
\n\t      rate.   There is fortunately no  dispute\tthat
\n\t      the person who must make that decision is\t the
\n\t      Income-tax   Officer,  for,  apart  from\t the
\n\t      assessee, no one else is in a position to\t say
\n\t      whether  income has been assessed or  at\twhat
\n\t      rate  it has been assessed.  The omission\t to
\n\t      prescribe\t expressly  what the nature  of\t the
\n\t      decision\tshould be and by what  procedure  it
\n\t      must  be\treached is all the  more  surprising
\n\t      because  in  other  sections of  the  Act\t the
\n\t      legislature has been careful to define what is
\n\t      necessary\t   in\t these\t  respects.\tThis
\n\t      circumstance  was\t founded on by\tthe  learned
\n\t      Counsel  for the respondents, who pointed\t out
\n\t      that  where  some fact had to  be\t established
\n\t      merely prima facie to the satisfaction of\t the
\n\t      Income-tax  Officer in the bona fide  exercise
\n\t      of his discretion, this was expressed by\tsuch
\n\t      phraseology as “When it appears to be  Income-
\n\t      tax  Officer,” or “if the\t Income-tax  Officer
\n\t      has  reason to believe”.\tOn the\tother  hand,
\n\t      when the statute requires that the  Income-tax
\n\t      Officer shall make a decision, which is  final
\n\t      so  far as he is concerned, upon a  matter  of
\n\t      fact, the usual expression is “if he is satis-
\n\t      fied”.\n<\/p><\/blockquote>\n
\t      It was further observed
\n\t      “The section, although, it is part of a taxing
\n\t      Act,  imposes  no charge on the  subject,\t and
\n\t      deals merely with the machinery of assessment.
\n\t      In  interpreting provisions of this  kind\t the
\n\t      rule  is\tthat  that  construction  should  be
\n\t      preferred which makes the machinery  workable,
\n\t      ut res valeat potius quam pereat.”\n<\/p><\/blockquote>\n
In  view  of the criticism levelled against the\t wording  of
\nsection\t 34 of the Indian Income Tax Act, the above  section
\nwas  amended by Amendment Act of 1939 Despite the  amendment
\nmade in section 34 of the Indian Income Tax Act, the  Orissa
\nLegislature,
\n319<\/span>
\nit  would appear, has used phraseology in section  12(8)  of
\nthe  Act similar to that of section 34 of the Indian  Income
\nTax Act, 1922 as it existed before the said amendment.
\nThe  above  decision of the Judicial Committee is  Also\t an
\nauthority  for the proposition that it is not  necessary  to
\nintimate   to  the  assessee  the  nature  of  the   alleged
\nescapement  in\tthe  notice which is  issued  to  him  under
\nsection\t 34  (as it then existed) of the Indian\t Income\t Tax
\nAct, 1922.  The notice which was issued in that case did not
\ngive any particulars and was in the following words :\n<\/p>\n
\t      “Whereas\tI have reason to believe  that\tyour
\n\t      income  from business and other sources  which
\n\t      should  have  been assessed in  the  financial
\n\t      year  ending the 31st March, 1933, has  wholly
\n\t      escaped assessment and I therefore propose  to
\n\t      assess  the  said\t income\t that  has   escaped
\n\t      assessment.   I hereby require you to  deliver
\n\t      to me, not later than the 9th March, 1934,  or
\n\t      within 30 days of the receipt of this  notice,
\n\t      it return in the attached form of your  income
\n\t      from  all sources which was assessable in\t the
\n\t      said year ending the 31st March, 1933.”
\n\t      It   was\tobserved  while\t dealing  with\t the
\n\t      validity of the above notice
\n\t      ”\t Accordingly their Lordships are of  opinion
\n\t      that the Income-tax Officer is not required by
\n\t      the  section  to convene the  assessee,.or  to
\n\t      intimate\tto  him the nature  of\tthe  alleged
\n\t      escapement,  or to give him an opportunity  of
\n\t      being heard, before he decides to operate\t the
\n\t      powers  conferred\t by  the  section.   In\t the
\n\t      opinion of their Lordships the view which\t the
\n\t      learned Judges of the High Court have taken of
\n\t      the section is too narrow, and the notice sent
\n\t      to  the respondents on 8th February, 1934,  is
\n\t      in  form\ta  competent preliminary  to  a\t new
\n\t      assessment.”\n<\/p><\/blockquote>\n
In the case of K. S. Rashid and Son and Others v. Income Tax
\nOfficer(1)  this Court expressed the view that the  assessee
\nwas  not  entitled  to\ta copy of  the\treasons\t which\twere
\nrecorded by the\t    income  tax officer when he\t issued\t the
\nnotice under section 34 of    the  Indian  Income  Tax\tAct,
\n1922.  In the later case of S.\t   Narayanappa and Others v.
