AI Structured Summary
Not yet generated for this judgment
Judgment
Rajagopala Ayyangar, J.—The entire question turns upon the powers of the Sales Tax Appellate Tribunal u/s 12-A of the General Sales Tax
Act. The relevant portions of this section run in these terms:
12-A.(1) Any Assessee objecting to an order relating to assessment passed--
(i) by the Commercial Tax Officer whether on appeal u/s 11 or suo motu u/s 12, Sub-section (1) or
(ii) by the Deputy Commissioner suo motu u/s 12, Sub-section (2),
may, if the Assessee has not preferred an application for revision of the order u/s 12, Sub-section 2, or under Sub-section 3 of that section, as the
case may be, appeal to the Appellate Tribunal within sixty days from the date on which the order was communicated to the Assessee....
(4) The Appellate Tribunal shall, after giving both parties to the appeal a reasonable opportunity of being heard pass such order thereon as it thinks
fit.
(5) Notwithstanding that an appeal has been preferred under Sub-section 1, tax shall be paid in accordance with the assessment made in the case:
Provided that the Appellate Tribunal may, in its discretion, permit the Appellant to pay the tax in such number of instalments, or give such other
direction in regard to the payment of the tax, as it thinks fit:
Provided further that if as a result of the appeal any change becomes necessary in such assessment, the Appellate Tribunal may authorize the
assessing authority to amend the assessment, and on such amendment being made, the amount overpaid by the Assessee shall be refunded to him
without interest, or the further amount of tax due from him shall be collected in accordance with the provisions of this Act, as the case may be.
The arguments advanced by Mr. Swaminatha Iyer, learned Counsel on behalf of the Petitioners, was based upon the language of Sub-section 4,
which authorizes the Appellate Tribunal ""to pass such order thereon as it thinks fit."" The expression thereon, it is contended, limits the jurisdiction of
the Tribunal not merely to the assessment which is complained of but to the grounds upon which the order of the lower authorities is attacked by
the particular Appellant. It is stated that it is not the entire assessment that is before the Appellate Tribunal at the stage of the hearing of the appeal
but only those portions of the assessment order which an Appellant attacks.
Learned Counsel based this argument mainly on certain decisions on the scope of Section 33(4) of the Indian Income tax Act where words
similar to those in Section 12-A(4) of the General Sales Tax Act, occur. But before referring to those decisions it is necessary to point out that
under the Madras General Sales Tax Act it is the Assessee and the Assessee alone that has the right of appeal to the Tribunal and that the State
has no right of filing an appeal or cross-objections against any order of the assessing authorities; as also that the income tax Act does not contain
any provision such as to be found in the second proviso, to Sub-section 5, which we have extracted above. We shall be dealing with the effect of
these distinctions at a later stage.
The first decision to which our attention was invited was that of the Bombay High Court in THE MOTOR UNION INSURANCE CO., LTD.
Vs. COMMISSIONER OF Income Tax, BOMBAY., . Section 33(4) of the Indian income tax Act, contains language almost identical with that
which is used in Section 12-A(4) of the General Sales Tax Act and runs thus:
The Appellate Tribunal may after giving both parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit, and shall
communicate any such orders to the Assessee and to the Commissioner.
