- Bookmark
- Share
- CaseIQ
Manordas Kalidas v. V.V Tatke
Factual and Procedural Background
The assessees are Messrs Manordas Kalidas, cloth dealers in Bombay and registered dealers under the Bombay Sales Tax Act. For the assessment years 1948–1949 and 1949–1950 (assessment period from 7 October 1948 to 31 March 1950), the Sales Tax Officer (C-I-J Ward, Bombay) assessed the assessees on 4 May 1951 under section 11 of the Bombay Sales Tax Act, 1946, accepting the gross turnover returned by the assessees at Rs. 1,15,50,858-10-3 and determining the sales-tax payable.
On 13 June 1958 the Assistant Collector of Sales Tax issued notices to the assessees alleging suppression of sales of Rs. 20,00,000 from the regular books for 1948–1949 and proposing revision of the earlier orders to incorporate those sales and subject them to tax; a similar notice was issued for 1949–1950.
The assessees applied under Article 226 of the Constitution seeking writs (certiorari or other writs/directions) calling for the records relating to assessment, reassessment or revision for the assessment years 1947–1948, 1948–1949 and 1949–1950 and seeking to set aside the notices; they also sought writs (prohibition or mandamus or other) to restrain the Assistant Collector from taking any action to reassess or enforce the notices. The Assistant Collector appeared and contested the assessees' right to obtain the writs.
Legal Issues Presented
- Whether notices issued by the Assistant Collector in June 1958 purporting to proceed under the form and language of the Bombay Sales Tax Act, 1953, were invalid because the original assessments had been made under the Bombay Sales Tax Act, 1946.
- Whether the notices for revision of assessment, having been issued more than eight years after expiry of the assessment period, were barred by limitation or were issued after an unreasonable lapse of time — specifically in view of section 15 of the Bombay Sales Tax Act, 1953, and the corresponding section 14 of the Sales Tax Act, 1946.
Arguments of the Parties
Assessees' Arguments (as presented by Mr. Mistree)
- The notices were illegal because the assessments being revised were originally made under the Bombay Sales Tax Act, 1946, whereas the notices were issued under provisions (forms/references) of the Bombay Sales Tax Act, 1953.
- The notices were barred by limitation: they were issued more than eight years after the assessment period and therefore inconsistent with the limitation provisions in s. 15 of the 1953 Act and the corresponding s. 14 of the 1946 Act; in any event the notices were issued after an unreasonable lapse of time.
Assistant Collector (Respondent)
- The Assistant Collector appeared and challenged the assessees' entitlement to the writs; the opinion records that he contested the right of the assessees to obtain the relief sought (no detailed separate argumentation by the Assistant Collector is set out in the opinion).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Comr. I.T. v. Narsee Nagsee & Co., 1956 58 Bom. L.R. 950 | Held that a notice calling for a return under the Business Profits Tax Act may not validly issue after the expiry of the period prescribed by the Legislature for re-assessment; even where no express time is prescribed for the notice, statutory powers must be exercised reasonably and a notice issued beyond the re-assessment period was held to be beyond the statutory authority. | The Court referred to this principle and observed that, by analogy, a limitation (or reasonableness) is implied for notices under tax statutes: a notice issued after the period for re-assessment would be beyond a reasonable period. The present Court applied the principle to the interpretation of revisional jurisdiction, observing the same rationale should apply. |
| Messrs Bisesar House v. The State of Bombay, 1958 60 Bom. L.R. 1395 (Full Bench) | Dealt with provisions analogous to the Sales Tax Act and held that, although no period was prescribed for issuance of a notice under s.11(2), because re-assessment under s.11A could not be made after three years, a notice under s.11(2) issued more than three years after the relevant period was incompetent. | The Court cited this full-bench decision as applying the principle from Narsee Nagsee's case to Sales Tax law; the present Court stated that the same principle must apply to revisional jurisdiction — i.e., revisional power must be exercised within a reasonable period, measured by the period prescribed for re-assessment. |
Court's Reasoning and Analysis
The Court proceeded in stages and gave a step-by-step legal analysis grounded in statute and prior authorities as follows:
- Character of the notices: The Court held that the mere use of the form or heading prescribed by the 1953 Act (specifically form No. XXIV and references to s.31 of the 1953 Act) did not alter the true character of the notices. The Assistant Collector had authority under the Act of 1946 to issue notices of the type impugned; and in the absence of any statement in the body of the notices that they were issued under the 1953 Act, they were not unauthorised simply because the form resembled that of the 1953 Act.
