Nathmal Tolaram v. Superintendent of Taxes, Dhubri and Another.

Shah J. The principle of this case has in our judgment no

application to the present case. The High Court at Bombay in its advisory jurisdiction had declared the assessment already ma.de to be.illegal. But the Commis-sioner was under s. 33 of the Indian Income-tax Act invested with jurisdiction to direct further enquiry, and he purported to exercise that jurisdiction. The Privy Council rejected the challenge to the exercise of that jurisdiction. In the present case, no proceedings were started by the Commissioner of Taxes in exercise of his revisional authority. The . Col!lmissioner of Taxes had directed the Superintendent of Taxes merely to dispose of the case according to the judg-ment of the High Court, and the Superintendent had to carry out that order. If he was competent-and on that question, we express no opinion-he could, if the conditions precedent to the exercise of his jurisdic-tion existed, proceed to reassess the appellants. But the proceedings for reassessment were clearly barred because the period prescribed for reassessment had expired. The Superintendent therefore had no power to issue a notice calling upon the appellants to produce evidence to enable him to start an enquiry which was barred by the expiry of the period of limitation pre-scribed by the Act. In the Bombay TrU8t Oorpora. tion case {supra), the Income-tax Officer acted-in pursuance ofthe direction of the Commissioner lawfully given in exercise of revisional authority and reopened the assessment. In the present case, no such direction has been given by an authority competent in that behalf: and the Superintendent had no power to reassess the income under s. 19 assuming that the section applied to a case where the assessee though registered had failed to include his sales in a particular commodity in his turnover, because the period of limitation prescribed in that behalf had expired.

The appeal must therefore be allowed and the order r960 passed by the High Court set a.side. In the circum- - stances o f t h e case, no use f u 1 purpose w1 "ll b e serve d Nathmal Tolaram by remanding the case to the High Court. We superi:;endent accordingly direct that a. writ quashing the proceed-of Tam ings commenced by the Superintendent of Taxes, Dhubri, by his notice dated January 30, 1953, be Shah J. issued. The appellants will be entitled to their costs of the appeal.

A ppeaJ, al,lowed.

THAKUR KESARI SINGH

v.

O&lober r9.

THE STATE OF RAJASTHAN AND OTHERS.

(JAFER IMAM, A. K. SARKAR and RAGHUBAR

DAYAL, JJ.)

I Landlord and Tenant-General refusal of payment of rent-

Notijication by Government-Application for recovery of rent as arrears of land revenue-Rescission of notijication-V alidity of pro-ceeding-Procedure-Marwar Tenancy Act, z949 (XXXIX of z949), s. 85-Rajasthan Revenue Courts (Procedure and Jurisdic-tion) Act, z95r (I of z95rJ, s. 2.

The Marwar Tenancy Act, r949, now repealed but which was in force in the State of Jodhpur at the relevant period, by s. 85 authorised the Government in case of any general refusal by tenants to pay rent to declare by notification that such rents might be recovered as arrears of land revenue. A notification having been issued by the Government of Rajasthan under that section the appellant, a jagirdar, applied to the Collector there-under for the recovery of rents due to · him from his tenants.

The tenants also applied to the Collector stating that notice of the said application should be served on them and they should be given a hearing as required by the rule framed uncer the Rajasthan Revenue Courts (Procedure arid Jurisdiction) Act, r95r. The Collector rejected the tenants' application and passed an order directing the recovery of the sum found to be due to:

the appellant as arrears of land revenue. The Additional Com-missioner on appeal and the Board of Revenue in revision upheld the Collector's order. But before the Board passed its order the

CIVIL APPELLATE JURISDICTION: . Civil Appeal No. 196 of 1958.

Appeal by special leave from the judgment and ..,. order dated April 27, 1953, of the Assam High Court

in Civil Rule No. 66 of 1953.

Sukumar Mitter and Sukumar Ghose, for the appel.

lant. · ~

Veda Vyasa and Naunit Lal, for the respondents.

