Citation Codes

Equivalent Citations

citation codes

Case Number

Misc. Petn. No. 211 of 1965

Advocates

K.K.Dubey
J.S.Verma

Judges

K.L Pandey
A.P Sen, JJ.

Acts

Section 39(2) of the Madhya Pradesh General Sales Tax Act, 1958, read with Section 22(5) of the C. P. and Berar Sales Tax Act, 1947.
Section 11(3) of the C. P. and Berar Sales Tax Act (Act XXI of 1947),
MADHYA PRADESH GENERAL SALES TAX ACT 1958
Section 22-B of the C. P. and Berar Sales Tax Act
Section 52 of the new Act that the repealed Act
C. P. and Berar Sales Tax Act, 1947.
Section 22(5) of the repealed Act.
Section 11-A and Section 22-B
Section 39(2) of the new Act.
Section 52(1) of the new Act.
Section 52 of the new Act."
Rule 80 of the Rules
Section 22-B

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The applicant, G. C. Mehta, a P. W. D. contractor, filed an application under Article 226 seeking a writ in the nature of prohibition and other reliefs in respect of a notice issued by the Commissioner of Sales Tax, Madhya Pradesh.

The applicant was originally assessed for the period 1 April 1953 to 31 March 1954 by an order dated 13 October 1954 of the Sales Tax Officer, Satna, under Section 11(3) of the C. P. and Berar Sales Tax Act (as extended to the Vindhya Pradesh region). The Sales Tax Officer reviewed that assessment and passed a fresh assessment order. That process resulted in a finding that the applicant had paid Rs. 6,900 in excess; the applicant applied for a refund.

During these proceedings, the Assistant Commissioner of Sales Tax acted suo motu and revised the assessment by an order dated 1 October 1957, fixing the resultant tax payable at Rs. 6,825/9/-, with an excess payment of Rs. 1,977/6/6. On appeal the Deputy Commissioner enhanced the tax from Rs. 7,662/1/- to Rs. 14,561/10/-. The applicant then moved the Tribunal in revision.

The Tribunal accepted the applicant's contention that enhancement in revision by the Assistant Commissioner lacked jurisdiction because no notice required under Rule 80 of the Rules had been issued. The Tribunal quashed the enhancement proceedings, set aside the orders of the Assistant and Deputy Commissioners, and restored the original order of assessment.

Subsequently, the Commissioner of Sales Tax issued a notice under Rule 80 dated 8 January 1965 / 4 March 1965 proposing to pass an order suo motu in revision under Section 39(2) of the Madhya Pradesh General Sales Tax Act, 1958, read with Section 22(5) of the C. P. and Berar Sales Tax Act, 1947, to levy tax of Rs. 14,387/10/- on a taxable turnover of Rs. 4,69,395. The applicant challenged the initiation of these proceedings as being in excess of jurisdiction because nearly ten years had elapsed since the original assessment.

Legal Issues Presented

Whether initiation of suo motu revisional proceedings by the Commissioner to enhance a 1954–55 assessment after nearly ten years is in excess of jurisdiction.
Whether the revisional power under Section 22(5) of the C. P. and Berar Sales Tax Act can be invoked to tax turnover that "escaped assessment" or was "assessed at a lower rate" after the period fixed by Section 11‑A has expired.
Whether, after repeal of the C. P. and Berar Sales Tax Act and enactment of the Madhya Pradesh General Sales Tax Act, 1958, the Commissioner’s power to initiate proceedings suo motu is governed and limited by Section 39(2) of the new Act (including its proviso limiting initiation to within three years from the date of the order sought to be revised).
Whether the saving/fictitious provisions of Section 52(1) of the new Act operate to prevent reassessment where the period fixed under Section 11‑A of the repealed Act has expired.

Arguments of the Parties

Applicant's Arguments

The initiation of revisional proceedings by the Commissioner in January/March 1965 to enhance an assessment made in 1954–55 (after nearly 10 years) was beyond jurisdiction.
Under the repealed C. P. and Berar Sales Tax Act, Section 11‑A limited the window to three calendar years for bringing turnover which had escaped assessment or been assessed at a lower rate to tax, so revision under Section 22(5) could not be invoked after that period.
After repeal and the new Act coming into force, Section 39(2) of the new Act (with its proviso) restricted initiation of revisional proceedings to within three years; a notice issued beyond that period is invalid.
Section 52(1) of the new Act creates a legal fiction that preserves rights and liabilities under the repealed Act; as such, the applicant acquired a right not to be reassessed after expiry of the period in Section 11‑A of the repealed Act.

