21 October 1964
Supreme Court


Case number: Appeal (civil) 830 of 1963






DATE OF JUDGMENT: 21/10/1964


CITATION:  1965 AIR 1213            1965 SCR  (1) 780  CITATOR INFO :  RF         1994 SC2101  (2)

ACT: U.P. Sales Tax Act (U.P. Act 15 of 1948), s. 21-B Before and after amendment by U.P. Act 19 of 1956-Scope of.

HEADNOTE: The  sales tax officer made a best judgment assessment  with respect to the turnover of the appellant under s. 21 of  the U.P.  Sales Tax Act, 1948.  The order was set aside  by  the appellate  authority.  The revisional authority revised  the appellate  order  and  remanded the case to  the  sales  tax officer  for  making a fresh assessment.  When  the  officer issued a notice for assessment, in pursuance of that  order, the  assesee contended that as the original  assessment  had been  set  aside, no proceeding in connection  with  it  was pending, and that reassessment was barred because, more than three  years  had  elapsed  since the end  of  the  year  of assessment.   The  office,,rejected  the  contentions.   The assessee filed a writ petition in the High Court and it  was allowed  by  a  Single Judge.  The  State  appealed  to  the Division  Bench.   While the appeal was pending, s.  21  was extensively  amended  in  1956  and  the  legislature   gave retrospective operation to the amended section.  As a result of  the  amendment, it was provided that  when  the  officer proceeded   in  pursuance  of  a  direction  given  by   the revisional authority, no period of limitation applied.   The Division  Bench, however, relied upon the unamended  section and  set aside the order of the Single Judge, holding,  that even  under the unamended section, no period  of  limitation applied  when the assessing officer was directed to  proceed by  an  order  of the revisional  authority.   The  assessee appealed to the Supreme Court. HELD:The appeal should be dismissed.    Though the High Court was in error in its  interpretation of the unamended section on the principle of Commissioner of Income-tax, Bombay Presidency and Aden v. Khemchand  Ramdas, (L.R. 65 I.A. 236) still the order of the High Court must be confirmed because of the amendment of 1956.  The words  used by  the legislature in the amended section are  precise  and admit  of  only  one interpretation,  namely,  that  nothing



contained  in the section limits the time from the  year  of assessment  within  which proceedings should  be  taken  for assessment  or  reassessment in consequence of  or  to  give effect  to an order of the revisional authority. [783  E--G; 784 D-E; 785 H; 786 B]    Even  assuming that the amended section applied  only  to pending  proceedings, when the revisional authority made  an order  after  examining the record directing  the  assessing officer  to make a fresh assessment, there was a  proceeding pending before such officer in pursuance of such  direction. [786 E]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 830 of 1963. Appeal  by special leave from the judgment and decree  dated March 3, 1960 of the Allahabad High Court in Special  Appeal No. 3 of 1956. G.   S. Pathak and S. P. Varma, for the appellants. 781 O.P. Rana, for the respondents. K.   Srinivasan and R. Gopalakrishnan, for the intervener. The Judgment of the Court was delivered by Shah J. The appellants public limited Company--having  its registered office at Calcutta, was, with effect from October 5, 1946, appointed sole agent for sale of goods manufactured by  the  Swadeshi Cotton Mills Company Ltd.   On  March  20, 1952, the Sales Tax Officer, Kanpur issued a notice under s. 21  of  the  U.P.  Sales Tax  Act,  1948  calling  upon  the appellant  Company to file a return of its turnover for  the assessment year 1948-49 on the ground that the turnover  had escaped  assessment.   On  March 31,  1952,  the  Sales  Tax Office.-  made a "best judgment" assessment  and  determined the  taxable  turnover of the appellant Company, at  Rs.  50 lakhs  for the year 1948-49 and determined  the  appropriate tax liability. In  the appeal to the Judge (Appeals) Sales Tax,  the  order passed    by  the  Sales Tax Officer, was  set  aside,  that authority  holding  that  the appellant Company  was  not  a dealer  within the meaning of s. 2(c) of the Act.   But  the order of the appellate authority was set aside by the  Judge (Revisions) Sales Tax, by order dated March 28, 1955 and the case  was  remanded  to the Sales  Tax  Officer  for  "fresh assessment".   In  the view of the Judge  (Revisions)  Sales Tax,  it  was necessary to determine "the ownership  of  the goods at the time of their sale". The Sales Tax Officer then issued a notice calling, upon the appellant Company to produce its books of account and  other relevant  documents  on  July 23, 1955 for  the  purpose  of assessment  for  the year 1948-49.   The  appellant  Company contended  that as the original assessment under s.  21  had been  set  aside  by the Judge  (Revisions)  Sales  Tax,  no proceeding  in connection with that assessment  was  pending and  re-assessment was barred because more than  three  year had  elapsed since the end of the year of  assessment.   The Sales  Tax Officer rejected the contention of the  appellant Company  and  insisted that the books of account  and  other documents  be produced as directed earlier.   The  appellant Company  then  petitioned on September 2, 1955 to  the  High Court of Allahabad under Art. 226 of the Constitution for  a writ in the nature of prohibition restraining the Sales  Tax Officer, Kanpur, from proceeding with the assessment of  the appellant   Company for the assessment year 1948-49  and for a  writ of certiorari quashing the order dated September  2,