\nCommissioner  of Income Tax Bangalore<\/a> (2 ) an  argument\t was
\nadvanced  that the income tax officer should have  indicated
\nto the assessee the reasons which
\n(1) [1964] 52 I.T.R. 355.\t  (2) [1967] 63 I.T.R. 219
\n320<\/span>
\nled him to initiate the proceedings under section 34 of\t the
\nAct. This contention was repelled in the following words :\n<\/p>\n
\t      “It was also contended for the appellant\tthat
\n\t      the    Income-tax\t   Officer    should\thave
\n\t      communicated to him the reasons which led\t him
\n\t      to  initiate the proceedings under section  34
\n\t      of  the Act.  It was stated that a request  to
\n\t      this  effect was made by the appellant to\t the
\n\t      Income-tax Officer, but the Income-tax Officer
\n\t      declined\tto  disease  the  reasons.   In\t our
\n\t      opinion, the argument of the appellant on this
\n\t      point  is misconceived.  The  proceedings\t for
\n\t      assessment or reassessment under section 34(1)\n<\/p><\/blockquote>\n
\t      (a)  of the Income-tax Act  start\t with  the
\n\t      issue  of\t a notice and it is only  after\t the
\n\t      service of the notice that the assessee, whose
\n\t      income is sought to be assessed or reassessed,
\n\t      becomes  a  party to those  proceedings.\t The
\n\t      earlier stage of the proceedings for recording
\n\t      the reasons of the Income-tax Officer and\t for
\n\t      obtaining the sanction of the Commissioner are
\n\t      administration in character and are not quasi-<\/p><\/blockquote>\n
\t      judicial.\t The scheme of section 34 of the Act
\n\t      is that, if the conditions of the main section
\n\t      are  satisfied, a notice has to be  issued  to
\n\t      the  assessee  containing all or\tany  of\t the
\n\t      requirements which may be included in a notice
\n\t      under  subsection\t (2)  of  section  22.\t But
\n\t      before   issuing\tthe  notice,   the   proviso
\n\t      required\tthat the officer should\t record\t his
\n\t      reasons for initiating action under section 34
\n\t      and  obtain the sanction, of the\tCommissioner
\n\t      who  must be satisfied that the  action  under
\n\t      section\t34  was\t justified.   There  is\t  no
\n\t      requirement  in any of the provisions  of\t the
\n\t      Act or any section laying down as a  condition
\n\t      for the initiation of the proceedings that the
\n\t\t\t    reasons  which  induced  the  Commissi
\noner   to
\n\t      accord  sanction to proceed under\t section  34
\n\t      must also be communicated to the assessee.”
\nAs the provisions of section 12(8) of the Act and section 34
\nof  the\t Indian\t Income\t Tax  Act,  1922  are  substantially
\nsimilar,  the dicta laid down in cases under section  34  of
\nthe  Indian  Income-Tax ‘Act has, in our opinion,  a  direct
\nbearing.\n<\/p>\n
Mr.  Govind  Das has tried to distinguish the cases  under
\nsection 34 of the Indian Income Tax Act on the ground that,
\nunlike section 12(8) of the Act which also provides for\t the
\nimposition  of penalty, there was no mention of\t penalty  in
\nsection 34 of the Indian Income Tax Act.  This circumstances
\nin  our opinion, makes no substantial difference and  cannot
\nprevent\t the applicability of the dicta laid down  in  cases
\nunder section 34 of the Indian
\n321<\/span>
\n     Income  Tax Act, 1922 to cases under section  12(8)  of
\nthe Act The question of imposition of penalty can only arise
\nat  the\t time  of making an  order  for\t reassessment.\t Mr.