The opinion does not contain a detailed account of the respondent's counter-arguments in the text provided.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Purushottam Kalidas v. Commissioner of Sales-tax, 1961 MPLJ 35	Interpreting Section 22‑B; the power of revision under Section 22‑B cannot be exercised to tax turnover which escaped assessment when the limitation period under Section 11‑A (three years) has elapsed.	The court expressly stated full accord with this view and applied the principle that Section 22(5) (analogous to Section 22‑B) cannot be invoked to deal with turnover falling within the ambit of Section 11‑A after the limitation period has expired.
Commissioner of Income Tax v. Khemchand Ramdas, AIR 1938 P.C. 175 (Privy Council)	General principle that a taxing officer's power to reopen a final assessment is subject to statutory conditions and time-limits; a final assessment cannot be reopened except in circumstances and within time‑limits detailed by statute.	The decision was used to fortify the view that the Commissioner's revisional power is not unlimited in time and must be exercised subject to statutory limits and conditions.
The Sales Tax Officer, Jabalpur v. Hanuman Prasad, 1967 MPLJ 138 = (AIR 1967 SC 5651)	Held that the period of reassessment on grounds of under-assessment/escapement or wrong deduction had to be as provided in section 11‑A(1) of the repealed Act (three years).	The court relied on this decision to support the conclusion that reassessment is time-barred where the statutory period under the repealed Act has expired, and that the saving/fictitious provision in Section 52 of the new Act preserves rights and liabilities accrued under the repealed Act.

Court's Reasoning and Analysis

The court's analysis proceeded by reference to the statutory scheme of the repealed C. P. and Berar Sales Tax Act and the later Madhya Pradesh General Sales Tax Act, 1958, and by application of prior case law cited in the opinion.

Under the repealed Act the Commissioner’s suo motu revisional power to enhance an assessment under Section 22(5) was controlled and limited by Section 11‑A, which permitted taxation of turnover that had "escaped assessment" or been "assessed at a lower rate" only "within three calendar years" of the expiry of the relevant period. Therefore, once the three-year period of Section 11‑A had expired, Section 22(5) could not be invoked to enhance the tax for that period.
Applying that principle to the facts, the impugned notice initiating proceedings in January/March 1965 to enhance a 1954–55 assessment (nearly ten years later) was in excess of jurisdiction and therefore invalid.
The court reinforced this conclusion by following the reasoning in Purushottam Kalidas, which held that Section 22‑B (similar to Section 22(5)) cannot be used to tax turnover that falls within Section 11‑A after the limitation has lapsed. The court stated it was fully in accord with that view.
The Privy Council decision in Commissioner of Income Tax v. Khemchand Ramdas was cited to support the broader proposition that powers to reopen assessments are subject to statutory provisions and time-limits and cannot be exercised indefinitely.
After repeal of the repealed Act and enactment of the new Madhya Pradesh General Sales Tax Act, the Commissioner’s revisional power previously exercisable under Section 22(5) could only be exercised within the framework of Section 39(2) of the new Act. Section 39(2) includes a proviso that "no proceeding shall be initiated under this sub‑section after the expiry of three years from the date of the order sought to be revised." Because the impugned notice was issued after that three‑year period, it was invalid under the new Act as well.
In addition, the fiction introduced by Section 52(1) of the new Act (preserving rights, liabilities and acts under the repealed Act and deeming them to have been done under the new Act, where consistent) meant that the applicant's order of assessment for 1954–55 must be treated as "deemed" to have been made under the new Act. Consistent with the Supreme Court decision in The Sales Tax Officer, Jabalpur v. Hanuman Prasad (cited), reassessment was therefore barred by time where the period under section 11‑A of the repealed Act had already expired.
For these cumulative reasons—(a) the limitation under Section 11‑A of the repealed Act, (b) the proviso to Section 39(2) of the new Act, and (c) the saving/fictitious operation of Section 52(1)—the court concluded that the Commissioner’s notice of January/March 1965 was beyond jurisdiction and invalid.

Holding and Implications

Core Ruling: The application is allowed and the impugned notice dated 8th January 1965 / 4th March 1965 is quashed.

Direct consequences:

The Commissioner of Sales Tax is commanded to desist from giving effect to the impugned notice in the manner threatened.
The application under Article 226 succeeds and is allowed; hearing fee of Rs. 100 is ordered, if certified.

Broader implications:

The court applied and reinforced existing statutory limitations and prior case law on the temporal limits of revisional powers: specifically, that turnover which falls within the ambit of Section 11‑A of the repealed Act cannot be taxed by invoking the revisional power after the limitation period has expired, and that after repeal the new Act's Section 39(2) proviso and Section 52(1) fiction preserve and limit reassessment rights. The opinion does not purport to lay down a novel doctrine beyond application and reconciliation of these statutory provisions and prior authorities to the facts before the court.

