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PETITIONER: SUPERINTENDENT OF TAXES, TEZPUR AND ORS.

       Vs.

RESPONDENT: M/s.  BORMAHAJAN TEA CO.  LTD.

DATE OF JUDGMENT17/01/1978

BENCH: KAILASAM, P.S. BENCH: KAILASAM, P.S. UNTWALIA, N.L.

CITATION:  1978 AIR  533            1978 SCR  (2) 573  1978 SCC  (1) 513

ACT: Constitution  of India Art. 136-The discretion of the  Court at  the  final  hearing to decide whether  the  court  would interfere   taking   the   totality  of   the   facts   into consideration. Assam  Taxation  (On  Goods Carried by  Road  or  on  Inland Waterways) Act. 1961.  Section 7, 9, 11, 20-The return filed beyond  the period prescribed whether non est.-Return  filed without  payment  of the tax due whether  non  est.--Whether Revenue  can  treat  the return as  invalid  and  thereafter contend before this Court that the return was valid.

HEADNOTE: The  respondent is an assessee under the Assam Taxation  (On Goods  Carried  by Road or on Inland Waterways)  Act,  1961. The  respondent  in C. A. 602 of 1974 submitted  the  return under  section  7(1)  of  the  Act  for  the  period  ending September 30, 1960, without paying the tax on the return  as required under section 20(2) of the Act.  The respondent  in C.  A.  No. 603 of 1974 submitted his return  under  section 7(1) for the quarter ending 31st December 1960.  The  return was  filed  beyond  the period of 30  days  as  required  by section 7(3).  No tax was paid along with the submission  of the  return  in this case also.  The  assessing  authorities treated   the  returns  filed  as  invalid  and   therefore, proceeded with the best judgment assessment.  The  assessing authorities passed assessment orders in both the cases under section  9(4) of the Act.  No notices either  under  section 7(2)  or  section 11 of the Act were served on  the  respon- dents. The  respondent filed a Writ Petition in the High Court  and challenged the assessment orders on the grounds 1.Since  the return was filed without depositing the  tax in both cases and filed beyond time in one case the  returns are  not returns within the meaning of section 7(1)  and  no assessment proceedings can be made on that. 2.Since  no  notice as contemplated by section  7(2)  and section  11 of the Act directing the assessee to show  cause why  assessment proceedings should not be  initiated  within two  years from the date of the expiry of the return  period ,:as  issued no proceedings could be validly initiated ,is it had become time-barred under section 7(2) of the Act.

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The  appellant  contended  that the  demand  by  the  Taxing Officer  under  section 9(3) of the Act is in  pursuance  of the return filed voluntarily by the assessee though  without payment of the tax and that it can be taken as a return  and assessment made under section 9 of the Act. The High Court held that under section 7(1) the return  must be submitted within a period of 30 days after the completion of  the return quarter and that the return  submitted  after the  statutory  period must be held to be non  est  for  the purpose  of  initiating assessment  proceedings.   The  High Court  also  held  that the  return  submitted  without  the payment   of  due  on  the  return  which  is  a   mandatory requirement  makes  the return non est  and,  therefore,  no further  proceedings  could  be taken on  such  a  defective return. In appeal by Special Leave the appellant contended 574               1.    The  High Court was in error in  holding               that the return submitted by the respondent is               non est.               2.    The return is complete and valid when it               is submitted in such form to such  authorities               as  prescribed by the rule and the  fact  that               there  was  any defect in the return  such  as               nonpayment of tax required under section 20(2)               or delay in filing the return within the  time               prescribed  under section 7(3) does  not  make               the return non est. The  respondent contended that this Court should  not  allow the  plea  put forward on behalf of the appellant  that  the return  was  a  valid  one  as  it  was  admitted  that  the assessment  did not proceed on the return  submitted.   That the appellant treated both the returns as invalid ones; that the Tax Authorities cannot be allowed to change their  front and submit that they proceeded on the ?oasis of the  returns furnished by the respondent. Dismissing the appeal, the Court HELD : 1. On a reading of section 7(1) and section 20(2)  of the Act it cannot be said that the submission of the learned Counsel for the appellant that it is not necessary that  the tax  should  be  paid before valid return  is  submitted  is without   substance.    This  Court  in  the   decision   of Superintendent  of Taxes v. Onkarmal Nathman has  held  that before  proceedings could be taken under section 9(4) it  is mandatory  that  notice under section 7(2) will have  to  be issued. Therefore,  the  only  approach which is  available  to  the appellant  and which has been taken by it before this  Court is  that the assessment proceedings are valid as the  return is  not non est.  This Court should not allow the  appellant to  take this plea-.  It was admitted before the High  Court that  the  assessment was not based on  the  returns  filed. This  Court  under Article 136 of  the  Constitution  cannot permit the State to contend that it can proceed on the basis that the returns were valid especially when the plea  before the High Court was that the returns were invalid. [579 A, D, F-G] Superintendent of Taxes, Dhubri and Ors. v. Onkarmal Nathmal Trust etc. 1975 Supp.  S.C.R. 365 at p. 375 referred to. 2.The   exercise   of  powers  under   Article   136   is discretionary.   Even though there may be substance  in  the argument  put forward on behalf of the appellant  the  Court taking  the  totality of the circumstances  may  decline  to interfere in an appeal by special leave. [579 G-H, 580 A] Trivedi  v. Nagrashra, [1961] 1 SCR 113 at 117 and State  of