1955  of  the Sales Tax Officer, Kanpur and  the  proceeding taken for re-assess- 782 ment  in  pursuance  thereof.   Chaturvedi  J.,  held   that assessment  sought  to  be made by  the  Sales  Tax  Officer pursuant  to  the order of the Judge (Revisions)  Sales  Tax "was clearly barred by the law of limitation" prescribed  in that  behalf by S. 21 of the U.P. Sales Tax Act.  It was  in the view of the learned Judge immaterial whether  assessment was  being made by the Sales Tax Officer suo motu  or  under the  direction  of a superior authority if at  the  time  of making the re-assessment the period prescribed by S. 21  had expired.  The order passed by Chaturvedi J., was reversed in appeal  by  a Division Bench of the High  Court.   The  High Court held that the Sales Tax Officer was competent in  view of the order of remand which directed "fresh assessment"  to commence fresh assessment proceedings against the  appellant Company  and in commencing and continuing those  proceedings he was acting in compliance with the directions given  under ss. 9 and 10 of the Act which he was bound to carry out  and to  such  assessment proceedings the  period  of  limitation prescribed  by S. 21 of the Act did not apply.  Against  the order passed by the High Court reversing the order passed by Chaturvedi  J., this appeal has been preferred with  special leave. The  material  provisions  of the U.P.  Sales  Tax  Act  are briefly  these : S. 9 conferred a power upon the  designated authority to entertain an appeal against the order passed by the  Sales Tax authority, and by sub-s. (3) of S. 9  it  was provided:               "The appellate authority may, after giving the               appellant  a reasonable opportunity  of  being               heard,               (a)   confirm,  reduce, enhance or, annul  the               assessment, or               (b)   set aside the assessment and direct  the               assessing  authority  to pass  a  fresh  order               after such further inquiry as may be directed,               or               (c)  .     .      .       .               By  sub-s.  (3) of s. 10 as it  stood  at  the               relevant time, it was provided:               " The Revising Authority may in his discretion               at any time suo motu or on the application  of               the  Commissioner of Sales Tax or  the  person               aggrieved, call for and examine the record  of               any  order made by any Appellate or  Assessing               Authority  under this Act, for the purpose  of               satisfying  himself  as  to  the  legality  or               propriety  of  such order and  may  pass  such               order as he thinks fit:               783               Provided  that  no such application  shall  be               entertained  in any case where an  appeal  lay               against the order, but was not preferred."               Section  21 as it stood at the  relevant  time               provided:               "Where  the whole or any part of the  turnover               of  a  dealer  has, for  any  reason,  escaped               assessment  to tax in any year, the  Assessing               Authority "may, at any time within three years               from  the  expiry  of such  years,  and  after               issuing  notice to the dealer and making  such               enquiry  as may be necessary, assess  the  tax               payable on such turnover."