The facts of the case were as follows: the Assessee, a non-resident company, incorporated in the United Kingdom carried on insurance business in
British India on lines other than life insurance. The income tax Officer who was the assessing authority proceeded under Rule 6 of the schedule and
included in its assessment an amount of Rs. 7,615, as interest received by the company. The Appellate Assistant Commissioner, on appeal,
confirmed the assessment and the Assessee appealed to the Tribunal. The Tribunal held that the income tax Officer was wrong in applying Rule 6
of the schedule but should have applied Rule 8, with the result that the income earned in the shape of interest was increased to Rs. 49,549. The
question was whether the Appellate Tribunal was entitled to so enhance the assessment. Dealing with the scheme of appeals tinder the Indian
income tax Act, Kania, J., as he then was, stated:
After the income tax Officer has made an order, if the Assessee feels aggrieved, he can appeal to the Appellate Assistant Commissioner. The
powers of the Appellate Assistant Commissioner in such a case are defined in Section 31. Sub-section 3, Clause (a), in terms, provides that in
disposing of an appeal the Appellate Assistant Commissioner may confirm, reduce, enhance or annul the assessment. He has also power under
Clause (5) to set aside the assessment and direct the income tax Officer to make a fresh assessment, after making such inquiry as the income tax
Officer thinks fit, or the Appellate Assistant Commissioner may direct. It is significant that there is no provision for appeal to the Appellate
Assistant Commissioner by the Department against the assessment made by the income tax Officer. u/s 33, a right of appeal to the Appellate
Tribunal is given, on the order made by the Appellate Assistant Commissioner. That right is given both to the Assessee and to the Commissioner.
Under Sub-section 3, the appeal has to be filed in the prescribed form and verified in the prescribed manner. Under Sub-section 4, the Appellate
Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate
the orders to the Assessee and to the Commissioner....
...On behalf of the Commissioner it is urged that Section 33(4), does not circumscribe the powers of the Tribunal, and leaves the Tribunal at large
to raise any question it pleases and decide the same. In our opinion, this argument is unsound. Apart from the statute, it is elementary that if a party
appeals, he is the party who comes before the Appellate Tribunal to redress a grievance alleged by him. If the other side has any grievance he has
a right to file a cross-appeal or cross-objections. But if no such thing is done, the other party, in law, is deemed to be satisfied with the decision
(the italicised is ours). He is, of course, entitled to support the judgment of the first officer on any ground open to him, but he is not entitled to raise
a ground so as to work adversely to the Appellant and in his favour.... The word ''thereon'' used in Section 33(4), only means ''on the appeal'',
which must mean on the grounds raised in the appeal. Read in that way, the sub-section only gives power to the Appellate Tribunal to give its
decision and pass orders in respect of all grounds urged (which must be on behalf of the Appellant) in respect of the decision appealed against. In
deciding those'' grounds it can pass appropriate orders. But, in our opinion, it is not open to the Tribunal itself to raise a ground or permit the party
who has not appealed, to raise a ground, which will work adversely to the Appellant (italicised is ours).
It will be seen that the construction of the word thereon is related to the fact that the department has a right of appeal and that, by not availing
themselves of such a right, they should be deemed to have acquiesced in or agreed to abide by the decision of the lower authority. In this
connection we might refer to a decision of this Court in Gajalakshmi Gin. Factory v. Commr. of I.T. (1953) 1 M.L.J. 35, where it has pointed out
the relevancy of this feature in considering the powers of the income tax Appellate Tribunal.
The decision of the Patna High Court in Jagarnath Therani v. Commissioner of income tax (1925) 2 I.T.C. 4, was next referred to. There the
Assessee was carrying on business in the district of Purnea and had also branches at Calcutta and Jalpaiguri. In the assessment order in question
the income tax Officer at Purnea who was the assessing authority reserved for future consideration the income derived from the Calcutta and
Jalpaiguri branches and made an assessment in regard to the income derived by the Assessee from his business in Purnea district. The Assessee
appealed against this assessment to the Assistant Commissioner and this appellate authority while reducing the assessment on the Purnea business
enhanced the assessment as a whole by including in the assessable income that which was derived from Calcutta and Jalpaiguri branches. The
Assessee then had a case referred to the High Court by the Commissioner of income tax as to whether the Assistant Commissioner had the power
to include a source of income which was not at all assessed by the income tax Officer. The learned Judges held that as the income tax Officer who
was the assessing authority had reserved for future consideration by himself as such assessing authority, the income derived by the Assessee from
the Calcutta and Jalpaiguri branches, the subject-matter of the appeal before the Assistant Commissioner was the assessment in relation to the
Purnea business alone and that in consequence the latter had no jurisdiction to travel beyond and seek to assess the income from those sources
which had been reserved for future consideration. We are unable to see how this decision affords any assistance to the Petitioners in the present
case.
