Faridabad Industrial... v. The Excise And Taxat...

1. Messrs Faridabad Industrial and Quarrying Company, the petitioner in this case, is a registered dealer within the meaning of the Punjab General Sales Tax Act, 1948, (hereinafter referred to as the principal Act). The petitioner-company admittedly entered into transactions of purchase and sale of commodities in which they carried on business. It is not disputed that for none of the four quarters of the financial year 1959-60 (i.e, for the period 1st April, 1959 to 31st March, 1960), the petitioner-company filed any quarterly returns of its turnover under the principal Act. On 22nd March, 1963, the Excise and Taxation Officer. Gurgaon, respondent No. 1, who is the appropriate Assessing Authority, passed an order relating to the year in question, copy of which has been filed as annexure “C” to the writ petition. In this order the Assessing Authority stated, inter alia, as follows:—

(i) “the perusal of the file reveals………………”

(ii) “the case has again come before me today for assessment after substituted service of the memo notice has been effected by the Taxation Sub-Inspector himself by affixing the copy of the same to his business premises.”

(iii) “………………….but it is established that the dealer did work his stone crushing machine during this period and transacted business and also on basis of local enquiries and to best of judgment, I deter mine his gross turnover at…………….”

(iv) “His chargeable purchases of stone, lubricants and electricity are determined to best of judgment, on the basis of local enquiries at

2. When this writ petition was filed on 5th December, 1963, a prayer had been made in it to quash the assessment order annexure “C” relating to the financial year 1959-60 as well as the assessment orders, copies of which are annexures “A” and “B” to the writ petition, which related to two previous years. At the time of the motion hearing of the petition on 6th December, 1963, the petitioner proposed to confine the relief claimed by him in this case to the assessment order dated 22nd March, 1963, for the year 1959-60 copy of which is annexure “C” to the writ petition.

3. The only ground on which the impugned assessment order dated 22nd March, 1963, is sought to be quashed and set aside is that the same is beyond the statutory jurisdiction of respondent No. 1 as he could not pass an order of assessment on the basis of best judgment under section 11(5) of the principal Act after the expiry of a period of three years from the last day of the relevant quarter of the year in question. The argument is that if the petitioner is made to pay the sales tax and the penalty levied by the Assessing Authority in respect of the period for which the law did not allow him to assess the petitioner, it would amount to violation of the fundamental right of property guaranteed to the petitioner under Article 31 of the Constitution as he would be deprived of the amount in question save by authority of law. section 11(5) of the principal Act reads as follows:—

“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.”

4. It is not disputed that the petitioner did not furnish any of the returns in respect of the three quarters of the year 1959-60 in respect of which the order of the Assessing Authority is being impugned in the instant case. Nor is it disputed that the respondent No. 1 proceeded to assess the petitioner in respect of the said quarters to the best of his judgment. Under rule 20 of the rules framed under the Act the return in respect of each respective quarter could be filed within thirty days after the expiry of the relevant quarter. But it has been authoritatively held by the Supreme Court of India in Madan Lal Arora v. Excise & Taxation Officer, Amritsar [1961] 12 S.T.C 387, that when sub-section (4) of section 11 talks of “returns in respect of a period”, that refers, in the case of the assessee who has filed the returns, to the quarters in respect of which he submitted the returns and that the three years within which the authority could proceed to make the best judgment assessment have, therefore, to be counted from the end of each quarter in respect of which returns had been filed. Their Lordships of the Supreme Court further held in that case that where the last of the quarters in respect of which the assessee has filed his returns ended on 31st March, 1956, the Assessing Authority could not proceed to make a best judgment assessment in respect of that quarter after 31st March, 1959. The relevant phraseology of sub-sections (4) and (5) of section 11 of the principal Act is the same. It is, therefore, obvious that if the requisite steps are not proved to have been taken by the Assessing Authority in respect of the quarter March to June, 1959, before the 1st of June, 1962 and so on, the assessment order in respect of those quarters made after the expiry of three years from the last day of the relevant quarter has to be held to be without jurisdiction.

5. The return to the rule issued in this case was filed on behalf of the respondents which is dated 7th January, 1964. This return was based on the law as prevailed at that time in view of the Full Bench judgment of this Court in Rameshwar Lal Sarup Chand v. U.S Naurath [1964] 15 S.T.C 932, wherein it had been held that an assessment under sub-sections (4) and (5) of section 11 of the principal Act had to be completed within three years of the date of the end of the quarter. In the meantime, however, the law in this respect had been settled by a Full Bench of five Judges in F. Jagat Ram Om Parkash v. The Excise and Taxation Officer, Assessing Authority, Amritsar. In view of the changed situation brought about by the authoritative pronouncement in Jagat Ram Om Parkash's case, it was ordered by this Court (P.D Sharma, J.) on 10th of March, 1965, that the respondent should file a detailed written statement keeping in view the decision of this Court in the aforesaid case. Following the said order the respondents have filed a revised written statement dated 20th April, 1965, to which alone reference has now to be made.