- Effect of repeal and transitional provision: The Court analysed s.48 of the Bombay Sales Tax Act, 1953 (subsections (1) and (2)). Sub-s. (1) repealed the 1946 Act. Sub-s. (2) preserved rights, obligations and liabilities already accrued under the 1946 Act and provided that recovery of taxes or penalties which became payable under the 1946 Act shall be assessed, imposed and recovered in accordance with the provisions of the 1953 Act. On that basis the Court concluded the Assistant Collector had authority to issue the notices and to conduct re-assessment proceedings under the 1953 Act in respect of liabilities that had arisen under the 1946 Act.
- Precedent on implied limitation and reasonable exercise of power: The Court reviewed two prior decisions (Comr. I.T. v. Narsee Nagsee & Co. and Messrs Bisesar House v. The State of Bombay) which had held that even where a taxing statute did not expressly limit the time for issuing a notice calling for a return, a limitation is implied and a notice issued after the period prescribed for re-assessment is beyond a reasonable exercise of statutory power. The Court stated that the rationale of those cases applies equally to revisional jurisdiction: revisional power must be exercised within a reasonable period, with the statutory period for re-assessment serving as the yardstick.
- Effect of legislative amendment (Act XXII of 1959): The Court then examined Act XXII of 1959, which amended s.15 of the 1953 Act. The amendment renumbered s.15 and inserted sub-s. (2), which (a) provided that nothing in sub-s. (1) shall apply to any proceeding (including any notice issued) under s.14 or s.31, and (b) declared that the validity of such proceedings or notices shall not be questioned merely on the ground that they were inconsistent with sub-s. (1), and (c) stated that notwithstanding any judgment, decree or order of a Court or Tribunal, sub-s. (1) shall be deemed never to have been applicable to such proceedings or notices.
- Interaction of the antecedent judicial principle with the amendment: The Court observed that by enacting sub-s. (2) of s.15 the Legislature had expressly superseded the judicial rule adopted in the prior cases (which would have implied a limitation for notices and revisional action). The amendment was given the widest retrospective operation in the opinion — it was read to validate proceedings and notices under s.14 and s.31 even if they would previously have been inconsistent with s.15(1) or earlier judicial pronouncements. Thus, the legislative change removed the implied limitation that the Court earlier would have applied to revisional jurisdiction.
- Conclusion on entitlement to writ: In light of the statutory preservation and transitional provisions and the retrospective amendment effected by Act XXII of 1959, the Court concluded that the assessees had not made out a case for issuance of writs and that their petition must fail.
Holding and Implications
Holding: Petition dismissed.
Implications:
- The assessees' challenge to the validity of the Assistant Collector's notices (challenging form/character and limitation/unreasonable delay) was rejected; the notices were held not to be unauthorised on the grounds argued.
- The Court held that the transitional and saving provisions in s.48(2) of the 1953 Act empowered the Collector (and Assistant Collector) to proceed under the 1953 Act to assess, impose and recover taxes or penalties which had become payable under the 1946 Act.
- By reason of Act XXII of 1959 (the amendment to s.15 of the 1953 Act), the prior judicial principle implying a limitation period for notices and revisional proceedings (as applied in Narsee Nagsee and Bisesar House) was expressly superseded by the Legislature, and the amendment was given retrospective effect so as to validate proceedings and notices under ss.14 and 31 even if they would have been inconsistent with the earlier version of s.15.
- Direct effect on the parties: the Assistant Collector was not restrained from proceeding with reassessment/revision; the writs sought by the assessees were denied. The Court ordered that, having regard to the circumstances, there would be no order as to costs of the application.
Solicitors for the petitioner: Bustomji & Ginwalla. Solicitors for the respondents: Little & Co. (as recorded in the opinion).
