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Judgment
Ramamurti, J.—The main point that arises for decision relates to the legality of the order passed by the Deputy Commissioner on 3rd July,
1961, in exercise of his powers of revision u/s 32 of the Madras General Sales Tax Act, 1959 (hereinafter called the Act). The brief facts of the
case are :
The petitioners, who are tanners and dealers in hides and skins, were assessed to sales tax by the Deputy Commercial Tax Officer by his order
dated 12th February, 1954, on a turnover of Rs. 7,68,298-1-0 for the year (1952-53), and, on appeal by the assessee, this assessment was
confirmed by the Commerical Tax Officer, North Arcot, by his order dated 4th March, 1955. The Deputy Commercial Tax Officer, by an order
dated 30th November, 1957, revised the assessment refixing the taxable and licence turnover of the assessee at Rs. 1,01,597-2-9, purporting to
follow certain decisions of the Madras High Court. The Deputy Commercial Tax Officer took the view that the turnover of Rs. 6,66,700-14-3
ought not to have been included in the original assessment. The Deputy Commissioner of Commercial Taxes, Coimbatore Division (suo motu),
exercised his powers of revision u/s 32 of the Act, and, by his order dated 3rd July, 1961, he restored the original order of the Deputy
Commerical Tax Officer dated 12th February, 1954, and determined the turnover at Rs. 7,68,298-1-0 after hearing the objections of the
petitioners. The petitioners preferred an appeal to the Sales Tax Appellate Tribunal from this order of the Deputy Commissioner, but without
success. The present revision has been filed against the order of the Appellate Tribunal.
Learned counsel for the petitioners advanced some arguments on the merits with a view to establish that the second order by the Deputy
Commercial Tax Officer refixing the turnover at Rs. 1,01,597-2-9 was the correct order and that the Deputy Commissioner had erred in setting
aside that order in revision. It is unnecessary to advert to the arguments of learned counsel on this aspect of the matter, as we are of the opinion
that the revision is liable to be dismissed on a more fundamental ground.
Mr. Ramanujam, on behalf of the State, raised the contention that, even assuming (but not conceding) for purposes of argument that the first
order of the Deputy Commercial Tax Officer dated 12th February, 1954, determining the turnover at Rs. 7,68,298-1-0 was wrong on the merits
or vitiated by an error apparent on the face of the record within the meaning of Rule 18 of the Madras General Sales Tax Rules of 1939, the
power under the said rule to rectify such an error could not be exercised by the assessing authority, after the order was confirmed by an appellate
authority, i.e., the Commercial Tax Officer by his order dated 4th March, 1955, and that therefore the Deputy Commissioner was well within his
jurisdiction in exercising his powers of revision u/s 32, in setting aside the second order of the Commercial Tax Officer and restoring the original
order dated 12th February, 1954. He urged that the original order of assessment got merged in the order passed on appeal and that thereafter the
original assessing authority had no jurisdiction to interfere with the operation of the order as confirmed on appeal. We accept this argument as
clearly well-founded. Whether it is a proceeding in a civil court or a proceeding before a quasi-judicial tribunal, it is settled law, that when the order
of the lower court or the subordinate authority is confirmed by the appellate court or appellate authority, the original order or decree is superseded
and the only court that can amend thereafter is the appellate court. It is sufficient to refer to the Full Bench decision in Pichuvayyangar v. Seshay-
yangar (1895) 13 Mad. 214, in which it was held that the jurisdiction of the court of first instance to amend the decree was ousted by the
confirmation of the decree on appeal. We may also refer to a recent decision of this Court in Sundaram and Co. (Private), Ltd. Vs. The First
Additional Income Tax Officer, . In this case, the Income Tax Officer revised the original assessment, and, on appeal by the assessee, that revised
assessment was confirmed, with some modification. The Income Tax Officer purported to rectify the original assessment u/s 35. The Bench held
that the original order of assessment sought to be rectified did not subsist on the date when the Income Tax Officer initiated proceedings u/s 35,
for, the original order was cancelled and set aside by the officer himself. The Bench pointed out that the only order that was in force was the order
of the Appellate Assistant Commissioner and the original order of assessment was no longer subsisting. It follows therefore that the second order
passed by the Deputy Commercial Tax Officer on 30th November, 1957, exercising powers under Rule 18 aforesaid is without jurisdiction. As
observed earlier, it is in this view that, we think, it is unnecessary to consider the correctness of the order dated 30th November, 1957, on its
merits.