The last case that was referred to in this connection was that of the Lahore High Court in Nawal Kishore Kharaiti Lal v. The Commissioner of
Income Tax, Punjab (1932) 9 I.T.C. 356. There the Assessee was carrying on business as a jeweller and for the year 1932-33 disclosed a gross
income from sales of Rs. 26,553. The income tax Officer accepted the figures of sales, but enhanced the net profits available for assessment.
Against this order the Assessee preferred an appeal to the Assistant Commissioner. The Appellate Authority, acting u/s 31, issued a notice to the
Assessee to show cause why certain items of expenditure which had been allowed by the taxing officer should not be disallowed and the income
enhanced. After hearing the Assessee the appellate authority passed an order dismissing the appeal and enhancing the assessment by a sum of Rs.
4,512. Against the order of assessment as finally passed by the Appellate Authority the Assessee preferred an appeal to the Commissioner of
income tax under the repealed Section 32. The Commissioner of income tax partially accepted the appeal and allowed a portion of the deductions
which had been granted by the income tax Officer, and the appeal was otherwise dismissed, on 3rd September 1934. On the same day the
Commissioner of income tax issued a notice to the Assessee to show cause why enhancement of the income from the sales of jewellery should not
be made and after receiving the explanation of the Assessee passed an order in October 1934, in the purported exercise of his powers of review
u/s 33 and enhanced the income from the sales from Rs. 26,000 and odd to Rs. 50,000. The question canvassed before the High Court was
whether this order of enhancement by the Commissioner was within his jurisdiction. If the income of Rs. 23,000 and odd, which was added to the
Assessee was treated as income which had escaped assessment, the same was not liable to be included in the assessment because no notice was
served on the Assessee within one year of the end of the assessment year u/s 34 of the Act, as it then stood. The learned Judges held that, when
the Commissioner was dealing with an appeal u/s 32, he could pass orders only with respect to the subject-matter of the appeal and could not suo
motu enhance the assessment which he had power to do u/s 33, but that the latter provision was subject to the limitations provided in Section 34.
Reliance is placed upon a sentence in this judgment dealing with the powers of the Commissioner as an Appellate authority being confined to the
appeal before him and as not extending to assessing escaped income. But we are unable to find any useful analogy or assistance furnished by this
case for the determination of the question arising in the present revision.
We are, therefore, unable to read these decisions as a conclusive judicial interpretation of the expression thereon occurring in Section 12(A)(4)
of the General Sales Tax Act and confining the powers of the appellate authority to deciding for or against any particular point raised by the
Appellant. It will be seen from the extracts quoted above that the content of that expression has been determined with reference to the context and
in the light of the provisions of the income tax Act, which confer a right of appeal on the department equally with the Assessee. Under the
provisions of the Madras General Sales Tax Act from any order of assessment passed by the Deputy Commercial Tax Officer, appeals to the
Commercial Tax Officer as well as to the Appellate Tribunal therefrom are open only to the Assessee and not to the department, and the powers
of the appellate authority to modify the basis of an assessment cannot be circumscribed by the consideration of the department having accepted the
order of the lower authority in so far as it decided any point against it.