Shah, J.:— Messrs Manordas Kalidas, who will hereafter be referred to as “the assessees”, carry on busines in cloth in Bombay, and are registered dealers under the Bombay Sales Tax Act. For the assessment years 1948–1949 and 1949–1950 corresponding to the assessment period from October 7, 1948, to March 31, 1950, the Sales Tax Officer, C-I-J Ward, Bombay, assessed the assessees on May 4, 1951, under s. 11 of the Bombay Sales Tax Act, 1946. The Sales Tax Officer accepted the gross turnover returned by the assessees at Rs. 1,15,50,858-10-3 and determined sales-tax payable thereon. On June 13, 1958, the Assistant Collector of Sales Tax issued a notice to the assessees informing them that they had suppressed sales of Rs. 20,00,000 from their regular books of account for the year 1948–1949 and it was proposed to revise the order passed by the Sales Tax Officer for the said year by incorporating and adding sales of Rs. 20,00,000 to the turnover, and subject the same to sales-tax at the rate of one anna in a rupee. A similar notice was also issued on the same day in respect of the year 1949–1950. The assessees then applied under art. 226 of the Constitution of India claiming a writ in the nature of certiorari or other writ, direction or order against the Assistant Collector of Sales Tax calling for the records relating to the assessment, re-assessment or revision of assessment of the assessees for the assessment years 1947–1948, 1948–1949 and 1949–1950, and after making inquiries and looking into the matter, setting aside the notices issued by the Assistant Collector of Sales Tax. The assessees also claimed a writ in the nature of prohibition or mandamus or other writ or direction prohibiting or restraining the Assistant Collector of Sales Tax and his successors in office from taking any action or proceeding for assessment, reassessment or revision of assessment of the assessees in respect of the assessment years 1947–1948, 1948–1949 and 1949–1950 and from enforcing the notices. The Assistant Collector of Sales Tax, who has appeared before us in pursuance of the notice, has challenged the right of the assessees to obtain the writ or writs claimed by them.
2. Mr. Mistree on behalf of the assessees has raised two contentions: (i) that whereas the assessment proceedings for the years in question against the assessees for assessment of sales-tax were taken under the Bombay Sales Tax Act, 1946, the notices to revise the assessment were issued under the provisions of the Bombay Sales Tax Act, 1953, and as such the notices were illegal and could not form, the basis of proceedings for revising the assessments made under the Act of 1946, and (ii) that the notices for revision of assessment were issued more than eight years after the expiry of the period of assessment and in view of the provisions contained in s. 15 of the Bombay Sales Tax Act, 1953, and the corresponding provisions contained in s. 14 of the Sales Tax Act, 1946, they are barred by limitation, and that, in any event, the notices are issued after an unreasonable lapse of time. The two impugned notices were issued in form No. XXIV prescribed under the Sales Tax Act of 1953: and in terms it is stated that it is a “notice to a person when it is proposed to pass an order which affects him adversely under section 31 of the Bombay Sales Tax Act, 1953,” and reference is made to r. 41 of the Bombay Sales Tax (Procedure) Rules, 1954. In the notice itself there is no reference to the provisions of the Act of 1953. The two notices which are substantially in identical terms state that whereas it was proposed to pass an order to the effect “mentioned below” the assessees were informed that if they wished to prefer any objection against such order they should attend either personally or by a legal practitioner or by an agent duly authorised for the purpose at the time and place mentioned in the notice: and the gist of the order proposed to be passed was stated as follows:
“You have suppressed sales of Rs…. from the regular books of accounts for the year … and as such it is proposed to revise the orders passed by the Sales Tax Officer for the said year by incorporating and adding sales of Rs…. subject to sales tax at the rate of one-anna in the rupee.”
3. The mere heading or the use of the form prescribed for issuing a notice for taking action under s. 31 of the Sales Tax Act, 953, will not, in our judgment, alter the true character of the notices issued by the Assistant Collector of Sales Tax. The Assistant Collector of Sales Tax had authority under the Act of 1946 to issue notices of the nature of the impugned notices. Even assuming that the notices had to be issued in exercise of the powers conferred under the Act of 1946, in the absence of any indication in the body of the notices that they were intended to be issued under the Act of 1953 and not under the Act of 1946, the notices were not unauthorised.
4. By sub-s. (1) of s. 48 of the Bombay Sales Tax Act, 1953, the Bombay Sales Tax Act, 1946, was repealed. By sub-s. (2) it is provided that the repeal does not affect or will not be deemed to affect any right, title, obligation or liability already acquired, accrued or incurred, and also the recovery of any tax or penalty which may have become payable under the Act of 1946 and that such taxes or penalties or arrears thereof shall be assessed, imposed and recovered, so far as they may be, in accordance with the provisions of the Act of 1953. Evidently by virtue of the provisions contained in the Sales Tax Act, 1946, the assessees, for any evasion of tax, incurred an obligation to pay that tax, liability to pay which had arisen by reason of the sales effected but of which the particulars were concealed. The repeal of that Act does not, by virtue of the provision contained in s. 48(2), affect that obligation: and the recovery of that tax which was payable under the Act of 1946 is, by the express provision made in s. 48(2), not affected by the repeal of the Act of 1946, and all such taxes are to be assessed, imposed and recovered in accordance with the provisions of the Act of 1953. The Assistant Collector of Sales Tax had, therefore, authority to issue the notices and to conduct the proceedings for re-assessment of the liability, if any, of the assessees under the Act of 1953.