\nRamachandran an behalf of the appellants has frankly  stated
\nthat  it  would\t be only at that stage that  the  sales\t tax
\nofficer\t would\tgo  into  the question\tas  to\twhether\t the
\nescapement or under-assessment or composition\t  has\tbeen
\ndue to the fact that the dealer concealed particulars of his
\nturnover  or  without sufficient cause\tfurnished  incorrect
\nparticulars  thereof.\tThe  sales tax officer\tin  such  an
\nevent, it is not disputed, would have to give opportunity to
\nthe dealer to show, cause why penalty in addition to the tax
\nshould not be imposed upon him.\n<\/p>\n
Reference  has also been made by Mr. Gobind Das to  the
\nfact that notice issued to the respondent on March 31,\t1967
\nrelated\t  not  merely  to  the\tescaped\t assessment  or
\nunder-assessment, it also     called\t  upon\t    the
\nrespondent to show cause why penalty should not be  imposed
\nupon him. It is urged that such a combined notice\tis
\ninvalid even though it may be in accordance with Form  VI
\nprescribed by the rules. Calling upon the respondent to show
\ncause  why penalty should not be imposed upon him, according
\nto the learned counsel, is premature at this stage. In\tthis
\nrespect\t  we  find  that  no such ground was  taken  by\t the
\nrespondent in the   writ petition before the High Court.  As
\nsuch,  it is not necessary for the purpose of this  case  to
\nexpress an, opinion on the, point as  to whether  a  notice
\nunder section 12(8) should be struck down, on the  aforesaid
\nground.There is nothing in the language of section  12(8)
\nof the Actwhich\t  either  expressly  or\t by   necessary
\nimplication postulates therecording  of reasons\t in  the
\nnotice which is issued to the dealerunder   the\t   above
\nprovision of law. To hold that reasons which led to the
\nissue of the said notice should be incorporated in thenotice
\nand that failure to do so would invalidate the notice, would
\nbe tantamount to reading something in the statute which,  in
\nfact, is not there. We are consequently unable to accede  to
\nthe contention that the notice under the above provision, of
\nlaw shouldbe  quashed if the reasons which led\tto  the
\nissue of the notice are\t not mentioned in the notice. At the
\ngame time, we would liketo make it clear that if the  sales
\ntax officer is in possession of material     which     he
\nproposes  to  use  against the\tdealer\tin  proceedings\t for
\nreassessment,  the  said  officer  must\t before\t using\tthat
\nmaterial  bring it to the notice of the dealer and give\t him
\nadequate  opportunity to explain and answer the case on\t the
\nbasis of that  material.\n<\/p>\n
Mr. Gobind Das has also argued that the existence of  a
\nreason\t  that\tthe  turnover of a dealer  has\tescaped
\nassessment or has been
\n322<\/span>
\nunder-assessed\tin cases, not dealing with composition is  a
\ncondition  precedent to the issue of a notice under  section
\n12(8) of the Act.  It is urged that such reason is not shown
\nto have existed in the present case.  Although we agree with
\nthe  learned counsel that the existence of the\treason\tthat
\nthe turnover of a dealer has escaped assessment or has\tbeen
\nunder-assessed\tis  a  sine qua non for\t the  issue  of\t the
\nnotice,\t we  are, unable to accept the contention  that\t the
\nsaid reason has been shown to be nonexistent in the  pretent
\ncase.\tAlthough the High Court did not go into this  aspect
\nof the matter, we find that the appellant has brought  mate-
\nrial  on  the record to indicate that there did\t exist\tsuch
\nreasons.   Affidavit of Shri Prakash Chandra Mohanty,  Sales
\nTax Officer, Intelligence Circle was filed in opposition  to
\nthe petition, Shri Mohanty is the successor of Shri  Patnaik
\nwho had issued the notice under section 12(8) of the Act  to
\nthe respondent.\t According to the affidavit of Shri Mohanty,
\nthe  material on record indicates that Shri  Patnaik  issued
\nthe impugned notice after he had obtained information  about
\ncertain clandestine dealings of the respondent. It     was
\nfurther\t stated\t that the seized documents  disclosed  prima
\nfacie  material\t to hold that the respondent had  failed  to
\ndisclosehis  entire turnover.  It was also mentioned  that
\nthe  details of the material which led to the initiation  of
\nproceedings under section 12(8) of the Act had been recorded
\nin  the relevant case file.  The said file, it would  appear
\nfrom the affidavit of Shri Mohanty, was kept ‘available\t for
\nreference  by  the High Court at the time  of  hearing.\t  No
\nreference,  it\twould seem, was\t however made to  that\tfile
\nbecause\t the High Court did not feet the necessity of  doing
\nso.\n<\/p>\n
In  our\t opinion  the view taken by the High  Court  in\t the
\njudgment  under appeal as well as in the earlier case of  B.
\nPatnaik\t Mines (P) Ltd. v. N. K. Mohanty Sales\tTax  Officer<\/a>
\n(supra)\t was  not correct.  We accordingly  accept  the\t two
\nappeals,   set\taside  the judgment of the  High  Court\t and
\ndismiss\t  the\twrit   petitions.   Looking   to   all\t the
\ncircumstances, we leave the parties to bear their own  costs
\nof this Court as well as in the High Court.\n<\/p>\n
V.P.S.\t\t\t     Appeals allowed.\n323<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Sales Tax Officer, Ganjam & Anr vs M\/S. Uttareswari Rice Mills on 18 September, 1972 Equivalent citations: 1972 AIR 2617, 1973 SCR (2) 310 Author: H R Khanna Bench: Khanna, Hans Raj PETITIONER: SALES TAX OFFICER, GANJAM & ANR. Vs. RESPONDENT: M\/S. UTTARESWARI RICE MILLS DATE OF JUDGMENT18\/09\/1972 BENCH: KHANNA, HANS […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-63578","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSales Tax Officer, Ganjam & Anr vs M\/S. Uttareswari Rice Mills on 18 September, 1972 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/sales-tax-officer-ganjam-anr-vs-ms-uttareswari-rice-mills-on-18-september-1972\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sales Tax Officer, Ganjam & Anr vs M\/S. 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