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PETITIONER: NATHMAL TOLARAM

       Vs.

RESPONDENT: SUPERINTENDENT OF TAXES, DHUBRI  AND ANOTHER.

DATE OF JUDGMENT: 18/10/1960

BENCH: SHAH, J.C. BENCH: SHAH, J.C. DAS, S.K. HIDAYATULLAH, M. GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA

CITATION:  1961 AIR  331            1961 SCR  (2)  40

ACT: Sales  Tax--Reassessment--jurisdiction  of  the  Sales   Tax Officer--High   Court’s   power   in    References--Advisory jurisdiction--Period  of  limitation  for  proceedings   for reassessment--Assam Sales Tax Act, 1947 (Assam 17 of  1947), SS. 2(12),16(2), 19, 19A, 32(8),34.

HEADNOTE: The  appellants who were dealers registered under the  Assam Sales  Tax Act, 1947, submitted a return of  their  turnover for the account period April 1, 1948 to September 30,  1948, which included sales in Assam of all goods other than  jute. The Superintendent of Taxes, however, summarily assessed the appellants under sub-s. 4 of S. 17 of the Act by order dated September  30, 1950, to pay tax on sales of jute  despatched by them to Calcutta during the account period.  The order of assessment  was confirmed by the Commissioner of Taxes.   On an  application by the appellants the Commissioner  referred certain  questions of law arising out of the  assessment  to the  High  Court, which then gave its opinion  that  as  the consignments  in question were not sales within the  meaning of sub-s. 12 of s. 2 of the Act, they were not taxable,  and that as to whether the sales could thereafter be assessed if they fell within the purview of the Explanation to sub-s. 12 of S. 2, it expressed no opinion.  On receipt of the opinion the  Commissioner  directed the Superintendent of  Taxes  to dispose of the case in accordance with the judgment of.  the High Court.  The Superintendent of Taxes then set aside  the order  of assessment dated September 30, 1950, and issued  a notice to the appellants on January 30, 1953, directing them to produce the necessary evidence in order in     the   case came within the purview of the Explanation to sub-s.12 of S. 2 of the Act.  The appellant claimed that the Superintendent had  no jurisdiction to commence any further proceeding  for assessment  as  the notice issued to him  was  beyond  three years  from the end of the assessment period as provided  by s. 19 of the Act. Held,  that  the  High  Court  in  answering  the  questions referred  to it was exercising an advisory jurisdiction  and

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could  not and did not give any direction to the  sales  tax authorities  to  proceed  to assess or  not  to  assess  the appellants  to sales tax ; it merely gave its  opinion  that the transactions were not sales within the meaning of S.  2, sub-s. 12 of the Act and were accordingly not taxable. 41 Held,  further, that the Commissioner not having issued  any notice  under s. 19A of the Act or exercised his  revisional authority  under s. 31, but having merely directed the  case to  be  disposed of in accordance with the judgment  of  the High Court, the Superintendent of Taxes had no  jurisdiction to  initiate fresh proceedings for reassessment under s.  19 after the expiry of three years from the assessment period. Commissioner  of Income Tax, Bombay Presidency and Aden  and others  v. Bombay Trust Corporation Ltd., (1936) L.R. 63  1. A. 408, distinguished.

JUDGMENT: CIVIL APPELLATE, JURISDICTION: Civil Appeal No. 196 of 1958. Appeal  by special leave from the judgment and  order  dated April 27, 1953, of the Assam High Court in Civil Rule No. 66 of 1953. Sukumar Mitter and Sukumar Ghose, for the appel. lant. Veda Vyasa and Naunit Lal, for the respondents. 1960.  October 18.  The Judgment of the Court was  delivered by SHAH  J.-The  appellants are dealers  registered  under  the Assam Sales Tax Act XVII of 1947-hereinafter referred to  as the Act.  For the account period April 1, 1948 to  September 30,  1948,  the  appellants  submitted  a  return  of  their turnover  which included sales in Assam of all  goods  other than  jute.  The Superintendent of Taxes, Dhubri,  summarily assessed  the appellants under sub-s. 4 of s. 17 of the  Act to  pay tax on sales of jute despatched by them to  Calcutta during  the  account period.  Appeals against the  order  of assessment to the Assistant Commissioner of Taxes and to the Commissioner  of  Taxes, Assam,  proved  unsuccessful.   The appellants  then  applied to the Commissioner  of  Taxes  to refer certain questions arising out of the assessment to the High   Court  in  Assam  under  S.  34  of  the  Act.    The Commissioner referred the following questions and another to the High Court of Judicature in Assam: (1)  Whether,   in   view  of  the   aforesaid   facts   and circumstances the turnover from 20,515 maunds of 6 42 jute mentioned under item (i) is taxable under the Act ? (2)  Whether,   in   view  of  the   aforesaid   facts   and circumstances  the  turnover  from  5,500  maunds  of   jute mentioned under item (ii) is taxable under the Act ? (3)     Whether,  in  view  of  the  aforesaid   facts   and circumstances,  the  turnover  from 25,209  maunds  of  jute mentioned under item (iii) is taxable under the Act ? In  respect of each of the three questions 1 to 3, the  High Court recorded the following answer: s.   " Not being a sale within the meaning of sub12 of s.  2 of the Act, the consignments are riot taxable     ". The High Court, however observed: " As to whether these consignments can hereafter be assessed if they fall within the purview of the Explanation to sub-s. 12 of s. 2, we express no opinion ". As  required  by s. 32(8) of the Act,  the  Commissioner  of Taxes  by  his  order dated August  1,  1952,  directed  the Superintendent of Taxes to dispose of the case in accordance

