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PETITIONER: SALES TAX OFFICER & ANR.

       Vs.

RESPONDENT: SUDARSANAM IYENGAR & SONS

DATE OF JUDGMENT: 13/08/1969

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C. (CJ) RAMASWAMI, V.

CITATION:  1970 AIR  311            1970 SCR  (1) 859  1969 SCC  (2) 396

ACT:     Travancore-Cochin General Sales Tax Rules, 1950 Rule  33 Determination and assessment of escaped turnover--Limit   of three  years--Proceedings  for assessment  whether  must  be initiated or finally completed within that period.

HEADNOTE:     The respondent was assessed to sales tax in the State of Kerala  for the year 1962-63 in March, 1964.  In   December, 1965 the Sales Tax Officer issued notice under R. 33 of  the Travancore-Cochin   General  Sales Tax Rules, 1950 in  force at  that time for reopening the original assessment  on  the ground   that  certain  turnover  had  escaped   assessment. According  to  the  relevant portion of the  said  rule  the assessing authority "may at any time within three years next succeeding  that to which the tax relates determine  to  the best  of  his  judgment  the  turnover   which  has  escaped assessment  and  assess the tax payable   on  such  turnover after  issuing a notice to the dealer and after making  such enquiry  as  he  considers  necessary".   The   respondent’s objection  to  the  notice having failed  it  filed  a  writ petition  in the High Court.  The learned Single  Judge  who heard  the writ petition felt that it was due to the  orders of  the  court  that  the Sales  tax  authorities  had  been prevented  from  completing the assessment within  the  time allowed by Rule 33.  While disposing of the writ petition he observed that the Sales Tax Authorities would be at  liberty to complete the proceedings initiated by the notice within a further  period  of 59 days.  The  respondent  preferred  an appeal  to the division bench which set aside the  direction granting  59 days extension for completing  the  assessment. The  Revenue appealed..  On behalf of the appellant  it  was contended  that on a true construction of Rule 33 it  should be  held  that  the proceedings under  that  rule:  have  to commence  within three years next succeeding that  to  which the tax relates and that it is not necessary that the entire proceeding.s  relating to the escaped assessment  should  be completed  within that period.  On behalf of the  respondent it was urged that the word ’determine’ in Rule 33 meant that the  final determination of the turnover which  had  escaped

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assessment  and  the assessment of the tax have to  be  done within three years.  Allowing the appeal. HELD:  In  view of the previous decisions of this  Court  in which  provisions  similar to Rule 33,  namely,  sub-clauses (2),  (4) and (5) of s. 11 of the PUnjab General  Sales  Tax Act, 1948 came up for consideration, the principle is firmly established that assessment proceedings under the Sales  Tax Act  must  be  taken  to  be  pending  from  the  time   the proceedings  are  initiated until they are terminated  by  a final  order of assessment.  In these cases  the  initiation o.f proceedings within the prescribed period was  considered sufficient.   The  fact  that the word used in  Rule  33  is ’determine’  whereas in ss. 11(4) and (5) of the Punjab  Act the  words  ’proceed to assess’ are used,  cannot,   in  the context   of  sales  tax legislation  lead  to  a  different result. r862 H-863 C]     The  words which follow the word ’determine’ in Rule  33 must be accorded their due signification.  The words ’assess the  tax payable’ cannot be ignored and it is clearly  meant that  the  assessment  has  to be  made  within  the  period prescribed. ’Assessment" is a comprehensive word and can 860 denote  the  entirety of proceedings which  are  taken  with regard to it.  It cannot and does not mean a final order  of assessment alone unless there is something in the context of a  particular provision which compels such a  meaning  being attributed  to it.  Rule 33 must not be so interpreted  that it may be defeated by taking certain collateral  proceedings and  obtaining a stay order as was done in the present  case or by unduly delaying assessment proceedings beyond a period of  three years.  It must be interpreted like the  analogous provisions   considered   in  earlier  cases.    This   must particularly be so when there is no provision in the Rule in question analogous to. sub-s. (3) of s. 34 of the Income-tax Act, 1922 by which the Income Tax authorities were  debarred from completing the assessment beyond the period prescribed. [863 D-G]     The State of Punjab v. Tara Chand Lajpat Rai, 19  S.T.C. 493 and The State of Punjab v. Murlidhar Mahabir Prashad, 21 S.T.C. 29 applied.     Ghanshyam  Das  v. Regional  Assistant  Commissioner  of Sales  Tax, Nagpur, [1964] 4 S.C.R. 436., referred to.