Learned counsel for the assessee, recognising this position, has really no answer to the objection on behalf of the State. Learned counsel would,
however, contend that the powers of revision of the Deputy Commissioner are circumscribed by the limits specified in Section 32 of the Act and
that it is only in the case of an order passed or proceeding recorded by the appropriate authority under Sections 12, 14 and 15 or Sub-section (1)
or (2) of Section 16 that the Deputy Commissioner can exercise the powers of revision. He urges that the order passed by the original assessing
authority under Rule 18 of the Madras General Sales Tax Rules of 1939 would correspond to the power u/s 55 of the Act of 1959, and that an
order passed u/s 55 cannot be revised u/s 32. He contends that an order passed by the assessing authority u/s 55 is an order passed in the
exercise of special jurisdiction and cannot be assimilated to or viewed as an order u/s 12, so as to render it liable to be revised u/s 32.
In support of his argument, learned counsel relied upon certain decisions rendered under the Indian Income Tax Act. We see no substance in
this contention, as we are of the opinion that, if an order is passed by the assessing authority u/s 55, after a fresh approach to the facts and the law
involved in the assessment, such an order would be in substance an order of assessment within the meaning of Section 12 of the Act. When the
officer, after rectifying the alleged error passes an order u/s 55, there will be a resultant fresh assessment to be followed by a fresh demand notice
revising the tax due or a certificate for the refund, as the case may be. Under the scheme of the Madras General Sales Tax Act of 1959, an order
u/s 55 will necessarily attract the operation of the provisions of Section 12. In fact, Section 55, Sub-section (3), makes the position clear. Sub-
section (3) provides that where any such rectification has the effect of enhancing an assessment or penalty, the assessing authority shall give the
dealer a revised notice of assessment or penalty and thereupon the provisions of the Act and the Rules made thereunder would apply as if such
notice had been given in the first instance. It may be noticed that, under the Madras General Sales Tax Act of 1939, when the original assessing
authority exercised his powers under the guise of rectifying a mistake under Rule 18 of that Act, any one of the authorities mentioned in Section 12
will have jurisdiction to revise the order of the assessing authority. It is obvious that the revisional authority must have this revisional jurisdiction, as
otherwise the order of the assessing authority however erroneous or illegal it may be, would enjoy a special immunity. The Act of 1939 and the
Rules framed thereunder did not give any such finality to orders of the assessing authority, but powers have been expressly conferred u/s 12 for
purposes of revision. We cannot conceive of any reason as to why the Legislature should have made such a departure in the Act of 1959, as to
take away the powers of revision in such a situation. The acceptance of the contention of learned counsel for the assessee would result in absurd
and very inconvenient results. Under the Act of 1959, it will be seen that there is no provision for the department to take up the matter to any
appellate or revisional authority functioning under the Act. Section 33 would apply only to an assessee and not to the department. Sections 34 and
35 of the Act, on their own language, again would not cover a situation like the instant case, and the department would have no right to file a
revision to the Board of Revenue. Equally, u/s 36 of the Act, the department will have no right of appeal to the Tribunal. The position is the same
even with reference to the right of appeal to the High Court u/s 37. The right of revision provided in Section 38 will have no operation at all, if the
assessing authority passes an order u/s 55 in favour of the assessee, as there will be no occasion for him to take up the matter to a higher authority
either appellate or revisional. The net result therefore is that, if the assessing authority passes a wrong or illegal order adverse to the department
involving huge. loss of revenue to the State, the department would be without any remedy, and the wrong order of the assessing authority would
remain unassailable. We see no warrant for construing the provisions of the Act so as to result in this anomalous position. In this connection, we
may refer also to an unreported decision of ours in T. C. Nos. 30, 31 and 53 of 1963 Since reported as Deputy Commissioner of Commercial
Taxes, Coimbatore Division, Coimbatore-2 v. M. K. Muthuswami Chettiar and Ors. [1964] 15 S.T.C. 732. In that decision, the assessee made a
claim for refund of tax paid by him, on the ground that a portion of the turnover related to inter-State trade. The assessing authority as well as the
Appellate Assistant Commissioner rejected his claim for refund. The Sales Tax Appellate Tribunal ordered the refund. In the revision before us, it
was contended that an order granting or refusing a refund under the proviso to Section 4 would not be an order within the meaning of Section 12
of the Act of 1959 and therefore the assessee would have no right of appeal u/s 31. We rejected this argument, holding that, when a refund is
granted, it virtually amounted to passing an order u/s 12 of the Act carrying with it the right of appeal u/s 31. We were of the view that the
subsequent order for refund should be taken in essence as a modification of the original order of assessment attracting the operation of Section 12.