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with the judgment of the High Court.  The Superintendent  of Taxes  thereafter issued on January 30, 1953, the  following notice to the appellants: "  In  view of the Hon’ble High Court’s order  in  Sales-tax Reference  No.  3 of 1951, the assessment order  dated  30th September, 1950, for the return period 30th September, 1948, has been set aside and you are directed to produce necessary evidence,     con.    tract    papers,    account     books, etc..................  in order to see whether the  contract of sale involved in this case come within the purview of the Explanation to sub.s. 12 of s. 2 of the Act ". By their letter dated March 23, 1953, the appellants  called upon the Commissioner of Taxes to direct the  Superintendent of  Taxes not to proceed with the notice.  The  Commissioner having   failed  to  direct  as  requested,  the   appellant petitioned  the  High Court in Assam under Art. 226  of  the Constitution for a writ 43 prohibiting the Superintendent of Taxes from re-opening  and proceeding  with the assessment of the appellants under  the Assam Sales Tax Act and for a writ quashing the order  dated August 1, 1952, passed by the Commissioner.  The High  Court summarily dismissed the petition.  Against the order  passed by  the High Court, this appeal is filed with special  leave under Art. 136 of the Constitution. The High Court, in answering the questions submitted to  it, was  exercising an advisory jurisdiction and could  not  and did  not give any direction to the sales tax authorities  to proceed  to assess or not to assess the appellants to  sales tax  : it merely recorded its opinion that the  transactions referred  to  in  the questions were not  sales  within  the meaning of s. 2, sub-s. 12, of the Act and were  accordingly not taxable.  Pursuant to the opinion of the High Court, the Commissioner directed the Superintendent of Taxes to dispose of  the case " in accordance with" the judgment of the  High Court;  but the Superintendent of Taxes thought that he  was entitled to re-open the assessment proceedings and to assess the appellants in the light of the Explanation to s. 2, sub- s.  12.   In so doing, the Superintendent of Taxes,  in  our judgment,  acted without authority. The  Superintendent  had made  the assessment, and that assessment was  confirmed  in appeal  by  the Assistant Commissioner.   On  the  questions arising  out of that assessment, the High Court  had  opined that the transactions sought to be assessed were not  liable to  tax.  The Superintendent of Taxes, on this  opinion  was right in vacating the order of assessment.  But any  further proceeding  for  assessment which he sought to  commence  by issuing  a  notice  requiring  the  appellants’  to  produce evidence,  contract  papers, account books, etc.  so  as  to enable  him  to  determine  whether  the  transactions  were taxable under the Explanation to sub-s. 12 of s. 2 had to be supported   by   some   authority  under   the   Act.    The Superintendent of   Taxes has not referred to the  authority in exercise of which he issued this notice.  It is true that tinder s. 19  of  the  Act,  the "  taxation  Officer  "  if satisfied  upon information coming into his possession  that any 44 dealer  has been liable to pay tax under the Act in  respect of  any period and has failed to apply for registration  and to  make the return required of him, may at any time  within three years of the end of the aforesaid period serve on  the dealer  a notice containing all or any of  the  requirements which  may be included in a notice under sub-s. 2 of  s.  16 and  may  proceed to assess the dealer in  respect  of  such

