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High Court Of Madhya Pradesh
P. V. Dixit, C. J. and K. L. Pandey, J.
FIRM JANTA HARDWARE STORES - Appellant
Versus
B.S.PARIHAR, ASSTT.SALES TAX OFFICER - Respondents
Misc. Petn. 4 Of 1962
Decided On : 04/07/1962
SALES TAX - REASSESSMENT - NOTICE - VALIDITY - AMENDMENT OF SECTION 19 (1) OF THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958 - FORM XVI OF THE MADHYA PRADESH GENERAL SALES TAX RULES, 1959 - INTERPRETATION - EFFECT OF AMENDMENT - REQUIREMENT OF SPECIFYING REASON FOR UNDERASSESSMENT OR ESCAPED ASSESSMENT - STRICT COMPLIANCE WITH FORM XVI MANDATORY - NOTICES ISSUED IN OLD FORM INVALID - REASSESSMENT PROCEEDINGS AND ORDERS QUASHED.
Fact of the Case:
The petitioner was reassessed for sales tax for three years under Section 19 of the Madhya Pradesh General Sales Tax Act, 1958, based on notices issued on the report of a Sales Tax Inspector who discovered two sets of account books indicating undisclosed sales. The petitioner challenged the validity of the reassessment proceedings, contending that the notices were invalid as they were issued without the satisfaction of the assessing authority that there was escaped assessment, as required under Section 19 before its amendment in 1961, and that the amended Section 19 and Rule 33 of the Madhya Pradesh General Sales Tax Rules, 1959, required a notice specifying the reason for underassessment or escaped assessment.
Finding of the Court:
The court held that the notices issued to the petitioner were invalid and the reassessment proceedings and orders were without jurisdiction. The court found that the amendment to Section 19 (1) of the Act changed the requirement for initiating reassessment proceedings from a tentative opinion based on information to a certainty of underassessment or escaped assessment for any reason. The court also found that Rule 33 required the issue of a notice in Form XVI specifying the default, escapement, or concealment, and that the form used, though valid before the amendment, was inconsistent with the amended Section 19 (1). The court held that strict compliance with Form XVI was mandatory and that the notices issued in the old form were invalid.
Issues: 1. Whether the notices issued for reassessment were valid under the amended Section 19 (1) of the Madhya Pradesh General Sales Tax Act, 1958, and Rule 33 of the Madhya Pradesh General Sales Tax Rules, 1959. 2. Whether the requirement of specifying the reason for underassessment or escaped assessment in the notice was mandatory.
Ratio Decidendi: 1. The court interpreted the amended Section 19 (1) of the Act and Rule 33 of the Rules to hold that reassessment proceedings could only be initiated if there was a certainty of underassessment or escaped assessment for any reason, and that the notice issued to the dealer must specify the default, escapement, or concealment, as well as the reason or reasons for it. 2. The court held that strict compliance with Form XVI was mandatory and that the notices issued in the old form, which did not specify the reason for underassessment or escaped assessment, were invalid.
Final Decision: The court allowed the petition, quashed the notices for reassessment and imposition of penalty, the assessment proceedings, and the assessment orders made in those proceedings. The court directed that the parties bear their own costs and that the outstanding amount of security deposit be refunded to the petitioner.
( 1 ) THIS is an application under Article 228 of the Constitution or the issue of a writ of certiorari for quashing three re-assessment orders under Section 19 of the Madhya Pradesh General Sales Tax Act, 1958, in respect of three years from 1957 to 1960, imposing a total amount of Rs. 23,1 4. 19 np. as tax and penalty on the petitioner.
( 2 ) THE petitioner was in the normal course assessed to sales tax for three years included in the period from 24th October, 1957 to 19th October, 1960. On 17th October, 1961 three notices in respect of the three accounting years stated above were issued to the petitioner under Section 19 of the Act for escaped assessment. The notices directed the petitioner to appear before the Sales Tax Officer with account-books for the period. It was mentioned in the notices that they had been issued on the basis of a report made by Shri Ghai, the Sales Tax Inspector. It appears that on 10th October, 1961, the Sales Tax inspector paid a visit to the shop of the petitioner for checking the account-books. During this checking the Inspector discovered that the applicant had maintained two sets of account-books for the three material years which indicated sale and purchase transactions in each year of the value ranging from Rs. 1,20,000/- to Rs. 1,40,000/-and that these sales had not been disclosed by the petitioner in the returns filed for the three years during the period from 24th October, 1957 to 19th October, 1960. The Inspector wanted to seize those account-books. But two of the partners, Poonamchand and Ramkishan, obstructed the Inspector in the seizure of the books. A scuffle then ensued between the Inspector and the partners which led to the filing of a Challan under Sections 186, 333 and 353, I. P. C. against the two partners in a criminal Court at Raigarh. That prosecution is still pending.
( 3 ) THE petitioner has questioned the validity of the assessment proceedings on the grounds that the issue of a valid notice under Section 19 is a condition precedent to an assessment under that provision; that before issuing a notice the assessing authority must be satisfied in consequence of any information which has come into his possession that any sale or purchase of goods chargeable to tax under the Act during any year has been under-assessed or has escaped assessment or assessed at a lower rate; that this satisfaction was a sine qua non for the issue of a notice; that the three notices were issued by the assessing authority merely on the basis of a report of the Sales Tax inspector with regard to the incident which occurred on 10-10-1961; and that they had not been issued because of any satisfaction of the assessing authority in consequence of any information coming into his possession with regard to the escaped assessment. It is also contended that the applicant was not given adequate opportunity to meet the case of re-assessment and the best judgment assessments made by the assessing authority were arbitrary, capricious and without the exercise of any judgment at all.
( 4 ) SECTION 19 of the Act was amended by the Madhya Pradesh General Sales Tax (Amendment) Act, 1961. The amendment came into force from the 1st June 1961. The notices that were issued to the petitioner on 17th October 1961 were not on the basis of the amended provision but they purported to be under Section 19 as it stood before the amendment. Section 19 (1) in its original form ran as follows: "where an assessment has been made under this Act, and the Commissioner, in consequence of any information, which has come into his possession, is satisfied that any sale or purchase of goods, chargeable to tax under this Act, during any year has been underassessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made therefrom, the Commissioner may at any time within five calendar years from the expiry of such year, after giving the dealer a reasonable opportunity of being heard and after mak
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