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Judgment
H.L. Dattu, J.-The appellant is proprietary concern and is a registered dealer under the provisions of the Karnataka Sales Tax Act, 1957. For the assessment year 1991-92 it was awarded with a sub-contract by the principal contractor, namely, M/s. Skyline Shah Joint Venture, Bangalore and M/s. Skyline Constructions Company (Private) Limited, Bangalore. On the amounts paid to the sub-contractor for execution of the works contract, the principal contractor had paid taxes after completion of their assessment for the assessment year 1991-92.
The assessment for the assessment year 1991-92 was completed in the appellant''s case by the Assessing Authority by its order dated 30-10-1998 and had assessed the appellant on the taxable turnover of Rs. 9,90,000/- relating to transfer of property in goods involved in the execution of works contract and had issued a demand notice for a sum of Rs. 49,500/-.
After coming to know that the principal contractor has already paid the taxes on its behalf, the appellant before us had filed an application before the Assessing Authority to adjust the taxes paid by the principal contractor towards the taxes quantified in its assessments for the assessment year 1991-92. The request is rejected by the Assessing Authority by issuing endorsement dated 11-4-2000.
The assessee being aggrieved by the endorsement so issued, had filed an appeal before the Joint Commissioner of Commercial Taxes in Appeal No. 145 of 2000-01. The Appellate Authority has allowed the appeal and has quashed the endorsement and further has directed the Assessing Authority to give credit of Rs. 49,351/- to the account of the appellant after obtaining details, if any, required from the office in which the main contractors have been assessed. To issue such direction, there are certain observations made by the Appellate Authority in the course of his order and we may not agree with those observations, but even then also, in our view, the assessee is entitled to the relief sought in this appeal for a different reason.
The Revisional Authority has taken exception to the order passed by the Appellate Authority, on the ground that the Appellate Authority could not have allowed the appellant''s appeal in view of Rule 6(4) and 6(4)(n) of the Karnataka Sales Tax Rules, 1957. Therefore, is of the view that the order passed by the Appellate Authority is erroneous and prejudicial to the interest of the revenue.
The appellant had filed its objections to the show-cause notice issued by the Revisional Authority. The Revisional Authority after considering the objections so filed, once again relying on Rule 6(4) and 6(4)(n) of the Rules has set aside the order passed by the Appellate Authority and thereby has confirmed the order passed by the Assessing Authority. It is the correctness or otherwise of the said order which is called in question in this appeal filed under Section 24(1) of the Karnataka Sales Tax Act, 1957.
Sri Rabinathan, learned Counsel for the appellant would contend that there is no error which is prejudicial to the interest of the revenue in the directions issued by the First Appellate Authority and therefore, the Revisional Authority could not have initiated any proceedings much less revisional proceedings by invoking his powers under Section 22-A(1) of the Act. Apart from this, the learned Counsel would submit that the Appellate Authority had only directed the Assessing Authority to obtain the particulars from the office where the main contractor is assessed and give credit of Rs. 49,351/- to the account of the appellant and this direction according to the learned Counsel, by no stretch of imagination can be construed as an error and prejudicial to the interest of the revenue which would authorise the Revisional Authority to invoke his revisional powers.
Sri Anand, learned Counsel appearing for the revenue justifies the order passed by the Revisional Authority. By placing his fingers on Rule 6(4)(n) of the Rules, the learned Counsel would submit, that, it is the main contractor who can claim reductions towards the amounts paid to the sub-contractor and keeping this in view the Revisional Authority was justified in setting aside the order passed by the Appellate Authority and restoring the order passed by the Assessing Authority.
The question of law that would arise for our consideration and decision is:
"Whether the orders passed by the Appellate Authority is erroneous and prejudicial to the interest of the revenue which would empower the Revisional Authority to initiate proceedings under Section 22-A(1) of the Act?"
The power of suo motu revision under Section 22-A(1) of the Act is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exists. The two circumstances must exist to enable the Additional Commissioner or Commissioner to exercise the power of revision. Firstly, the order passed by their Subordinate Officers is erroneous and secondly, it should be prejudicial to the interest of the revenue. The expression "prejudicial to revenue" must be read in conjunction with an erroneous order.