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period.   But admittedly, the appellants were registered  as dealers  and  had  submitted their  returns:  the  power  to reassess could not therefore be exercised by virtue of s. 19 of the Act.  Under s. 19-A, the Commissioner has also power, if  satisfied upon information coming into  his  possession, that  any  turnover  in  respect  of  sales  of  any   goods chargeable  to tax has escaped assessment during the  return period,  to  serve  at any time within three  years  of  the aforesaid  period,  on the dealer liable to pay the  tax  in respect  of such turnover a notice containing all or any  of the  requirements  which may be included in a  notice  under sub-s. 2 of s. 16 and may proceed to assess or reassess  the dealer in respect of such period.  But the Commissioner  bad not  issued  any  such notice under s.  19A.   Nor  had  the Commissioner  in exercise of his revisional authority  under s. 31 of the Act set aside the original order of assessment. The Commissioner merely directed under s. 32, sub-s. 8, that the  case be disposed of in accordance with the judgment  of the  High  Court,  and  acting  under  that  direction,  the Superintendent   of  Taxes  had  no  power  to  reopen   the assessment  and  to  call upon  the  appellants  to  produce documentary  evidence  with a view to  commence  an  enquiry whether  the  sales involved in the case fell "  within  the purview  of  the  Explanation to s. 2 sub-s. 12  ".  In  any event,  the account period as has already been observed  was April  1, 1948 to September 30, 1948, and three  years  from the end of that period, expired before the date on which the notice was issued.  Fresh proceedings for reassessment could not be initiated by the Superintendent of Taxes under s.  19 after  the expiry of three years from the assessment  period assuming that this could be regarded as a case of failure to apply for 45 registration   and  to  make  a  return  required   of   the appellants. In  support  of his contention that  the  Superintendent  of Taxes had authority to proceed to reassess the appellants in the  light of the observations made in the judgment  of  the High Court, counsel for the appellants invited our attention to  the  judgment of the Privy Council  in  Commissioner  of Income Tax, Bombay Presidency and Aden and others v.  Bombay Trust Corporation Ltd. (1).  In that case, a foreign company was assessed by the Income Tax authorities in the name of  a resident  company  for  profits and gains  received  by  the latter  as  its agent under ss. 42(1) and 43 of  the  Indian Income-tax  Act,  1922.  In a reference under s. 66  of  the Income-tax  Act,  the High Court at Bombay opined  that  the assessment  was  illegal.  The Commissioner  of  Income-tax, thereafter sent back the case with a direction to set  aside the  assessment and to make a fresh assessment after  making such  further enquiry as the Income-tax Officer might  think fit. Acting upon that order, the Income-tax Officer requir- ed  the resident company as agent of the foreign company  to produce  or  cause to be produced books of account  for  the year  of assessment and also to produce such other  evidence on which it might seek to rely in respect of its return, and the  resident company having failed to produce the books  of the  foreign  company, he proceeded to  make  an  assessment under s. 23(4) of the Income-tax Act, 1922.  By its petition under  s.  45 of the Specific Relief Act filed in  the  High Court  at Bombay, the resident company prayed for  an  order for  refund  of the taxes already Paid  under  the  original assessment,  and  for  an  order  for  disposal  of  certain proceedings  initiated  by  it  before  the  Assistant  Com- missioner  and the Income-tax Officer.  The High Court  made

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an order directing refund of tax paid, and further directing cancellation  of assessment.  In an appeal preferred by  the Commissioner  of  Income-tax against the order of  the  High Court,  it  was  observed  by the  Privy  Council  that  the Commissioner  was  not obliged  to  discontinue  proceedings against the resident 46 company  as agent of the foreign company in respect  of  the year  of assessment, and it was within the  jurisdiction  of the  Commissioner  under s. 33(2) of the Income-tax  Act  to direct  further enquiry if he thought such an enquiry to  be reasonable and to be profitable in the public interest. The   principle  of  this  case  has  in  our  judgment   no application  to the present case.  The High Court at  Bombay in  its  advisory jurisdiction had declared  the  assessment already made to be illegal.  But the Commissioner was  under s.   33   of  the  Indian  Income-tax  Act   invested   with jurisdiction to direct further enquiry, and he purported  to exercise that jurisdiction.  The Privy Council rejected  the challenge  to  the exercise of that  jurisdiction.   In  the present   case,   no  proceedings  were   started   by   the Commissioner   of  Taxes  in  exercise  of  his   revisional authority.   The  Commissioner  of Taxes  had  directed  the Superintendent  of  Taxes  merely to  dispose  of  the  case according  to  the  judgment  of the  High  Court,  and  the Superintendent  had  to  carry out that order.   If  he  was competent-and  on  that question, we express  no  opinion-he could,  if the conditions precedent to the exercise  of  his jurisdiction  existed, proceed to reassess  the  appellants. But  the  proceedings for reassessment were  clearly  barred because the period prescribed for reassessment had  expired. The Superintendent therefore had no power to issue a  notice calling  upon the appellants to produce evidence  to  enable him  to start an enquiry which was barred by the  expiry  of the  period  of limitation prescribed by the  Act.   In  the Bombay  Trust,  Corporation  case  (supra),  the  Income-tax Officer   acted  in  pursuance  of  the  direction  of   the Commissioner  lawfully  given  in  exercise  of   revisional authority and reopened the assessment.  In the present case, no  such direction has been given by an authority  competent in  that  behalf:  and the Superintendent had  no  power  to reassess  the income under s. 19 assuming that  the  section applied  to a case where the assessee though registered  had failed to include his sales in a particular commodity in his turnover,  because  the period of limitation  prescribed  in that behalf had expired. 47 The appeal must therefore be allowed and the order passed by the High Court set aside.  In the circumstances of the case, no  useful purpose will be served’ by remanding the case  to the High Court.  We accordingly direct that a writ  quashing the  proceedings commenced by the Superintendent  of  Taxes, Dhubri,  by  his notice dated January 30, 1953,  be  issued. The  appellants  will  be entitled to  their  costs  of  the appeal. Appeal allowed.