The principle of that decision would clearly apply to the instant case, and it does not matter whether it is an order for a refund under the proviso to
Section 4 of the Act or a rectification of an error u/s 55 of the Act, as, in either case, it necessarily involves a modification of the original order of
assessment.
It only remains to deal with the argument of learned counsel for the petitioners based upon the decisions rendered under the Income Tax Act.
Even though the Sales Tax Act and the Income Tax Act have the same object, i.e., securing revenue for the State, and the taxing provisions under
the two Acts are generally of the same pattern, it must be borne in mind that, on the question of right of appeal and right of revision, the provisions
of the two Acts are not identical or similar, with the result that the decisions rendered under the Income Tax Act may not be of decisive guidance
under the Sales Tax Act. Even so, we are of the opinion that the decisions relied upon by learned counsel for the petitioner far from supporting his
contention, are against him.
We shall first take up the decision of the Supreme Court in Commissioner of Income Tax, Madras Vs. Mtt. Ar. S. Ar. Arunachalam Chettiar, ,
on which counsel placed considerable reliance. In that case, the assessee preferred an appeal to the Appellate Tribunal against the disallowance of
certain expenses by the Income Tax authorities. The Tribunal partly allowed the appeal, allowing two items of expenses in favour of the assessee.
As per the directions of the Appellate Tribunal, the Income Tax Officer made a recomputation, but he also included a certain sum of unassessed
foreign income of earlier years remitted to India during the year of account. The assessee appealed to the Appellate Assistant Commissioner, who
declined to admit the appeal, on the ground that there had been no assessment u/s 23 and therefore there would be no right of appeal u/s 30. The
assessee filed an application to the Appellate Tribunal, who set aside the order of the Income Tax Officer and directed the latter to revise the
computation, confining the same to the two items allowed in favour of the assessee. The Commissioner of Income Tax filed an application to the
Appellate Tribunal for referring certain questions of law. As the Tribunal referred only one question to the High Court, on the application of the
Commissioner, the High Court directed the Tribunal to refer another question. When these two questions came up for hearing, the High Court held
that the references were incompetent and refused to answer the questions. On appeal, the Supreme Court confirmed the judgment of the High
Court. The point relevant for our present discussion is dealt with at page 188 of the reports. A perusal of the provisions of Sections 30, 31 and 33
would show that a right of reference u/s 66 is intimately connected with the question of right of appeal to the Appellate Assistant Commissioner
from the order passed by the Income Tax Officer, when the latter carried out the directions contained in the order of the Income Tax Appellate
Tribunal. The argument on behalf of the assessee was that the order passed by the Income Tax Officer should be regarded as virtually a fresh
order of assessment coming u/s 23, carrying with it the right of appeal u/s 30 to the Appellate Assistant Commissioner, who, while disposing of the
appeal, exercised jurisdiction and powers conferred on him u/s 31. The Supreme Court, while recognising that in certain cases the order passed by
the assessing authority on a later occasion revising the original order of assessment could be appealed from u/s 30 read with Section 23 of the
Income Tax Act, held that on the facts of that case the right of appeal was not available. The Supreme Court took the view that on the later
occasion when the Income Tax Officer modified the original assessment allowing two items of expenses in favour of the assessee, he was not
passing an order, applying his mind independently, but that he was mechanically carrying out the directions contained in the order of the Appellate
Tribunal. In other words, the Supreme Court took the view that, if the Income Tax Officer had no occasion to apply nor could apply his own
independent mind to the assessment but was obliged to carry out certain deductions purely by way of subtraction or additions in arithmetic in
pursuance of the mandate of the appellate authority, the order of the Income Tax Officer could not be said to be a fresh order of assessment within
the meaning of Section 23, so as to attract a right of appeal u/s 30. Das, j., delivering the judgment of the Court put the matter thus :
It is, therefore, clear that in order that the Appellate Assistant Commissioner may exercise his jurisdiction and make an order u/s 31, there must be