6. In the aforesaid Full Bench judgment in Firm Jagat Ram Om Parkash's case, it was held by this Court as follows:

1. That the time of three years prescribed by section 11 does not terminate with the issue of a notice in Form S.T XIV by the Assessing Authority to the dealer and it is not open to the Assessing Authority to proceed to make a best judgment assessment without any limitation in point of time if he has once issued such a notice within three years.

2. That the requirement of the relevant sub-section is for the Assessing Authority to proceed to assess to the best of his judgment within three years and this does not connote the actual framing of the final assessment order.

3. As to at what time the Assessing Authority actually proceeded to assess to the best of judgment it would have to be determined on the facts and circumstances of each case in its own setting.

4. That there must be some definite act or step taken by the Assessing Authority from which it can be clearly ascertained that from that point of time the Assessing Authority had proceeded to assess to the best of his judgment and the starting point of this process of proceeding to decide according to best judgment must be within the period of three years as provided in the principal Act.

7. In order to discharge the burden placed on respondent No. 1 by the dictum in the above-said Full Bench judgment to the effect that whenever a question arises as to whether or not an Assessing Authority has proceeded to assess to the best of his judgment, it is now for that authority to show that it has so proceeded within the period prescribed by the statute. Respondent No. 1 has stated in paragraph 3 of his return dated 20th April, 1965, as follows:—

“…………..that definite act and steps were taken by the Assessing Authority declaring his intention to frame assessment on best judgment basis—

(a) by issuing memorandum dated the 13th November, 1961, for appearance on the 30th November, 1961; and

(b) the intention of framing assessment on best judgment was reiterated by the Assessing Authority; vide his order dated the 14th December, 1961.”

8. In the passage following the above quotations the law settled in the Full Bench judgment of this Court in the case, Jagat Ram Om Parkash v. The Excise and Taxation Officer, Amritsar, has been almost repeated.

9. The defence of the State in reply to the writ petition is twofold. It is firstly contended that the averments in para. 3 of their written statement reproduced above which relate to a question of fact should be assumed to be correct and following the same it should be held that definite and proper steps for proceeding to assess on best judgment basis were taken in this case in respect of each of the three quarters well within time, i.e, within three years. It is not disputed that if the requisite steps are proved to have been taken by the Assessing Authority either on 13th November, 1961, or on 14th December, 1961, the assessment order would be unassailable. The second contention of the State is that even if the Assessing Authority did not proceed to direct assessment on best judgment basis within three years, the order is still not liable to be set aside in view of the amendment of section 11(5) of the principal Act by section 5 of the Punjab General Sales Tax (Amendment) Act (2 of 1963) which was enforced on 23rd March, 1963, in replacement of the corresponding provisions of an Ordinance to the same effect which had come into force on the 10th of January, 1963. Section 5 of the Amending Act (which is to the same effect as the corresponding provision in the earlier Ordinance) is in the following terms:

“5. Amendment of sections 11, 11A and 13 of Punjab Act XLVI of 1948.— In sub-sections (4), (5) and (6) of section 11, in section 11A and in sub-section (2) of section 13 of the principal Act, for the words ‘three years’ the words ‘four years’ shall be substituted.”

10. The argument of Shri L.D Kaushal, the learned Deputy Advocate-General is that when the Assessing Authority set down to pass the impugned order on 22nd March, 1963, the law in force was para. 5 of the Punjab General Sales Tax (Amendment) Ordinance, 1963 (Punjab Ordinance No. 2 of 1963) which was in terms the same as the subsequently enforced Punjab General Sales Tax (Amendment) Act (2 of 1963). That being the case, it is contended by the learned counsel for the State, the Sales Tax Assessing Authority was within its jurisdiction to make the assessment within four years. If this could be done, there is no doubt of the best judgment order being within four years of the end of each of the relevant quarters and the same would not be liable to be set aside.

11. Dealing with the second contention first it is clear that the relevant period of three years in respect of each of the quarters in question had expired before the 10th of January, 1963, the date on which the Amending Ordinance came into force. As observed above, the terms of para. 5 of the Amending Ordinance are merely prospective in nature and are not intended to have any retrospective effect. In the absence of a clear indication or necessary implication to resuscitate dead cases it cannot be presumed that any action which had become barred by time before the 10th of January, 1963, would become within time by such a prospective amendment of a particular Act which came into force after the expiry of the original period of limitation. This has also been authoritatively held in The Punjab Commerce Bank Ltd. v. Shri Brij Lal Mahandiratta, by a Division Bench of this Court (Bhandari, C.J, and Bishan Narain, J.) in connection with the amendment of section 45-0 of the Banking Companies Act. I, therefore, hold that the amendment effected by para. 5 of the said Ordinance and by section 5 of the Amending Act 2 of 1963 does not have retrospective effect and any assessments which had become barred by time before the 10th of January, 1963, could not be effected after that day by virtue of the amendment.