 In the view of the High Court s. 21 which imposed upon the Assessing  Authority  duty to exercise his power  to  assess turnover  which escaped assessment within three  years  from the end of the year of assessment applied only to the  order which the Assessing Authority made suo motu : where, he  was directed  to,  proceed  by  an order  of  the  appellate  or revisional  authority under ss. 9 and 10 of the Act  to  re- assess, the period of limitation has no application.    In  our view the High Court was in error in  so  limiting the operation of s. 21.  That section imposes a  restriction upon  the  power of the Sales Tax Officer: that  officer  is competent  within  three years next succeeding the  date  to which the tax relates to assess tax payable on the  turnover which  has  escaped assessment.  But the  section  does  not provide  expressly, nor is there any implication,  that  the period  within which re-assessment may be made applies  only to  those cases where the Sales Tax Officer acts on his  own initiative and not pursuant to the directions of the  appel- late or the revisional authority.  In our view the principle of  the  judgment of the Privy Council  in  Commissioner  of Income-tax,  Bombay Presidency and Aden v. Khemchand  Ramdas (a  firm) (1) applies to this case.  In Khemchand’s  case(1) the  tax-payer was assessed as a registered firm to  income- tax  by  order dated January 17, 1927 for the  year  1926-27 under  s. 23(4) of the Income-tax Act.  Under the Act as  it then  stood, a registered firm was not liable to pay  super- tax  and was liable to income-tax at the maximum  rate.   On January  9, 1928 the Commissioner of Income-tax In  exercise of powers of revision under s. 33 of the Act issued a notice to the assessee requiring him to show cause why the order of the Income-tax Officer granting registration of the firm and assessing it on that footing should not be set aside, and by order  dated  February  13,  1928  ordered  cancellation  of registration and (1)  (1938) L.R. 65 T.A. 236. 784 .directed  the Income-tax Officer to take  necessary  action thereupon.  On May 4, 1929, the Income-tax Officer  assessed to   super-:tax  the  assessee  on  the  footing  that   its registration  was  cancelled. authority  of  the  Income-tax Officer  to  assess  was challenged.  It  was  held  by  the Judicial  Committee that as the Income-tax Officer had  made the  order imposing super-tax on the assessee more than  one year after the earlier demand in respect of income-tax,  the ,order  was  without jurisdiction.  The  Judicial  Committee pointed  out that once a final assessment has been made,  it cannot  be  ,reopened by the Income-tax Officer of  his  own motion,  or at the direction of the Commissioner  exercising his  powers under s. 33 of the Indian Income-tax Act,  1922, except  in the circumstances and within the time  prescribed by ss. 34 and 35 of the Act.  They observed that ss. 34  and 35 were exhaustive and prescribed the only circumstances  in which,  and the only time in which, such  fresh  assessments could  be made and fresh notices of demand could be  issued. As the Income-tax Officer took no fresh step within one year under the statute, he was "hopelessly out of time  whichever of the two sections was applicable". But  the  order of the High Court must still  be  confirmed, because  during the pendency of the proceeding in  the  High Court s.  21  was  extensively  amended.   The  section   as amended by Act 19   of  1956  from  May 28,  1956  reads  as follows:               "(1) If the assessing authority has reason  to               believe  that  the whole or any  part  of  the               turnover  of  a dealer has,  for  any  reason,



             escaped  assessment to tax for any  year,  the               assessing authority may, after issuing  notice               to the dealer, and making such enquiry as  may               be necessary, assess or re-assess him to tax:               Provided that the tax shall be charged at  the               rate  at which it would have been charged  had               the  turnover not escaped assessment, or  full               assessment, as the case may be.               Explanation.-Nothing in this sub-section shall               be  deemed to prevent the assessing  authority               from  making an assessment to the best of  its               judgment.               (2)   No order of assessment under sub-section               (1)  or under any other provision of this  Act               shall  be made for ,any assessment year  after               the expiry of four years from the end of  such               year.               Provided  that  where the  notice  under  sub-               section  (1) has been served within such  four               years  the assessment or re-assessment  to  be               made in pursuance of such               785               notice may be made within one year of the date               of  the  service  of the notice  even  if  the               period of four-years is thereby exceeded:               Provided  further  that nothing  contained  in               this  section limiting the time  within  which               any  assessment or re-assessment may be  made,               shall apply to an assessment or  re-assessment               made in consequence of, or to give effect  to,               any finding or direction contained in an order               under section 9, 10, or 11.               Explanation.- Under the terms of s. 21 (1) as amended where the  assessing authority  has  reason  to  believe that  any  part  of  the turnover has or any reason escaped assessment to tax for any year, he may make Assessment within four years from the  end of  the year in which the turnover has  escaped  assessment. The  rule is, however, subject to two exceptions:  (i)  when notice  under sub-s. (1) has been served within  four  years the  assessment or re-assessment to be made in pursuance  of such  notice may be made within one year of the date of  the service  of the notice even if the period of four  years  is thereby  exceeded; and (ii) that, nothing contained in s  21 which  limits  the time within which any assessment  or  re- assessment  is  to  be made applies  to  assessment  or  re- assessment made in consequence of, or to give effect to, any finding  or direction contained in an order under ss. 9,  10 or  11.  Therefore where the Sales Tax Officer  proceeds  in pursuance of a direction given by the appellate or  revising authority  or  under an order made by the High  Court  in  a reference  under s. II, the period of limitation  prescribed by  sub-s.  (2) of s. 21 does not apply.  This  section  was incorporated in the Act by s. 15 of the amending Act,  which enacted:               "For  section  21  of the  Principal  Act  the               following  shall  be and be always  deemed  to               have been substituted: " The  amended  section was therefore to be deemed  to  be  in operation  at all material times since the enactment of  the U.P. Sales Tax Act 15 of 1948.  The Legislature has given  a clear retrospective operation to the amended section as from the date on which the principal Act came into operation, and correctness  of the order of the Sales Tax  Officer  holding that there was no bar of limitation to the making of a fresh