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Gujarat  and  Ors.  v. Gujarat Revenue  Tribunal  and  Ors., [1976] 3 SCR 565 at 578, followed. The  Court found that on the facts of the case the court  is not called upon to decide this question. [579 A]

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  602  and 603 of 1974. Appeals by Special Leave, from the Judgment and Order  dated the  3rd July, 1973 of the, Assam & Nagaland High  Court  in Civil Rule Nos. 1000 and 1001 of 1969. L.   N. Sinha and S. N. Chowdhary for the Appellant. A.   K.  Sen,  J. P. Bhattacharjee, P. H.  Parekh  and  Miss Manju Jetley for Respondent. The Judgment of the Court was delivered by KAILASAM,   J.   These   appeals  are   preferred   by   the Superintendent  of Taxes, Tezpur, by special  leave  against the judgment and order passed 575 by the High Court of Assam and Nagaland at Gauhati in- Civil Rule Nos. 1000 and 1001 of 1969. The  respondent is M/s.  Bormahajan Tea Co,.  Ltd.,  who  is assessee under the Assam Taxation (On Goods Carried by  Road or on Inland Water-ways) Act, 1961.  The Assam Taxation  (On Goods  Carried  by Road or on Inland  Water-ways)  Act  was passed in 19 5 4. The validity of the Act was challenged  by various parties before the Assam High Court and this  Court. This Court on September 26, 1960 held that-the Act was ultra vires  of the Constitution as the previous sanction  of  the President  was not taken as required under Art. 304  of  the Constitution.  The present Act, The Assam Taxation (On Goods Carried by Road or Inland Water-ways) Act, 1961 (hereinafter called  as "the Act"), was passed by the  Assam  Legislature with  the  sanction  of the President  for  the  purpose  of validating the tax that had been imposed under the 1954  Act The Act received the assent of the President.., on April  6, 1961  and was published in the Assam Gazette on  April,  15, 1961 and was to be in force only up to March. 31, 1962.  The Validity of this Act was also challenged and the High  Court of  Assam by its order dated August 1, 1963 held  that  this Act was also ultra vires.  The State Government appealed  to this  Court  against this judgment.  While  the  appeal  was pending  before  this  Court two  writ  petitions  filed  by different assessees under Art. 32 of the Constitution before this  Court  were disposed of on December 13,  1963  holding that  the  Act  was valid.  On an application  made  by  the Government  of  Assam pending the appeal against  the  order dated  August  1, 1963 of the Assam High  Court  this  Court granted  stay of the operation of the judgment of  the  High Court and on January 29, 1965 made the stay absolute subject to  the  condition that the  assessment  proceedings,  could continue but no levy should be made.  On April 1, 1968  this Court  reversed  the judgment dated August 1,  1963  of  the Assam  High  Court  and held the present Act  to  be  valid. Though the present Act was passed in 1961 as the matter  was pending  before the Courts the assessment proceedings  could not  be  taken  up till January 29,  1965  when  this  Court allowed the assessment proceedings to be continued. The  two appeals before us relate to the assessment  quarter ending  September 30, 1960 and December 31, 1960.  In  Civil Rule No. 1000 of 1969, Assam High Court, out of which  Civil Appeal  No.  602  of  1974 before  this  Court  arises,  the respondent company submitted the return on October 27,  1960

