Avtar Singh Ranjit Singh vs The State of Punjab

Rajendra Nath Mittal, J.—This judgment will dispose of General Sales Tax References Nos. 8 and 9 of 1976.

Briefly, the facts are that the petitioners are engaged in the business of purchase and sale of gur, shakar, vegetable ghee, etc. The Assessing Authority gave a direction to the firm to file monthly return on 27th December, 1956. Accordingly, the firm which had already filed quarterly returns for the first three quarters of the assessment year 1956-57, started filing monthly returns and did so till the end of the assessment year 1957-58. For the year 1956-57, it showed a gross turnover of Rs. 16,41,997-4-3. Deductions were claimed regarding sales made to registered dealers for an amount of Rs. 11,06,842-14-3. The gross turnover of the petitioner for the year 1957-58 was Rs. 19,74,483.17. Deductions were claimed regarding the sales in favour of registered dealers to the tune of Rs. 8,97,301.83.

The Assessing Authority issued notices in form S.T. XIV on 27th August, 1958, in respect of both the assessment years which were served on the petitioner on 4th September, 1958. At the request of the petitioner, the case was adjourned from time to time on several occasions. Finally, it came up for hearing on 15th July, 1961. Nobody appeared on its behalf on the said date and consequently the Assessing Authority made an ex parte assessment. The gross turnover disclosed by it was taken to be correct in both the assessment years by the Assessing Authority but it disallowed deductions u/s 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the Act), in respect of sales amounting to Rs. 7,69,400-14-6 regarding the assessment year 1956-57 and Rs. 4,25,657-13-6 for the assessment year 1957-58 on the grounds that the sales had not been made to registered dealers and that the declarations furnished were not genuine. An appeal against the order of assessment was rejected by the Deputy Excise and Taxation Commissioner, Punjab, on 11th January, 1965. A further revision to the Joint Excise and Taxation Commissioner was allowed by him on 23rd March, 1965.

The department then filed a revision petition before the Financial Commissioner (Taxation), Punjab, who vide his order dated 21st April, 1966, set aside the order of the Joint Excise and Taxation Commissioner and restored that of the Deputy Excise and Taxation Commissioner. The petitioner then moved an application u/s 22(1) of the Act for referring five questions of law arising out of the order of the Financial Commissioner (Taxation) to the High Court. That application was also rejected by him on 29th February, 1968. The petitioner then filed an application u/s 22(2) of the Act before this Court to the effect that the Financial Commissioner be directed to refer the questions of law to the High Court. This application was accepted and the High Court directed the Financial Commissioner to refer the following question of law to it for opinion :

Whether, on the facts and in the circumstances of the case, the order of assessment dated 24th July, 1961, was not an order u/s 11(4) of the Punjab General Sales Tax Act ?

This Court, vide its order dated 16th January, 1975 (Avtar Singh Ranjit Singh v. State of Punjab [1975] 35 STC 406), held that a plain reading of Sub-sections (3) and (4) of Section 11 shows that if a dealer fails to comply with the terms of the notice issued to him under Sub-section (2), the order will fall within the purview of Sub-section (4). It further held that in order to determine as to under which of the sub-sections the order had been passed, one of the facts to be determined was whether the dealer had complied with the terms of the notice issued to him under Sub-section (2) or not. However, the Financial Commissioner had not given any finding to that effect in the reference order. Consequently, the case was referred back to him directing that he should give a finding whether the petitioner had complied with the notice u/s 11(2) of the Act issued by the Assessing Authority or not. The Financial Commissioner has resubmitted the references after recording his finding on that question. Reference No. 8 of 1976 relates to the assessment year 1956-57 and Reference No. 9 of 1976 to the assessment year 1957-58.

As already observed above, in order to determine whether the order of the Assessing Authority dated 24th July, 1961, was u/s 11(4), it is to be seen whether the petitioner complied with the notice of the Assessing Authority u/s 11(2). The Financial Commissioner dealt with the matter at a considerable length and came to the conclusion that the notice u/s 11(2) gives directions on the following five points :

(1) Requires the attendance of the dealer in person or by any agent;

(2) Requires the production of the accounts and documents specified;

(3) Grants liberty to raise any objection which the dealer may wish to prefer;

(4) Grants liberty to produce any evidence the dealer may wish to adduce in support of his objections; and

(5) Grants liberty to show cause why a penalty should not be imposed upon the dealer u/s 11(6) of the Act.

Out of the above directions, the assessee had complied with the first three directions fully, whereas he complied with the fourth direction partly.

In view of the aforesaid observations, it cannot be held that the dealer complied with the notice u/s 11(2) fully. Thus, the order of assessment dated 24th July, 1961, was an order u/s 11(4) of the Act. Consequently, we reply to the question in both the references in the negative, that is, in favour of the petitioner-assessee and against the department. No order as to costs.