5. To appreciate the second contention, it is necessary to set out certain provisions of the Sales Tax Acts of 1946 and 1953. By s. 10 of the Act of 1946 it was provided that every dealer who may be required so to do by the Commissioner by notice served in the prescribed manner and every registered dealer shall furnish such returns by such dates and to such authority as may be preserved. By s. 11 the procedure for assessment of taxes was prescribed. Authority was given under that section to the Commissioner to make “best judgment-assessment” in certain specified cases. There was no provision enacted by the Sales Tax Act, 1946, about the period within which the notice requiring a dealer or a registered dealer to make a return was to be issued. By s. 11A, which was added by Act I of 1949, authority was given to the Collector to issue a notice within the period prescribed, where that Officer was satisfied that any turnover in respect of sales or supplies of any goods chargeable to tax under the Act had escaped assessment in any year or had been under-assessed or assessed at a lower rate or any deductions had been made wrongly therefrom and in any case where the Collector had reason to believe that the dealer had concealed the particulars of such sales or supplies or deliberately furnished incorrect returns. By that section authority was also conferred upon the Collector to proceed to assess or re-assess the tax due by such dealer and the provisions of the Act were to apply as if the notice were one served under s. 11. Even though no period was prescribed for issue of a notice under s. 11, re-assessment under s. 11A could be made within the period of five years or three years as prescribed,. By s. 22 power was conferred upon the Collector, subject to the rules which may be prescribed and for reasons to be recorded in writing, either upon application or of his own motion, to revise any order passed under the Act or the rules made thereunder by a person appointed under s. 3 to assist him. By this provision authority was evidently conferred upon the Collector to revise the orders of his subordinates who were authorised to act as Sales Tax Officers, but the Legislature did not prescribe any period for revising the orders of the subordinate authorities when the Collector proceeded suo motu. Under the Bombay Sales Tax Act, 1953, the corresponding provision relating to the making of returns was s. 13; the provision relating to the assessment of taxes was s. 14 and the provision relating to the issue of notice and re-assessment of dealers in respect of turnover escaping assessment was s. 15. By s. 31 authority was conferred upon the Collector, subject to the rules prescribed and for reasons to be recorded in writing, to revise the orders passed under the Act or the rules made-thereunder by a person appointed under s. 3 to assist him.
6. This Court has taken the view in Comr. I.T v. Narsee Nagsee & Co. . 1956 58 Bom. L.R 950., dealing with provisions which are analogous to those of the Sales Tax Act, that a notice calling for a return from a tax-payer under the Business Profits Tax Act may not issue after the expiry of the period prescribed by the Legislature for re-assessment. It was hold in that case that even though the Legislature had not prescribed any period for issuing a notice calling for a return, inasmuch as the Legislature had prescribed a period of four years from the close of the accounting period for re-assessment, the notice issued more than four years after the close of the accounting period was beyond the time mentioned in s. 14 of the Business Profits Tax Act and hence the notice was not a valid notice under s. 11 of that Act. Chagla, C.J observed (at p. 954 of the report):
“…although the Legislature has not imposed any limitation of time with regard to the issue of a notice under s. 11 and although as a canon of construction it may be said that if the Legislature has not imposed any limitation it is not for the Court to restrict the power conferred by the Legislature upon the Income-tax Officer, it is well settled that if statutory powers are conferred upon an authority, the Court must hold that those statutory powers must be exercised reasonably, and, in our opinion, if statutory power is conferred upon the Income-tax Officer to issue a notice for the purpose of assesment under s. 11, that power must be exercised reasonably, and looking to the provisions of s. 14 it could not be said that when the Income-tax Officer issued this notice four years after the close of the chargeable accounting period he was exercising, his statutory authority in a reasonable manner,”.