assessment  pursuant  to  the  order  of  the  appellate  or revising authority had to be adjudged in the light of s.   21 as  amended  by  Act  19 of 1956.  The  words  used  by  the Legislature are precise and admit of only one interpretation that 786 proceedings   taken  for  assessment  or  re-assessment   in consequence  of,  or  to  give effect to  an  order  of  the appellate  or revising authority or an order passed  by  the High  Court  under s. 11 may be  taken  notwithstanding  the expiry of the period prescribed by sub-s. (2) of s. 21.    Mr.  Pathak  on behalf of the appellant  Company  pleaded that  even  if that be the true interpretation of s.  21  as amended,  the section could only apply to proceedings  which were  pending at the date on which the Act was amended,  but in   law  no  proceeding  was  pending  because  the   Judge (Revisions)  Sales  Tax  had no power to  direct  after  the expiry of the period prescribed under s. 21 as it originally stood  to  make a fresh assessment in respect  of  the  year 1948-49.   There are two clear answers to this plea,  either of  which  is  sufficient  to  reject  it.   The  revisional authority had under s. 10(3) power to make such order as  he thought  fit after calling for and examining the  record  of any order made by an appellate or an assessing authority and after satisfying himself as to the legality or propriety  of such  order.   Even assuming that the  revisional  authority came  to  a conclusion which was erroneous in  law,  it  was still  an order which he had jurisdiction to make  and  that order  unless set aside in a proper proceeding could not  be ignored  on the ground of lack of jurisdiction.  There  was, therefore, a proceeding pending before the Sales Tax Officer in pursuance of the direction given by the Judge (Revisions) Sales  Tax who had directed the Sales Tax Officer to make  a fresh assessment.  Whether in pursuance of this direction, a fresh  assessment  could be made under s. 21 before  it  was amended,  need  not detain us.  We are  concerned  with  the jurisdiction  of  the revising authority to make  the  order that  he did under the section as it stood amended, and  not with  the competence of the assessing authority to  pass  an order  for  assessment  under  the  statute  before  it  was amended.  The other ground is also equally decisive.  By  s. 15  of Act 19 of 1956, s. 21 of the Act as amended, must  be deemed to have been on the statute book on the date on which the  revising  authority passed his order,  and  under  that amended  provision the power of the assessing  authority  to assess  or  re-assess pursuant to an order of  the  revising authority was not lost when the period prescribed by  sub-s. 2  of s. 21 for assessment or re-assessment expired.   Under s.  21,  before it was amended, there could be no  order  of assessment or re-assessment either by the Sales Tax  Officer suo  motu, or pursuant to the direction of the appellate  or revising  authority after the expiry of the period of  three years prescribed by the statute, but under s. 21 as amended, the power may be exercised by the Sales Tax Officer suo motu within four years for assessment or 787 re-assessment.   That  power could be  exercised  under  the first  proviso  within  a further period of one  year  if  a notice under sub-s. (1) was served within four years of  the end of the year of assessment and without limit of time when it  was  made in consequence of, or to give effect  to,  any finding or direction contained in an order of the  appellate or revisional authority or under an order of the High  Court under  S.  11.   In initiating  proceeding  for  assessment, pursuant  to  the direction of the revising  authority,  the



Sales  Tax  Officer  was, by virtue of  S.  21  as  amended, subject to no restrictions as to the period within which the order of assessment could be made.  The order passed by  the High Court must therefore be confirmed.   The appeal fails and is dismissed with costs.   Appeal dismissed. sup,/65-7 788