an appeal as contemplated by Section 30. The learned Attorney-General only relies on the opening part of Sub-section (1) of Section 30 and
contends that the appeal before the Appellate Assistant Commissioner was with respect to the amount of income assessed u/s 23 or Section 27. It
will be recalled that the Appellate Tribunal held that the two sums claimed by the assessee would be allowed to him and concluded by saying that
the appeal was partly allowed. The power of the Appellate Tribunal u/s 33(4) is indeed wide, for on an appeal properly before it, it can make such
order as it thinks fit. Therefore, the order made by the Appellate Tribunal in this case on 20th August, 1943, must be read and construed as a
direction to the Income Tax Officer to carry out the directions by allowing the two deductions in question. When the matter again came before the
Income Tax Officer his function was only to carry out the order of the Appellate Tribunal; He could not otherwise reopen the assessment already
made by him u/s 23. Therefore, in carrying out the directions of the Tribunal and in doing what he did on 26th September, 1945, the Income Tax
Officer cannot be regarded as having acted u/s 23 or Section 27 of the Act and that being the position no appeal lay from that order of the Income
Tax Officer u/s 30(1) of the Act. The result of it was that there was no proper appeal before the Appellate Assistant Commissioner such as is
contemplated by Section 30(1) and, therefore, the order made by the Appellate Assistant Commissioner cannot be regarded as an order made by
him u/s 31(3), for an order u/s 31(3) can only be made in disposing of an appeal properly filed u/s 30, and consequently no further appeal lay to
the Appellate Tribunal u/s 33(1) so as to enable the Appellate Tribunal to make an order under Sub-section (4) of that Section.
From the observations extracted above, it will be seen that this case does not support the contention of the assessee; on the other hand, the
observations show that in certain circumstances where the original assessing authority passes a subsequent order applying his own independent
mind to the assessment and reaching his own independent conclusion, without in any way being compelled to mechanically carry out the directions
of the appellate authority, the subsequent order of the assessing authority could be regarded as one coming u/s 23 carrying with it the right of
appeal u/s 30 of the Income Tax Act.
Learned counsel also relied upon a Bench decision of this Court in COMMISSIONER OF Income Tax, MADRAS Vs. O. RM. M. SM. SV.
SEVUGAN., , in which it was held that an order rectifying an error passed by the Income Tax Appellate Tribunal u/s 35 could not be regarded as
a new order to ask for a reference to the High Court. That decision turned upon the language of Section 66(1) with regard to the right of reference
to the High Court and the reasoning in that case would not be of much assistance to the instant case. The question of right of appeal u/s 30 read
with Section 23 of the Income Tax Act is different from the ambit of a right to ask for a reference u/s 66 of the Act.
Learned counsel next relied upon a Bench decision of this Court in Commissioner of Income Tax, Madras Vs. Vellingiri Gounder and
Brothers, Coimbatore, . In that case, the Income Tax Officer, acting u/s 35, rectified certain mistakes in his original order of assessment and
enhanced the assessable income after giving notice to the assessee. The assessee preferred an appeal against the order but the Appellate Assistant
Commissioner dismissed the same holding it to be incompetent. On further appeal to the Tribunal, the Tribunal held that the appeal to the Appellate
Assistant Commissioner was competent and remanded the case. On reference, the High Court held that no appeal lay to the Appellate Assistant
Commissioner against the order of the Income Tax Officer u/s 35 and therefore no appeal lay to the Appellate Tribunal against the order of the
Appellate Assistant Commissioner. The Bench, in its brief judgment, took the view that the decision of the Supreme Court in Commissioner of
Income Tax, Madras Vs. Mtt. Ar. S. Ar. Arunachalam Chettiar, , already referred to, governed the case before the Bench. From the judgment, it
does not appear that any argument was advanced that even according to the judgment of the Supreme Court orders passed by the assessing
authority u/s 35 in certain cases may amount to orders of assessment. We see considerable force in the argument of learned counsel for the State
that the attention of the learned Judges was not drawn to the observations of the Supreme Court in Commissioner of Income Tax, Madras Vs.