JUDGMENT:     CIVIL  APPELLATE  JURISDICTION: Civil  Appeal  No.  1232 1968.     Appeal  by  special leave from the judgment  and  decree dated June 18, 1968 of the Kerala High Court in Writ  Appeal No. 46 of 1967. M.R.K. Pillai, for the appellant. T.A. Ramachandran, for the respondent. The Judgment of the Court was delivered by     Grover,  J.  This is an appeal by special leave  from  a judgment of the Kerala High Court.  The facts may be firstly stated: The respondent was a non-resident dealer carrying on business  in Quilon, Ernakulam and Calicut in the  State  of Kerala.   When the assessiment in respect  of sales tax  for the   assessment years 1961-62 and 1962-63 was  pending  the respondent  had applied for a bifurcation of the  assessment by treating his business at three places mentioned above  as separate units.  This request was acceded to by the Board of Revenue.  The orders of assessment relating to the two years were made in April 1964 and March 1964 respectively.

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   The  Sales Tax Officer issued notices in  December  1965 for  reopening the original  assessment  on the ground  that certain  turnover had escaped assessment.  The objection  of the  respondent  to  these notices  having   failed  a  writ petition seeking  to quash the orders made by the Sales  tax authorities was filed.  A learned Single Judge held that  in respect of the assessment year 1961-62 the Sales Tax Officer had no jurisdiction or authority to proceed under Rule 33 of the  Travancore Cochin General Sales tax Rules,  1950  which were in force ’at the material time.  It was found that  the notice served in December 1965 relating to that 861 assessment  year  was beyond the time limit of  three  years prescribed  by  the rule.  As regards  the  assessment  year 1962-63  the  learned judge held that the time  limit  would expire  on March 31, 1966.  Owing to the writ  petition  and the stay orders which had been made the assessment could not be  completed.  The learned judge felt that it was owing  to the orders of the  court that the Sales tax authorities  had been  prevented from  completing  the assessment within  the time.  While disposing of the writ petition it was  observed that  the  Sales  tax authorities would  be  at  liberty  to complete the proceedings initiated by the notice within  the period  of  59  days  at the  expiry  of  which  the  period prescribed  by  Rule  33  was  to  expire.   The  respondent preferred an appeal to a division bench which set aside  the direction   granting  59 days extension for  completing  the assessment  on  the ground that the same was  not  justified under the law.     Counsel  for the appellant has confined the appeal  only to the proceedings relating to the  assessment year 1962-63. It  is admitted that with regard to the other  year  1961-62 the  proceedings became barred.  It is contended  before  us that  on a  true construction of Rule 33 it should  be  held that  the   proceedings  under that Rule  have  to  commence within  three  years next succeeding that to which  the  tax relates  and  that  it  is not  necessary  that  the  entire proceedings  relating to the escaped  assessment  should  be completed  within  that  period.  In  other  words  if  such proceedings under Rule 33 have been  commenced  within   the period  prescribed  by the rule they can be  continued  even beyond  the  period  of three years till a  final  order  of assessment is made. Reliance has been placed on a number  of decisions  of this Court some of which may be  noticed.   In the  State of Punjab & Ors. v. Tara Chand Lajpat Rai(1)  the question which came up for consideration was that where  the Sales  tax Authority issued 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 finalised the assessment order  after three  years  from  the  aforesaid  date,  whether  such  an assessment could be said to be barred by time.  It was  held that  assessment  proceedings  commenced in the  case  of  a registered dealer either when he furnished a return or  when a notice was issued to him under s. 11(2) of the Punjab  Act and  if  such proceedings were taken within  the  prescribed time,   though the  assessment  was  finalised  subsequently even  after  the   expiry   of   the  prescribed  period  no question  of  limitation  would arise.  In  The   State   of Punjab & Anr. v. Murlidhar Mahabir Prashad(2) the   question of law was whether on a proper interpretation of sub-ss. (4) and (5) of s. 11 of the Punjab. Act the period of limitation was three (1) 19 S.T.C. 493.           (2) 21 S.T.C. 29. 862