7. In the view of the learned Chief Justice eventhough the Legislature had not prescribed any period for issuing a notice calling for return, a notice issued’ after the expiry of the period prescribed for re-assessment was a notice issued’ beyond a reasonable period and, therefore, unauthorised. This view, which was expressed in considering the scheme of the Business Profits Tax Act, was-adopted by the learned Chief Justice in dealing with a case under the Sales Tax Act. In Messrs Bisesar, House v. The State Of Bombay* . 1958 60 Bom. L.R 1395, F.B. a full bench of this Court held that eventhough no period of limitation was proscribed for issue of a notice under s. 11(2) of the Central Provinces and Berar Sales Tax Act, 1947, calling for a return from a dealer, because an order for re-assessment under s. 11A may not be made after the expiry of three years, the notice under s. 11(2) issued more than three years after the expiry of the period for which it was proposed to make the assessment was incompetent. Chagla, C.J, who delivered the judgment of the Court in that case, applied the principle of the case in Comr. I.T v. Narsee Nargsce & Co., to the interpretation of s. 11 of the Central Provinces & Berar Sales Tax Act. In both the aforesaid cases the Court took the view that eventhough not expressly prescribed, a period of limitation for the issue of a notice calling for a return must be regarded as implied when the Legislature has prescribed a period of limitation for re-assessment of escaped income. In neither of those two cases revisional powers were sought to be exercised, but the principle of those cases must, in our judgment, apply for the same reasons to the exercise of revisional jurisdiction, and that jurisdiction must be exercised within a reasonable period, and the yardstick of reasonableness will be the period prescribed for re-assessment.
8. If the Legislature had not intervened, we might have held that the notices issued beyond the period prescribed by s. 11A of the Bombay Sales Tax Act, 1946, or by s. 15 of the Act of 1953, were invalid and no proceeding for review or revision could lie at the instance of the Assistant Collector of Sales Tax. But the Legislature has by Act XXII of 1959 amended the Bombay Bales Tax Act, 1953. By s. 3 of Act XXII of 1959 it is provided that—
“Section 15 of the Bombay Sales Tax Act shall be renumbered as sub-section (1) of that section, and in that section after sub-section (1), the following sub-section shall be inserted, namely:—
‘(2)(a) Nothing in sub-section (1),—
(i) shall apply to any proceeding (including any notice issued) under section 14 or 31, and
(ii) notwithstanding any judgment, decree or order of a Court or Tribunal, shall be deemed ever to have been applicable to such proceeding or notice.
(b) The validity of any such proceeding or notice shall not be called in question merely on the ground that such proceeding or notice was inconsistent with the provisions of sub-section (1)’.”
9. On the principle of the two cases, to which we have referred, the taxing authority was obliged to issue a notice requiring a dealer to make a return within the period prescribed by s. 15 of the Bombay Sales Tax Act before it was amended, but the Legislature has now expressly provided by sub-s. (2) of s. 15 that nothing in s. 15 as it originally stood shall apply to any proceeding under s. 14. Evidently since the enactment of Act XXII of 1959, the principle applied by this Court in the interpretation of provisions relating to calling for a return, even though no period of limitation has been prescribed in that behalf by a taxing statute, must be regarded as superseded. The Legislature has also referred to s. 31 in sub-s. (2)(a)(i) of s. 15 as amended, and by that reference evidently the view which we have taken, viz., that the power of revision has to be exercised within a reasonable period and such period is not to exceed the period prescribed by s. 15 as it originally stood, must also be regarded as superseded. Clause (a) (i) of sub-s. (2) of s. 15 is undoubtedly prospective in terms, but by cl. (b) of sub-s. (2) the validity of any such proceeding or notice is not liable to be called in question merely on the ground that such proceeding or notice was inconsistent with sub-s. (1). It is again provided by cl. (a) (ii) of sub-s. (2) that notwithstanding any judgment, decree or order of a Court or Tribunal, nothing in sab-s. (1) shall be deemed ever to have been applicable to such proceeding or notice. The widest retrospective operation is, therefore, given to cl. (a)(i) of sub-s. (2) of s. 15. The retrospective operation is given to all proceedings and notices and even to proceedings which have been concluded by judgments, decrees or orders of Courts or Tribunals. It is evident that the Legislature intended by the amendment that in construing the provisions of s. 31 of the Bombay Sales Tax Act, 1953, the obligation to initiate proceedings within the period not longer than the period prescribed by s. 15 will not be implied.
10. Mr. Mistree for the assessees contends that even on that view, the role that revisional jurisdiction will be exercised within a reasonable period is not abrogated by legislation. But by s. 31 no period has been prescribed for the exercise suo motu of the jurisdiction of the Collector to revise the order of authorities appointed under s. 3: and by Act XXII of 1959 the rule of interpretation adopted by this Court in Narsee Nagsee's case and applied in case under the Sales Tax Act has been expressly superseded.
11. We are, therefore, of the view that the petitioners have made out no case for the issue of a writ.
12. The petition fails and is dismissed. Having regard to the circumstances, there will be no order as to costs of this application.
Solicitors for the petitioner: Bustomji & Ginwalla.
Solicitors for the respondents: Little & Co.
13. Petition dismissed.
Sales Tax Act.Alert