There is also one other matter to be considered in this connection and that is the light afforded by the second proviso to Sub-section 5 of
Section 12-A of the Act. Sub-section 5, is directed to the consequences of an appeal to the Tribunal and the orders that might be passed in
relation to the tax liability by this appellate authority. The body of the section enacts the usual declaration that an appeal does not by itself impede
the enforcement of the orders appealed against. To this two riders are added in the two provisos which follow. The first proviso empowers the
Appellate Tribunal, in cases where they deem it proper to permit the Appellant to pay the tax in instalments or in such other manner as the Tribunal
might order. Up to this stage the enactment is dealing with the assessment order appealed against and the limitations subject to which an order
could be enforced. The second proviso deals with the stage subsequent to the disposal of the appeal and enacts the consequences which might
follow the order of the Appellate Tribunal. There are two limbs to this proviso. The first is concerned with cases where the Tribunal accept any of
the grounds urged by the Appellant and this results in a reduction of his tax liability and in those casts, if, as a result of the enforcement of the
assessment order either under the main part of Sub-section 5 or in the manner contemplated by the first proviso, a larger amount has been
collected from the Assessee than is warranted by the assessment as modified by the Appellate Tribunal, provision is made for the refund of the
excess so collected. The second limit is concerned with the other possibility, namely, the effect of the Tribunal''s order necessitating the payment of
a larger sum than was originally assessed and provision is made for the collection of this sum in addition to the sum as originally determined. As this
proviso undoubtedly contemplates an order of the Tribunal leading to an enhancement in the assessment, the construction contended for by the
learned Counsel for the Petitioners that the only jurisdiction of the Appellate Tribunal is either to accept or reject the grounds of appeal raised by
an Assessee in his memorandum of appeal cannot be upheld. Mr. Swaminathan urged that it was not a permissible rule of construction to widen
the scope of an enacting part from implications to be gathered from a proviso and relied upon a decision to the House of Lords in West Derby
Union v. Metropolitan Life Assurance Society (1897) A.C. 647, as authority for that proposition. The House of Lords was there considering the
provisions of Section 2 of the Poor Law Loans Act of 1871, under which the Poor Law Board was given authority to borrow money at cheaper
rate of interest in order to pay off loans carrying a higher rate of interest. The section contained a proviso that loans made subsequent to the
enactment could not be redeemed before their term without the consent of the creditors. The Poor Law Board claimed a right to redeem loans
made before the Act before the expiry of term stipulated in such loans. The argument on which this power was supported was that the proviso
indicated that the Board could redeem before the term without the consent of the creditors and confined the protection only to those creditors who
lent money subsequent to the enactment. The House of Lords affirming the decision of the Court of Appeal held that the proviso was really in the
nature of a saving clause and not a true proviso and rejected the claim of the Poor Law Board. This was really a case where the proviso had been
introduced by way of abundant caution. This matter has been referred to by Lord Herschell, at page 656, where the learned Lord said:
My Lords, I am satisfied that many instances might be given where provisions could be found in legislation that are meaningless because they have
been put in to allay fears when those fears were absolutely unfounded, and when no proviso at all was necessary to protect the persons at whose
instance they were inserted.
On the other hand, a later judgment of the House of Lords in Jennings v. Kelly (1940) A.C. 206, clearly lays down that there is no rule that the
terms of an enacting part have to be construed without reference to the provisos.
The proper course is to apply the broad general rule of construction, which is, that a section or an enactment must be construed as a whole, each
portion throwing light, if need be, on the rest. (Per Lord Wright at page 229.)
The expression thereon in Sub-section 4 has no fixed or rigid meaning. It makes colour from the context and the terms of the proviso referred to
afford some light as to what the Legislature had in mind when enacting Sub-section 4 in the form in which it is found. This proviso undoubtedly
enacts that an order by the Appellate Tribunal on appeal might in certain cases conceivably result in the assessment being enhanced. Before leaving
this part of the case we might also refer to the terms of Section 12, which confers revisional powers on the Commercial Tax Officer, Deputy
Commissioner and the Board of Revenue. Each of these authorities is empowered to call for and examine the record of any order passed or
proceeding recorded by the subordinate authority and after satisfying itself as to the legality or propriety of such order or proceeding to pass such
order with respect thereto as it thinks fit. The words with respect thereto detached from the context are, it would be recognised, colourless and do
not throw any light on the question whether these revisional authorities have power to enhance the assessment but guidance on this point is afforded
by the terms of Sub-section 6, which runs thus:
No order shall be passed under Sub-section 1, 2 or 3, enhancing any assessment, unless the opportunity has been given to the Assessee to show
cause against the proposed enhancement.
It will be noticed that this is really a limitation en a procedure enjoined with respect to a power which is assumed to exist without any positive
provision conferring such power. In this connection the terms of Section 31(3), of the income tax Act might be usefully referred to. The language
there used is:
In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment (a) confirm, reduce, enhance or
annul the enhancement.