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years for making the assessment from the last date on  which the  return  was  to  be  filed  or  whether  the  order  of assessment  was valid even after it was made after a  period of three years provided the necessary notice had been issued within  that period. The aforesaid provision of  the  Punjab Act may be read:                      "11(4)  If a registered dealer,  having               furnished returns in respect of a period fails               to   comply with the terms of a notice  issued               under sub-s. (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.                      (5)  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, proceed               to  assess  to the best of his  judgment,  the               amount of tax, if any, due from the dealer".               Relying   mainly   on  the   observation    in               Ghanshyam    Das   v.    Regional    Assistant               Commissioner  of  Sales Tax,  Nagput(1)   this               Court held that the proceedings for assessment               were valid because the same had been initiated               within the period prescribed  under s. 11 (5).               The  principle laid down in Tara Chand  Lajpat                             Rai’s case(2) was followed.               Rule  33  of the relevant rules  is  in  these               terms:                     Rule  33  (1 ) "If for  any  reason  the               whole   or   any  part  of  the  turnover   of               business of a  dealer or licensee has  escaped               assessment  to  tax in any year   or   if  the               licence fee has escaped levy in any year,  the               assessing authority or licensing authority  as               the  case  may  be, subject to the  provisions               of sub-rule (2) may at  any time within  three               years  next succeeding that to. which the  tax               or  licence fee relates determine to the  best               of his judgment the turnover which has escaped               assessment and assess the tax payable or  levy               the  licence   fee   in  such  turnover  after               issuing  a notice to the  dealer  or  licences               and after making such enquiry as he  considers               necessary." Now  in  view of the previous decisions  the   principle  is firmly  established  that assessment proceedings  under  the Sales  Tax Act must be held to be pending from the time  the proceedings  are  initiated until they are terminated  by  a final  order  of assessment. The distinguishing  feature  on which emphasis has been laid by (1) [1964] 4 S.C.R. 436. (2) 19 S.T.C. 493.             863 the counsel for the respondent is that the language employed in  rule 33 is such as to lead to only one  conclusion  that the  final determination of the turnover which  has  escaped assessment  and  the assessment of the tax have to  be  done within  three  years.  It is pointed out that in  the  other Sales tax provisions which came up for consideration in  the cases mentioned  above  the  words employed were "proceed to assess"  e.g.,  sub-ss. (4) and (5) of s. 11 of  the  Punjab

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General  Sales Tax Act.  Our attention has been  invited  to the appropriate dictionary  meaning of the word  "determine" which  is  "to  settle  or decide--to  come  to  a  judicial decision--(Shorter   Oxford  English  Dictionary).   It   is suggested that the word "determine" was employed in Rule  33 with a definite intention to set the limit within which  the final order in the matter of assessment should be made,  the limit being three years. We find it difficult to accept that in the context of sales tax legislation the use of the words "proceed to assess" and "determine" would lead to  different consequences or result.  In this connection the words  which follow  the  word "determine" in Rule 33  must  be  accorded their due signification.  The words "assess the tax payable" cannot  be  ignored  and it is   clearly  meant   that   the assessment  has  to be made within  the  period  prescribed. Assessment  is  a  comprehensive word  and  can  denote  the entirety  of proceedings which are taken with regard to  it. It  cannot  and does not mean a final  order  of  assessment alone  unless  there  is  some thing in  the  context  of  a particular  provision  which compels such  a  meaning  being attributed  to it.  In our judgment despite the  phraseology employed  in  Rule 33 the principle which has been  laid  in other  cases relating to analogous provisions in  sales  tax statutes  must  be followed as otherwise the  purpose  of  a provision like Rule 33 can be completely defeated by  taking certain   collateral proceedings and obtaining a stay  order as  was  done  in the present case  or  by  unduly  delaying assessment proceedings beyond a period of three years.    It  is undoubtedly open to. the legislature or  the  rule making  authority to make its intention quite clear that  on the  expiry  of  a  specified  period  no  final  order   of assessment  can  be  made.  Then  taxing  authorities  would certainly be debarred from completing the assessment  beyond the period prescribed as was the case in sub-s. (3) of s. 34 of  the Income tax Act, 1922, but such is not the case  here and  we would hold that the assessment proceedings  relating to the year 1962-63 were within time.  The appeal is allowed and the Judgment of the High Court is set  aside.   The case shall g0 back to the High  Court  for disposal of such points as were previously not decided.   In terms  of  the  previous  order dated  April  3,  1969,  the respondents shall be entitled to costs in this Court. G.C. L15Sup.CI/--11                             Appeal allowed. 864