12. This takes me back to the first question, i.e, whether respondent No. 1 had proceeded to assess the petitioner to the best of his judgment in respect of the first three quarters of the financial year 1959-60 within three years of the end of each respective quarter. No copy of the memorandum dated 13th November, 1961, for appearance on the 30th November, 1961, referred to in para. 3 of the latest written statement of the respondents has been filed in this case. I asked the learned Deputy Advocate-General appearing for the respondents to show me a copy of the said memorandum so that it could be found out whether it contained anything beyond a usual notice in Form S.T XIV. The learned counsel who had some of the records of the case with him searched for the above-said memorandum but has not been able to place the same before the Court. Similarly I asked Mr. Kaushal to show me the order dated 14th December, 1961, referred to in para. 3 of the aforesaid written statement of respondent No. 1 in which the intention of framing an assessment on best judgment basis is said to have been reiterated by the Assessing Authority. No copy of that order had been filed with the return nor otherwise placed on the record of this case. The learned counsel was able to search some order dated 14th December, 1961, which is in the following terms:—

“None present despite the proper service after notice. Issue the same notice which was issued in case of the brick kiln contractors of Faridabad Township for some suitable date intimating that in case of default I shall be constrained to finalise the assessment pending for the years 1958-59, 1959-60 and 1960-61 on ex parte and best judgment basis. The unlikely payment of tax should also be notified from the register S.T XII”.

13. The subsequent order dated 13th December, 1962, for which date fresh notice was ordered to be issued on 14th December, 1961, is in the following terms:—

“None present, although S. Bhagwant Singh the manager met me in the morning at about 6 a.m and he told me that he would come and secure adjournment as the parties are out of station. I secured the address. Issue memo notice previously issued along with notice in Form S.T XIV for 27th February, 1962, at Ballabgarh.”

14. At this stage the learned Deputy Advocate-General has shown me the original notice dated 13th November, 1961, in the assessment file which is with him. This purports to be addressed to the petitioner-company and relates to the years 1958-59, 1959-60 and 1960-61 and gives the petitioner-company a last opportunity for the production of their account books for the aforesaid years in the Assessing Authority's Court on 30th November, 1961, and further directs as follows:—

“In case of default I shall constrain to dispose the pending assessment for the years in dispute on ex parte and to best of judgment basis.”

15. In the order dated 22nd March, 1963 (annexure “C” to the writ petition) it is stated as follows:—

“The case was fixed before me in the first instance on the 15th of December, 1962, and the dealer had duly been informed, but nobody turned up. The case was then adjourned to 16th January, 1963, and the dealer was again informed : vide this office memorandum No. 4166.Co. III dated 12th January, 1963, at his home address and substituted service of the memorandum was also effected at the business premises by affixing the notice thereto, but despite all this nobody attended the court on the specified date.

The case has again come before me today for assessment after substituted service……”

16. It is, therefore, obvious that respondent No. 1, the Assessing Authority was himself clear while passing the impugned order on 22nd March, 1963, that he was relying on the hearing before him held on 15th December, 1962, and the notices issued for 16th January, 1963, for making the best judgment assessment. The proceedings of those two dates have not been shown to me and do not actually appear in the order sheet referred to above. In this State of affairs it cannot be said that the respondents have discharged the burden placed on them to show that the Assessing Authority, which passed the impugned order, had proceeded to assess on best judgment basis at any time before 22nd March, 1963.

17. Mr. Kaushal, the learned Deputy Advocate-General has then referred to the law laid down by the Supreme Court in Shivram Poddar v. The Income-tax Officer, Central Circle II, Calcutta, where it was held that assessees should approach the relevant Revenue Authorities under the taxing statutes which provide a complete machinery for assessment in case the complaint against an order of assessment is that the impugned order is either improper or erroneous and that resort to the High Court in exercise of its extraordinary jurisdiction conferred or recognised by the Constitution in matters relating to assessment, levy and collection of income-tax may be permitted only when questions of infringement of fundamental rights arise, or where on undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess. The complaint in the instant case is of violation of the fundamental Tights. Nor is there any serious disputed question of fact on which the decision of this case has to depend. The question of fact on which dispute has been raised in the case is really not such which can debar the petitioner from seeking his relief from this Court in exercise of its writ jurisdiction.

18. On a careful consideration of all the relevant facts, above-mentioned recourses and circumstances of the case, I hold:

(i) that no definite step was taken or act done by respondent No. 1 after issuing the last notice, in Form S.T XIV and before 22nd March, 1963, from which step or act it could be clearly ascertained that the Assessing Authority had in fact proceeded to assess the petitioner according to “best judgment” at any time prior to passing the impugned order.

(ii) the Assessing Authority (respondent No. 1) actually proceeded to assess petitioner on best judgment basis in respect of the turnover for the 4 quarters of 1959-60 for the first time, on 22nd March, 1963. By then the assessment in respect of the first 3 quarters of that 3 year was beyond 3 years from the end of the respective quarters and was therefore without jurisdiction.

(iii) that the amendment of section 11(5) of the principal Act does not have retrospective effect and does not extend the period for assessment of sales or purchases effected during quarters from the end of which 3 years had expired before 10th January, 1963.

19. In view of my above findings, I grant this writ petition and set aside the impugned order of assessment in respect of the first three quarters of the financial year 1959-60, but leave the parties to bear their own costs.

20. Petition allowed.