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under  section  7(1)  of  the  Act  for  the  period  ending September  30,  1960.  The respondent submitted  the  return without  paying tax on the return as required under  section 20  (2) of the Act.  In Civil Rule No. 1001 of 1969  in  the Assam High Court, out of which Civil Appeal No. 603 of  1974 arises in this Court, the respondent submitted a return  on February  14, 1961 for the quarter ending December 31,  1960 under,  section 7(1) of the Act.  The return  under  section 7(1) has to be, submitted under section 7(3) within 30  days of  the  completion of the quarter in respect of  which  the returns  are  to be filed.  In this return also  no  tax  as required was paid prior to the submission of the return.  It may be noted that 576 while in Civil Appeal, No. 602 of 1974 the return was  filed within time but without payment of tax, in Civil Appeal  No. 603  of 1974 the return was filed out of time and  without payment of the tax. Orders of assessments were passed in both the cases on  June 19,  1969 in pursuance of the provisions of section 9(4)  of the Act.  It is the common case that no notice either  under section  7(2)  or Section 1 1 of the Act was served  on  the respondent for the submission of the return for the periods in  question.   In the High Court  the  respondent-submitted that  order  of assessment made by the Revenue on  June  19, 1969  is not valid in law on two grounds.  Firstly,  it  was contended that as the return in Civil Rule No. 1000 of  1969 was  filed  without  the necessary deposit of  the  tax  the return  is not a return within the meaning of  section  7(1) and  no assessment proceedings can be taken on that, It  was further  submitted that as no notice as  contemplated  under section  7(2)  and  section  11 of  the  Act  directing  the assessee to show cause why assessment proceedings should not be  initiated within 2 years from the date of the expiry  of the  return  period was issued,  no  assessment  proceedings could  be validly initiated as. it became time-barred  under section  7(2)  of  the  Act.  The  plea  on  behalf  of  the Government  was that the demand by the taxing officer  under section 9(3) of the Act is in pursuance of the return  filed voluntarily  by the assessee though without payment  of  the tax and out of time and that it can be taken as a return and assessment  made under section 9 of the Act.  In  this  view the  submission  was that it is not necessary  for  the  tax authorities to issue any notice under section 7(2) within  2 years from the date, on which the return ought to have  been submitted.   The High Court held that as under section  7(1) the  return  must be submitted within a period  of  30  days after  the  completion  of the return  quarter,  the  return submitted after the statutory period must be held to be non- est  for  the purpose of initiating  assessment  proceedings based thereon and as no action had been taken, either under section 7 (2) or section 11 of the Act, in the present case, the  assessment  order  dated June 19, 1969  is  beyond  the competence  of the authorities.  With regard to  Civil  Rule No. 1000 of 1969 the High Court came to the same  conclusion on  the  ground  that  though  the  return  was   admittedly submitted  within the prescribed time, the tax due  on  that return  was  not  paid  and as  payment  of  tax   before, furnishing  a  return  under section 7_(1)  of  the  Act  is mandatory  such  failure would result in making  the  return non-est and therefore no further proceedings can be taken or such a defective return.  In the result the High Court  held that  the  return submitted in Civil Rule No. 1000  of  1969 although  within  the,  prescribed period is  not  a  return within  the meaning of section 7(1) and that the  return  in