There is a proviso
provided that the Appellate Assistant Commissioner shall enhance an assessment or a penalty unless the Appellant has had a reasonable
opportunity of showing cause against such enhancement.
The framers of the General Sales Tax Act, it will be seen, have incorporated the proviso to Section 31(3) of the Income tax Act without
introducing a positive provision as is to be found in the enacting portion of that sub-section. Regard thus haying had to the manner of drafting
adopted by the framers of the Madras General Sales Tax Act, we feel that effect has to be given to the implication arising from the second proviso
to Sub-section 5, that the Appellate Tribunal have a power to pass an order which might result in an enhanced assessment.
We might now sum up our conclusions:
(i) The Appellate Tribunal have no authority to add a new item to the turnover and include therein what was not before the assessing authority, for
that would be a matter not assessed but omitted from the assessment.
(ii) As the Appellate Tribunal are not the assessing authorities and have merely to determine facts giving rise to the tax liability and the law in
relation thereto, they are obviously empowered to allow an appeal and remand it for the assessment being computed in accordance with the facts
as found and the law as laid down by them, and this re-assessment has to be done by the assessing authorities.
(iii) Where the basis of an assessment is challenged by an Assessee and this is accepted by the Tribunal and the matter is remitted to the assessing
authorities, there has to be a re-assessment in conformity with their order. In the normal cases this would result in the decrease of the tax-liability of
the Appellant. The second proviso to Sub-section 5 enables the refund to be obtained by the Assessee as a consequence of the re-assessment in
accordance with the orders of the Appellate Tribunal.
But on the facts of the particular case the giving effect to the order of the Tribunal might result in an enhancement of the tax. The point raised by
the Petitioners in its ultimate analysis amounts to a denial to the Tribunal of the power to pass an order which, if given effect to, would result in an
enhancement of the assessment. We are clearly of the opinion that this contention cannot be accepted not merely because of the second proviso to
Sub-section 5, but also as such a view does not accord with any logical or intelligible construction of the relevant provisions of the Act. To take the
present case as an illustration, the Petitioners, as Appellants before the Appellate Tribunal, raised two points for the latter''s determination, viz., i.
that the Commercial Tax Officer, erred in the view that as Assessee was not entitled at the same time to both the reliefs provided for by Rule 18(2)
of the (Turnover and Assessment) Rules and by Article 286(1)(a) of the Constitution, and ii. that the Commercial Tax Officer erred in refusing to
hold the sale turnover of oil sold outside the State as not falling within the exemption provided by Article 286(1)(a). The Tribunal was not bound to
accept both these contentions. The final result of their order was that they rejected the first of the above contentions raised on behalf of the
Appellants before them but accepted the second. It meant that, while the Appellants were entitled to the exemption under the Constitution, they
were not entitled to the benefit of both the deduction and the exemption as the Tribunal affirmed the view of the Commercial Tax Officer in this
regard. In this situation the only order that they could pass was one remanding it to the Commercial Tax Officer for making a computation on the
basis suggested by them, In particular cases, such a computation might have resulted in a diminution of tax liability. In other cases, as in the present,
it might result in an enhancement of the tax. The validity of their order cannot be judged by the result, that is, the order cannot be held valid if it
resulted in a reduction of tax liability but held invalid and beyond their jurisdiction if the re-computation resulted in enhancing the tax. Whether the
expression thereon in Section 12(A)(4) , read in the light of the second proviso to Sub-section 5, would include the entire assessment order or only
those grounds which are raised for consideration of the Appellate Tribunal by any particular Appellant, in the present case the claim to deduction
under Rule 18(2) of the (Turnover and Assessment) Rules and the constitutional exemption under Article 286(1)(a), were so interrelated to each
other that it would not be possible for the Tribunal to pass any order on the appeal other than that which they have passed.
In the result, we hold that the order of the Appellate Tribunal was within their jurisdiction and that was the proper order to pass. The Revision
Petition fails and is dismissed with costs.