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Gian Chand Mehta v. Commr. Of Sales Tax, Madhya Pradesh, Indore .

1. By this application under Article 226 of the Constitution, the applicant G. C. Mehta, a P. W. D. contractor, applied for issue of a writ in the nature of prohibition and other appropriate writ, direction or order, in respect of a notice issued by the Commissioner of Sales Tax. Madhya Pradesh.

2. The applicant was assessed to tax for the period between 1st April 1953 and 31st March 1954 by an order of the Sales Tax Officer, Satna, dated 13th October, 1954, under Section 11(3) of the C. P. and Berar Sales Tax Act (Act XXI of 1947), as extended to the Vindhya Pradesh region. Thereafter, the Sales Tax Officer reviewed his order and passed a fresh order of assessment. In accordance therewith, the applicant was found to have paid a sum of Rs. 6,900 in excess of the tax due. and the applicant, therefore, applied for a refund of the amount. During these proceedings the Assistant Commissioner of Sales Tax acting suo motu revised the assessment and passed an order dated 1st October 1957 whereby the resultant tax payable was determined at Rs. 6,825/9/-. Thus, the excess payment in consequence of this revisional order worked out to be Rs. 1,977/6/6. On appeal by the applicant, the Deputy Commissioner of Sales Tax, Jabalpur, enhanced that tax from Rs. 7,662/1/- to Rs. 14,561/10/-. The applicant, thereafter, preferred a revision before the Tribunal, which accepted his contention that the enhancement of the tax in revision by the Assistant Commissioner of Sales Tax was without jurisdiction as no notice required under Rule 80 of the Rules framed under the Act had been issued to him. The Tribunal, accordingly, had quashed the proceedings for enhancement and set aside the orders of the Assistant and Deputy Commissioner of Sales Tax. As a result, the original order of assessment made by the Sales Tax Officer was restored.

3. Pretending to act in his suo moto revisional jurisdiction, the Commissioner of Sales Tax has now issued a notice under Rule 80 dated 8th January 1965/4th March 1965, to the following effect:

"It is proposed to pass an order suo motu in revision under Section 39(2) of the Madhya Pradesh General Sales Tax Act, 1958, read with Section 22(5) of the C. P. and Berar Sales Tax Act, 1947. as extended to the Vindhya Pradesh region, with a view to levying tax amounting to Rs. 14,387/10/-on a taxable turnover totalling Rs. 4,69,395."

The contention that the initiation of proceedings in revision by the impugned notice for enhancing the assessment made in the year 1954-55, after a lapse of nearly 10 years from the date of assessment, is in excess of iurisdiction. must be accepted.

4. Under the C. P. and Berar Sales Tax. Act, 1947, as extended to the Vindhya Pra-j desh region, the power to revise suo motu under Section 22(5) an order of assessment was controlled and limited by Section 11-A, under which any turnover which had "escaped assessment" or had been "assessed at a lower rate" could be brought to tax "with-in three calendar years" of the expiry of the period. The power of revision under Section 22(5) ibid for enhancing the tax for any period could not. therefore, be invoked or exercised after expiry of the period fixed under Section 11-A. The initiation of proceedings in revision by the Commissioner of Sales Tax by the impugned notice dated 8th January 1965/4th March 1965, for enhancing the assessment made in the year 1954-55. after a lapse of nearly 10 years, must be regarded as altogether in excess of iurisdiction.

5. While interpreting Section 22-B of the C. P. and Berar Sales Tax Act which conferred similar revisional powers upon the Commissioner where an assessment was considered by him as being prejudicial to the revenue, one of us (Pandey J.) in Purushottam Kalidas v. Commissioner of Sales-tax, 1961 MPLJ 35 has stated:

"Even apart from this, Section 11-A of the Act specifically provides for assessment of the tax payable if. in consequence of any information, the Commissioner is satisfied that the turnover of a dealer during any period escaped assessment. In view of this special provision, any turnover which has escaped assessment must be dealt with as provided there. The power of revision under Section 22-B of the Act cannot be exercised to tax a turnover, which has escaped assessment, especially when the period of limitation prescribed under Section 11-A ibid, namely three calendar years from the expiry of such period, has already lapsed. It is true that the essential difference between Section 11-A and Section 22-B is that, while under the former only the turnover escaping assessment is taxed leaving the finality of the original order of assessment unimpaired, an exercise of powers under the latter affects the finality of the original order which is displaced by the order passed in revision. Even so, the powers of revision under Section 22-B cannot be invoked to deal with a turnover escaping assessment which falls substantially within the ambit of Section 11-A."