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Civil Rule No. 1001 of 1969 as it was beyond the  prescribed period and Without payment of tax cannot be treated  as  a return  under section 7(1) of the Act and as  admittedly  no proceedings were taken under section 7(2) of the Act the tax authorities   were  not  competent  to  proceed   with   the assessment. In  the appeals before us Mr. Lal Narain Sinha, the  learned counsel for the appellant, submitted that the High Court was in error in hold- 577 ing that the return submitted by the respondent is non  est. The  learn-, ed  counsel referred to  section  7(1)  which requires that the return shall be furnished in such form and to  such  authorities  as  may be  prescribed  The  form  is prescribed by Assam Taxation (On Goods Carried by Road or on Inland Water-ways) Rules, 1961.  Rule 6 prescribes that  the return shall be furnished in Form No. 1 and Rule 7  requires ,that  return shall be signed and verified by the dealer  or producer or his agent.  Form No. 1 under the Rules  requires in  Column E that ,the amount paid with the Challan No.  and date  should be noted.  Section 20 prescribes the manner  in which  the tax shall be paid.  Section 20(2)  provides  that before any producer or dealer furnishes’the return  required by sub-section (1) of section 7, he shall in the  prescribed manner  pay into the Government Treasury the full amount  of tax due from him under this Act on the basis of such  return and shall furnish along with the returns a receipt from such Treasury  in  token  of payment of  such  tax.   Section  13 provides  penalty for failure to pay tax.  It was  submitted by Mr. Lal Narain Sinha that a return is complete and  valid when  it is submitted in such form and to such authority  as prescribed  by  the Rules and the fact that  there  was  any defect in the return such as non-payment of tax as  required under section 20(2) or delay in filing the return within the time  prescribed  under  section 7(3) the  return  will  not become  non  est.   The consequence of  filing  a  defective return is not to make the return non est but to make the as- sessee  liable  to  penalty under section  13  of  to  other proceedings.   So  long  as ther is  a  return  the  learned counsel  submitted  that it was not necessary  for  the  tax authorities   to  proceed  under  section  7(2)   which   is applicable to cases where no return has been submitted.   In support  of  his contention that any defect  in  the  return would  not  make  the return non est,  the  learned  counsel referred  us  to  three decisions.  A.I.R.  1931  Cal.  476, A.I.R.  1932  P.  C. 165 and 48 I.T.R. 1.  In  Chandra  Nath Bagchi vs.  Nabadwip Chandra Dutt and Others(l) the judgment debtor pleaded want of notice under Order 21, Rule 22 of the Civil  Procedure, Code, which requires that  an  opportunity should  be  given  to  the  judgment-debtors  against   whom execution is taken out more than a year after the decree  to show  cause  why  execution  should  not  proceed.   It  was admitted,  that no such notice was in fact given but as  the judgment-debtor   in  that  case  was  actively   litigating objecting  to  the  execution being taken  against  him,  he cannot  be permitted to plead failure of notice  under  0.21 Rule   22.   Chief  Justice  Rankin  while   accepting   the requirement that a notice under 0.21, Rule 22, is  necessary found  that  in the case before him the  parties  have  been litigating  actively  with  each  other  upon  the  question whether  the  execution  should proceed and  how  it  should proceed.  In the circumstances the learned C. J. observed  : "It  appears  to  me  to  be  merely  piling  unreason  upon technicality  to  hold upon the circumstances of  this  case that it is open to the judgment-debtors on these grounds  to

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object  to the jurisdiction of the Court because  they  have not  got a formal notice to do something, namely to  dispute the execution of the decree when in point of fact they  were busy disputing about it in all the courts for the best  part of the last two years." Relying on the above observation the learned counsel submitted that the respondent who challenged the A.T.R. 1931 Cal. 476. 578  validity  of the assessment for several years and who  have the  return (cannot now contend that the assessment  is  not valid  having been filed beyond time or without  payment  of the tax. In  Nagendra Nath Dey and Anr. vs.  Suresh Chandra  Dey  and Others,(1) the Judicial Committee held that  any,application by a party to an appellate Court, asking it to set aside  or revise  a  decision  of a Subordinate Court,  is  an  appeal within the ordinary acceptation of the term, and that it  is no  less an appeal because it is irregular  or  incompetent. Relying on this decision it was submitted that the return is no less a return though it was defective in that tax was not paid and was presented out of time. In  Gursahari Saigal vs. Commissioner of Income-tax,  Punjab (2)  the Supreme Court was construing section 18A(6) and (8) ofthe  Indian  Income-tax Act,  1922.         Sub-section (6) provided thatwhen  the tax paid on the basis  of  his own  estimate is less than 80% of the tax determined on  the basis of the regular assessment simple interest at the  rate of 6% per annum from the first day of January in the  finan- cial  year in which the tax was paid up to the date  of  the said  regular  assessment shall be payable by  the  assessee upon the amount by which the tax so paid falls short of  the said eighty per cent.  According to the sub-section interest has  to  be calculated from first January in  the  financial year   in  which  the  tax  mentioned  was  paid  and   such calculation  has  to be made on the short-fall  between  the amount  paid  and  80 per cent of the tax  which  was  found payable on the regular assessment.  According to sub-section (8)  where  on  making  the  regular  assessment  Income-tax Officer  finds  that  no payment of tax  has  been  made  in accordance  with  the provisions of this  section,  interest calculated in the manner laid down in sub-section (6) ’shall be,  added to the tax as determined on the basis of  regular assessment.  The assessee’s contention was that since he had not  paid  any tax at all it is not  possible  to  calculate interest  in the manner laid down in sub-section  (6).   The plea  was  that in a case in which no tax had been  paid  at all, sub-section (6) will have no application as there is no short-fall  between  80  per cent of  the  tax  payable,  on regular assessment and the amount actually paid.  The Court rejected  the plea and held that sub-section (6)  should  be read according to the provisions of which interest has to be calculated  as provided in sub-section (8), in farmer  which makes it workable and thereby prevent the clear intention of sub-section (8) being defeated. The  Court  further  held that the intention was that interest should becharged from  first January of the financial year in which  the  tax oughtto have been paid and those who paid the tax but a smaller  amount and those who did not pay tax at  all  would then  be  put in the same position substantially.   On the strength   of  the  decision  it  was  submitted  that   the respondent who had not paid the tax cannot take advantage of his omission and say that the assessment proceedings  cannot be proceeded with on the return submitted. (1)  [1932] P.C. 165.