1960. October 18. The Judgment of the Court was delivered by

SHAH J.-The appellants are dealers registered un-Shah ]. der the Assam Sales Tax Act XVII of 1947-herein-after referred to as the Act. For the account period April 1, 1948 to September 30, 1948, the appellants submitted a return of their turnover which included sales in Assam of all goods other than jute. The Superintendent of Taxes, Dhubri, summarily assessed the appellants under sub-s. 4 of s. 17 of the Act to pay tax on sales of jute despatched by them to Calcutta during the account-period. Appeals against the order of assessment to the Assistant Commissioner of Taxes and to the Commissioner of Taxes, Assam, proved unsuccessful. The appellants then applied to the Commissioner of Taxe,s to refer certain questions aris-ing out of the assessment to the High Court in Assam under s. 34 of the Act. The Commissioner referred the following questions and another to the High Court of Judicature in Assam:

(1) Whether, in view of the aforesaid facts and circumstances the turnover from 20,515 maunds of '960 jute mentioned under item (i) is taxable under the - ~?

Nathmal Tolarani (2) W hether, m . view . of the aforesaid . facts a.nd

v.

sup"intendent circumstances the turnover from 5,500 maunds of

of Tam jute mentioned under item (ii) is taxable under the

Act?

Shali j. (3) Whether, in view of the aforesaid facts and

circumstances, the turnover from 25,209 ma.unds of jute mentioned under item (iii) is ta.xa.ble under the Act?

In respect of ea.ch of the three questions 1 to 3, the High Court recorded the following answer :

" Not being a. ea.le within the meaning of sub-s. 12 of s. 2 of the Act, the consignments a.re not tax-able ".

The High Court, however observed :

" As to whethes these consignments can hereafter be assessed if they fall within the purview of the Explanation to sub-s. 12 of s. 2, we express no opi-nion".

As required by s. 32(8) of the Act, the Commissioner of Ta.xes by his order dated August 1, 1952, directed the Superintendent of Ta.xes to dispose of the case in accordance with the judgment of the High Court. The Superintendent of Ta.xes thereafter issued on January 30, 1953, the following notice to the appel-lants:

"In view of the Hon'ble High Court's order in Sales-tax Reference No. 3 of 1951, the assessment order dated 30th September, 1950, for the return period 30th September, 1948, has been set a.side a.nd you a.re directed to produce necessary evidence, con-tra.ct papers, account books, etc .................. in order to see whether the contra.ct of sale involved in this case come within the purview of the Explanation to sub-s. 12 of s. 2 of the Act".

By their lettllr da.ted March 23, 1953, the a.priella.nts called upon the Commissioner of Ta.xes to direct t.he Superintendent of Ta.xes not to proceed with the notice. The Commissioner having failed to direct a.s requested, the appellant petitioned the High Court in Assam under Art. 226 of the Constitution for a writ prohibiting the Superintendent of Taxes from re-open-I960 ing and proceeding with the assessment of the a.ppel-N th ~ lants under the Assam Sales Tax Act and for a. writ a nia v. aram quashing the order dated August 1, 1952, passed by Superintendent the Commissioner. The High Court summarily dis-of Taxes missed the petition. Against the order passed by the High Court, this appeal is filed with special leave Shah J. under Art. 136 of the Constitution. ·

The High Court, in answering the questions submit-ted to it, was exercising a.n advisory jurisdiction and could not and did not give any direction to the sales .... tax authorities to proceed to assess or not to assess the

appellants to sales tax : it merely recor~ed its opinion that the transactions referred to in the questions were not sales within the meaning of s. 2, sub-s. 12, of the Act a.rid were accordingly not taxable. Pursuant to the opinion of the High Court, the Commissioner direc-ted the Superintendent of Taxes to dispose of the case " in accordance with " the judgment of the High Court; but the Superintendent of Taxes thought that he was entitled to re-open the assessment proceedings and to assess the appellants in the light of the Expla.- nation to s. 2, sub-s. 12 . .In so doing, the Superintend-ent of Taxes, in our judgment, acted without authori-ty. The Superintendent had ma.de the assessment, and that assessment was confirmed in appeal by the Assis-ta.rit Commissioner. On the questions arising out .of that assessment, the High Court had opined that the transactions sought to be assessed were not liable to tax. The Superintendent of Taxes, on this opinion was right in vacating the order of assessment. But any further proceeding for assessment which he sought to commence by issuing a notice requiring the appellants to produce evidence, contra.ct papers, account books, etc. so as to enable him to determine whether the transactions were taxable under the Ex-planation to sub-s. 12 of s. 2 had to be supported by some authority under the Act. The Superintendent of Taxes has not referred to the authority in exercise of which he issued this notice. It is true that under s. 19 o'f the Act, the "taxation Officer " if satisfied upon infor~ation coming into his possession that any 196° dealer has been liable to pay tax under the Act in res- -1 T pect of any period and has failed to apply for registra. N at ma o 1 aram t' ion an d to ma k e t h e re t urn require · d o f h' 1m, may at

v.