The meaning of the expression ''erroneous'', ''erroneous assessment'' and ''erroneous judgment'' have been defined in Black''s Law Dictionary. According to the definition ''erroneous'' means involving errors deviating from the law. ''Erroneous assessment'' refers to an assessment that deviates from the law and is a defect that is jurisdictional in its nature and similarly ''erroneous judgment'' means one rendered according to course and practice of Court, but contrary to law, upon mistaken view of the law or upon erroneous application of legal principles. From the aforesaid definitions, it is clear that an order cannot be termed as erroneous unless it is not in accordance with law.
What is prejudicial to the interest of revenue is explained by this Court and also by the Supreme Court. In its latest decision the Apex Court in the case of Malabar Industrial Company Limited v Commissioner of Income-tax, Kerala, (2000)243 ITR 83 (SC):, has observed as under:
"The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous, that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order or the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue".
Keeping in view the meaning of the expression ''erroneous'' and ''prejudicial to the interest of the revenue'' let me notice the fact situation in the present case.
The facts seems to be are not in dispute. The appellant before us is a sub-contractor and carries on business of execution of civil and structural works contract. During the assessment year in question, the appellant was awarded sub-contract by the main contractor, namely, M/s. Skyline Shah Joint Venture, Bangalore and M/s. Skyline Constructions Company (Private) Limited, Bangalore. The principal contractor in its annual returns filed, had included the amounts paid to the sub-contractor on the sub-contract executed by it and also had paid tax on that turnover.
The appellant is also a registered dealer and has also filed its returns before the Assessing Authority for the assessment year 1991-92. The Assessing Authority has determined the taxable turnover relating to transfer of property involved in the execution of the works contract in a sum of Rs. 9,90,000/- and has assessed the tax at 5% and has issued demand notice for a sum of Rs. 49,500/-. While computing the tax liability of the appellant, the Assessing Authority has included the amounts paid by the main contractor for execution of the sub-contract awarded to it.
The appellant, thereafter, has filed an application before the Assessing Authority, inter alia requesting him to adjust the tax paid by the main contractor towards the tax liability of the appellant which is quantified by an order of assessment passed on 30-10-1998 for the assessment year 1991-92. That reasonable request of the assessee is rejected by the Assessing Authority by his endorsement dated 11-4-2000.
The appellant had carried the matter in an appeal before the Appellate Authority against the said endorsement. In the appeal it was contended that on the works contract executed by the appellant as a sub-contractor to the principal contractor, the principal contractor has already paid tax on the amounts paid to the sub-contractor and therefore, there could not be levy of tax on the same amount in the hands of the appellant. The Appellate Authority has allowed the appeal and has set aside the endorsement issued by the Assessing Authority and further has ordered that tax paid by the principal contractor on the amounts paid to the appellant for execution of the works contract be given credit to the appellant after obtaining the details from the concerned officers. In our view the directions so issued cannot be characterised as erroneous and thereby prejudicial to the interest of the revenue, for the reason, under the Act, there is no option to the contractor not to deduct the tax from the bills of the sub-contractor and to deposit the amount so deducted into Government treasury and then issue a certificate in Form 50-A to the appellant. Therefore, on the amounts paid to the sub-contractor by the principal contractor has already suffered tax in the hands of the principal contractor and that turnover once again cannot be subjected to tax in the hands of the sub-contractor and if it is done, it would be a case of double taxation. Keeping these aspects of the matter in view, the First Appellate Authority has rightly ordered that tax of Rs. 46,487/- and Rs. 2,864/- paid by the principal contractors of the appellant be given credit to the appellant after obtaining the details from the concerned officers. In view of the above, the appeal requires to be allowed and the order passed by the Revisional Authority requires to be set aside. Accordingly, the following.-
ORDER
I. The appeal is allowed;
II. The order passed by the Revisional Authority is set aside;
III. A direction is issued to the Assessing Authority to give effect to the order passed by the Appellate Authority in Appeal No. 145 of 2000-01, dated 11-4-2001 as expeditiously as possible, at any rate within two months from the date of receipt of this order;
IV. If there is any other tax dues from the appellant, the Assessing Authority is at liberty to issue a fresh demand notice;
V. With these observations and directions, the appeal is disposed off. Ordered accordingly.