We are fully in accord with this view- The view stands fortified by the decision of their Lordships of Privy Council in Commissioner of Income Tax v. Khemchand Ramdas AIR 1938 P. C. 175 where Lord Romer J. stated:

"It is true that the Act nowhere imposes any limit of time within which an assessment under the provisions of sections 23 and 29 is to be made, and that the service of the notice of demand can therefore be made at any time. But it is not true that after a final assessment under those sections has been made, the Income tax Officer can go on making fresh computations and issuing fresh notices of demand to the end of all time. When once a final assessment is arrived at, it cannot be reopened except in the circumstances detailed in Section 34 and Section 35 of the Act and within the time limited by those sections. It is quite possible to suppose that the Income-tax Officer may in every kind of circumstance and after any lapse of time make fresh assessment or issue fresh notices of demand: or that the Commissioner can direct him to do so. The Commissioner's power under Sfction 33 can only be exercised subject to the provisions of the Act, of which the provisions in sections 34 and 35 are in this respect of the greatest importance"

We must accordingly, hold that the powers of revision under Section 22(5) cannot be invoked to deal with a turnover escaping assessment or under-assessed which falls substantially within the ambit of Section 11-A.

6. Viewing the matter from another angle, we are constrained to hold the impugned notice to be invalid. After repeal ol the C. P. and Berar Sales Tax Act, 1947. as extended to the Vindhya Pradesh region, by the Madhya Pradesh General Sales Tax Act. 1958 (Act II of 1959), the power of the commissioner to revise an assessment suo motu exercisable under Section 22(5) of the repealed Act. could only be brought into play within the four corners of Section 39(2) of the new Act. The saving is with a limitation. The power can now only be exercised under Section 39(2) ibid and is subject to the proviso contained therein which is to the following effect:

"Provided that no proceeding shall be initiated under this sub-section after the expiry of three years from the date of the order sought to be revised."

The impugned notice having been issued beyond the period stated, is invalid as upon the expiry of that period, the power itself was non-existent and. therefore, no such notice could be issued.

7. Even otherwise, the same result is brought about by reference to the fiction introduced by Section 52(1) of the new Act. As a consequence of this legal fiction, the order of assessment passed by the Sales Tax Officer in the year 1954-55 must be "deemed" to have been made under the new Act. Their Lordships of the Supreme Court have in The Sales Tax Officer. Jabalpur v. Hanu-man Prasad, 1967 MPLJ 138 = (AIR 1967 SC 5651, held in like circumstances that a notice of reassessment was barred by time, after stating:

"The period of reassessment on the ground of under assessment, escapement or wrong deduction had to be as provided in section ll-a(1) of the repealed act. so that the period was three years"

When the original assessment was in respect of a period when the new Act had not come into force and when the assessment was under the repealed Act. In regard to the proviso creating a fiction their Lordships, stated

"It was under Section 52 of the new Act that the repealed Act was repealed, and that section itself, under the proviso laid down that such repeal shall not affect the previous operation of the said Act or any right, title, obligation or liability already acquired, accrued or incurred thereunder. There was also the further addition that subject thereto, anything done or any action taken (including any appointment, notification, notice, order, rule, form, Regulation, certificate or licence) in the exercise of any power conferred by or under the said Act shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken in exercise of the powers conferred by or under this Act. as if this Act were in force on the date on which such thing was done or action was taken. In view of this proviso it has to be held that when this new Act came into force on 1st April, 1959, all rights, title, obligation or liability already acquired, accrued or incurred under the repealed Act by the respondent remained unaffected and intact. The rights and liabilities, which had been acquired or incurred under the repealed Act, included the right of liability to be assessed in accordance with the provisions of the repealed act in respect of turnover of sales effected during the time when that Act was in force. The repealed Act laid down what turnover was taxable, how it was to be computed, and at what rate the tax was to be charged. These provisions clearly created rights as well as liabilities of the dealers. Those rights and liabilities were thus preserved by Section 52 of the new Act."

A fortiori, it must be held that the applicant acquired a right not to be reassessed in respect of a turnover which had been reassessed after expiry of the period mentioned in section 11-a of the repealed act.

8. The result is that the application suc ceeds and is allowed. The notice issued by the Commissioner of Sales Tax dated 8th January 1965/4th March 1965. is hereby quashed and he is further commanded to desist from giving effect to the same in the manner threatened. Hearing fee Rs. 100, if certified.

Gian Chand Mehta v. Commr. Of Sales Tax, Madhya Pradesh, Indore .

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Applicant's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Gian Chand Mehta v. Commr. Of Sales Tax, Madhya Pradesh, Indore .

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