superintendent any time within three years of the end of the afore-

of Taxes said period serve on the dealer a notice containing all

or any of the requirements which may be included Shah ]. in a notice under sub-s. 2 of s. 16 and may proceed to

assess the dealer in respect of such period. But admit-tedly, the appellants were registered as dealers and had submitted their returns : the power to reassess could not therefore be exercised by virtue of s. 19 of the Act. Bnder s. 19-A, the Commissioner has also power, if satisfied upon information coming into his possession, that any turnover in respect of sales of any goods chargeable to tax has escaped assessment during the return period, to serve at any time within three years of the aforesaid period, on the dealer liable to pay the tax in respect of such turnover a notice containing all or any of the requirements which may be included in a notice under sub.a. 2 of s. 16 and may proceed to assess or reassess the dealer in respect of such period. But the Commissioner had not issued any such notice under s. 19A. Nor had the Commis-sioner in exercise of his revisional authority under s. 31 of the Act set aside the original order of assess-ment. The Commissioner merely directed u'nder s. 32, sub-s. 8, that the case be disposed of in accordance with the judgment of the High Court, and acting under that direction, the Superintendent of Taxes had no power to reopen the assessment and to call upon the appellants to produce documentary evidence with a view to commence an enquiry whether the sales involved in the case fell "within the purview of the Explanation to s. 2 su b-s. 12 ". In any event, the account period as has already been observed was April 1, 1948 to September 30, 1948, and three years from the end of that period, expired before the date on which the notice was issued. Fresh proceedings for reassessment could not be initiated by the Super-intendent of Taxes under s. 19 after the expiry-of three yea.rs from the assessment period assuming that this could be regarded as a case of failure tp apply for registration and to make a return required of the 1960 appellants. Nalhmal Tola.am

In support of his contention that the Superinten. v. dent of Taxes had authority to proceed to reassess the superintendent appellants in the light of the ob.servations made in the of Taxes judgment of the High Court, counsel for the appel. Shah J. lants invited our attention to the judgment of the Privy Council in Commissioner of Income Tax, Bombay Presidency and Aden and others v. Bombay Trust Corporation Ltd. (1). In that case, a foreign com-pany was assessed by the Income Tax authorities in the name of a resident company for profits and gains received by the latter as its agent under ss. 42(1) and 43 of the Indian Income-tax Act, 1922. In a reference under s. 66 of the Income-tax Act, the High Court at Bombay opined that the assessment was illegal. The Commissioner of Income-tax thereafter sent back the case · with a direction to set aside the assessment and to make a fresh assessment after making such further enquiry as the Income-tax Officer might think fit.

Acting upon that order, the Income-tax Officer requir-ed the resident company as agent of the foreign company to produce or cause to be produced books of account for the year of assessment and also to produce such other evidence on which it might seek to rely in respect of its return, and the resident company having failed to produce the books of the foreign company, he proceeded to make an assessment under s. 23(4) of the InQome-tax Act, 1922. By its petition under s. 45 of the Specific Relief Act filed in the High Court at Bombay, the resident compan,Y prayed for an order for refund of the taxes already paid under the original assessment, and for an order for disposal of certain proceedings initiated by it before the Assistant Com.

missioner and the Income-tax Officer. The High Court made an order directing refund of tax paid, and further directing cancellation of assessment. In an appeal preferred by the Commissioner of Income-tax against the order of the High Court, it was observed by the Privy Council that the Commissioner was not -obliged to discontinue proceedings against the resident z96o company as agent of the foreign company in respect N th T of the year of assessment, and it was within the juris-

1 diction of the Commissioner under s. 33(2) of the ma v. •••m superintendent Income-tax Act to direct further enquiry ifhe thought

of. Taxes such an enquiry to be reasonable and to be profitable

in the public interest.