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(2)  48 I.T.R. 1.  579 On a reading of section 7(1) and section 20(2) of the Act it cannot  be said that the submission of the  learned  counsel for  the  appellant that it is not necessary  that  the  tax should  be paid before valid return is submitted is  without substance.   On  the facts of the case we feel  we  are  not called upon to decide this question.  Certain enactments, as pointed  out  by  the High Court, provide  that  the  return submitted  will  not be valid unless it  is  accompanied  by Treasury  Receipt showing payment of tax  (vide  sub-section (6) of section 19 of the Assam Agricultural Income-tax  Act, 1939).   Section  16  of  the  Assam  Sales-tax  Act,   1947 providesthat no return submitted under this section  shall be valid unless it isaccompanied  by a Treasury  Receipt showing payment of the tax due. Section 7( l) of the  Act merely requires that the return should be furnished in  such form  and  to  such authority as  may  be  prescribed.   The returns  were  admittedly  submitted  to  the   authorities. Though  the form requires mentioning of the  particulars  of the  Treasury  challan for the payment of the  tax,  it  was submitted  that the return furnished without payment of  the tax  cannot  be said to be return at all.   It  was  further pleaded  that the failure to pay the tax as  required  under section 20(2) will not make the return non-est.  We, refrain from deciding this question. Mr.  A.  K. Sen, the learned counsel  for  the,  respondent, submitted  that  this Court should not allow  the  plea  put forward  on  behalf of the appellant that the return  was  a valid  ode  as it was admitted that the assessment  did  not proceed  on  the  return  submitted.   He  referred  to  the judgment  of  the High Court wherein it is stated  :"It  is also  the  admitted  position  in  both  these  cases,   the Superintendent of Taxes treated the returns filed as invalid ones." It was submitted that the tax authorities cannot  now be  allowed  to  change their front  and  submit  that  they proceeded to assess on the basis of the returns furnished by the  respondent.  It is common ground that no  notice  under section 7(2) of the Act within 2 years of the expiry of  the return period was issued to the respondent.  This Court,  by a  majority  in  Supdt.  of Taxes,  Dhubri  and  Others  vs. Onkarmal  Nathmal  Trust  etc.,(1)  has  held  that   before proceedings  could be taken under section 9(4) it is  manda- tory that notice under section 7(2) will have to be  issued. Therefore, the only approach that is available to the  State and which has been taken by the learned counsel, is that the assessment  proceedings are valid as the return is not  non- est.  The question that arises for consideration is  whether we  should allow this plea to be taken by the State when  it admitted  before the High Court that the assessment was  not based on the return.  It has to be seen that the ground that was  urged by the respondent was that the returns were  non- est which was accepted by the High Court. We do not think we will be justified in these  appeals under Art. 136of the Constitution to permit the State to contend that it  can proceed onthe  basis  that  the  returns  were   valid, especially when the plea before the High Court was that  the returns  were invalid. this Court has repeatedly  held  that the  exercise  of power under Art.  1.36  is  discretionary. (vide Trivedi vs.  Nagrashra (2)  In State of Gujarat &  Ors vs. Gujarat Revenue Tribunal & Ors. (3) this Court (1)[1975] Supp.  S.C.R. 365 at p. 375, (2) [1961] S.C.R. 113, 117. (3) [1976] 3 S.C.R. 565, 578. 580

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held that ever though there may be substance in the argument Pat forward on behalf of the appellant the Court taking  the totality of the circumstances may decline to interfere in an appeal filed by special leave of the Court under Art. 136 of the Constitution. In  the result the appeals are dismissed.   No  order as  to costs, P.H.P.                      Appeals dismissed. 581