Mtt. Ar. S. Ar. Arunachalam Chettiar, . A perusal of the judgment shows that it was taken for granted by both parties that the decision of the
Supreme Court in Commissioner of Income Tax, Madras Vs. Mtt. Ar. S. Ar. Arunachalam Chettiar, , either way, would decide the fate of the
case before the Bench. In view of this, we are of the opinion that this decision does not help the contention of the assessee in this case.
Learned counsel next drew our attention to a recent judgment of the Supreme Court in K.S. RASHID AND SON AND OTHERS Vs.
Income Tax OFFICER., . This decision too, far from helping the assessee, is against him. In that case, the question arose as to whether the
introduction of Section 34(1A), which was introduced by an amendment in the Act on the 17th July, 1954, for assessing escaped income was valid
and did not contravene Article 14 of the Constitution and whether there was a rational classification between assessees falling u/s 34(1)(a) and
those falling u/s 34(1A), which provisions dealt with cases of income which had escaped assessment. The argument was that, where the Income
Tax Officer took action u/s 34(1)(a) he had to deal with the matter on the footing that the notice issued against the assessee was a notice u/s 22(2),
that if Section 22(2) was attracted, the assessee would have a right of appeal and a right of revision as prescribed by Sections 30, 31, 32, 33, 33A
and 33B of the Act, that this right would not be available to an assessment u/s 34(1A), that the assessee would have no such right of appeal or
revision under the provisions referred to earlier and that this denial of right of appeal and right of revision to the assessee would contravene Article
14 of the Constitution. The Supreme Court rejected this argument, holding that in both u/s 34(1)(a) and 34(1A) the notice that is issued is one that
is referable to Section 22(2) and therefore the assessee will have the same rights of revision and appeal, as in the case of Section 34(1)(a).
Gajendragadkar, C.J., delivering the judgment, put the matter thus:
If Section 22 is held to be inapplicable to proceedings u/s 34(1A), the consequence would be entirely irrational and fantastic. The powers
conferred on the Income Tax Officer u/s 23(2) to take evidence would then not be available to him, and, indeed, all the powers prescribed and the
procedure laid down by Section 23 would become irrelevant. Likewise, the provisions in regard to appeals and revisions contained in Sections 30,
31, 33, 33A and 33B would also be inapplicable. As we have already seen, the inapplicability of these provisions is the main foundation of the
attack against the validity of Section 34(1A). It is, however, urged that though the specific powers conferred by Section 23 may not be available to
the Income Tax Officer, he may, nevertheless, exercise similar powers, because the authority to assess must itself include such powers as incidental
to assessment. The best judgment assessment which is authorised by Section 23(4) may, it is suggested, be made even in cases falling u/s 34(1A)
under the inherent authority of the Income Tax Officer. In our opinion, this approach is wholly misconceived. We are satisfied that it could not have
been the intention of the Legislature when it enacted Section 34(1A) that the procedure prescribed by the relevant provisions of the Act beginning
with Section 22 should not be applicable to proceedings taken u/s 34(1A), and that the procedure to be followed in the said proceedings and the
powers to be exercised by the Income Tax Officers dealing with them should be what is vaguely described as ''the inherent or incidental powers''
of such officers. Therefore, we have no hesitation in holding that the challenge made to the validity of Section 34(1A) on the ground that the
remedy by way of appeals or revisions which is available to the assessees against whom proceedings are taken u/s 34(1) is not available to the
assessees who are covered by Section 34(1A), cannot be sustained.
From this, it will be clear that, even though Income Tax is levied on escaped income u/s 34(1)(a) and Section 34(1A), it is essentially a case of
assessment u/s 23 of the Income Tax Act. It must be noticed that Section 30 of the Income Tax Act which provides for the right of appeal does
not in express terms refer to an order u/s 34 assessing income which had escaped assessment. But there can be no doubt about it that a right of
appeal u/s 30 would be available to an assessee on the footing that it is an assessment u/s 23 of the Act. The argument before the Supreme Court
was that orders u/s 34(1)(a) could be appealed against u/s 30 read with Section 23, while in the case of assessment u/s 34(1A), such a right of
appeal was not available, which argument, as mentioned above, was rejected. It is unnecessary to refer to the other decisions rendered under the
Income Tax Act referred to by the learned counsel.
For all the reasons mentioned above, we dismiss the revision case. No costs.