L.V. Veeri Chettiar and Another vs Sales Tax Officer, Bombay

Ramaprasada Rao, J.—Thiru L. V. Veeri Chettiar and his minor son V. Shamugham, the petitioners herein, formed themselves in to an

association of persons in the year 1961 for carrying on the business of manufacture of handloom and powerloom cloths. They adopted the trading

style of ''Messrs. Shamugham textiles'' and their factory was set up in Vembadithalam, Salem Dt. The petitioners later concerned themselves in the

manufacture of readymade garments and were exporting such garments, art silk fabric and pure silk zari embroidered sarees, all of which came

under the category of handloom cloth and handicrafts within the meaning of the Export Promotion Scheme for handicrafts and handloom cloths

initiated by the Government of India. Under the said scheme certain import licenses were issued to the petitioners as against the export of

handloom cloths and handicrafts. It is not necessary to set out the details of the export promotion scheme, as they are not necessary. The

petitioners conceded that the import license so obtained by them were being sold by them by way of forward sale through named brokers in

Madras. Such blank transfers enabled the brokers to negotiate further the licences and sell the same. The petitioners would state that on e they

effected a sale of the licences through the brokers, they were not aware as to who finally imported the goods undercover of the licence and under

the letters of authority which they signed in blank contemporaneously along with the sale of the licences.

The petitioners'' case is that they maintain no accounts, in respect of such sale of licenses and according to him, no goods imported under the said

licences were solidly them in the Maharashtra State, On 5-10-1964 the Sales Tax Officer (X-I) Enforcement Branch, Greater Bombay, who is the

respondent in this case, sent a registered letter stating that the petitioners have made large imports at Bombay and called upon them to furnish to

him the details of such imports and the disposal thereof. He characterised the petitioners as non-resident dealers and enclosed various forms to be

filled up by the petitions for the respondent to deal with them accordance with the sales tax law in force in Bombay. One such form which was

enclosed with the letter dated 5-10-1964 was a form which related to a certificate to be issued by a Chartered Accountant relating to the

maintenance of the books of account by the petitioners and the statement of sales of imported goods etc. The petitioners replied in their letter

dated 9-3-1965 stating that there were no imports of art silk as claimed during the period 1-1-1960 to 31-3-1964.

In this view they sent back the statement marked ""nil"". The petitioners claim that the association of persons was dissolved on 9-6-1965. In spite of

the disowning of any transaction in the nature of import or sale by the petitioners, the respondent was pursuing the petitioners to furnish before him

their books'' of account, In their letter dated 4-8-1966, the petitioners made it clear that there was no clearance of goods at Bombay Port and

there was no sale of any commodity by the petitioners who were by them dissolved on 9-6-1965. They denied liability and stated that the

association of persons is under no legal obligation to produce the accounts and documents called for. They reiterated that the licences were sold in

accordance with the common practice of the trade through named brokers and blank papers in the nature of letters of authority were given at or

abut the time of such sale. The petitions claim that there was no occasion or necessity for them, to keep accounts as there was no actual import of

goods subsequent to 1-4-1964. They categorically stated as follows:--

As soon as transactions are concluded with the brokers, blank papers would be signed to enable them taking necessary steps to effect the imports

in the name of the firm, by the ultimate purchasers of the licenses. There was no direct contact at any stage between the association and the buyers

of the licenses. Therefore the association is not in possession of the details regarding the names of parties. The names of buyers could be easily

verified and found by the sales tax authorities with reference to the import clearance papers with the Bombay Port trust authorities. If the officer

has any information on which the suspicion that any transaction of sale was effected by the dissolved firm in Maharashtra State is based, the

necessary material may kindly be furnished so that it would be possible to explain the nature of those transaction.

In effect, therefore, the petitioners challenged the factual hypothesis which prompted the respondent to issue the notice under the provisions of the

Bombay Sales Tax Act and purported to exercise jurisdiction thereunder. It appears that the petitioners'' representative interviewed the respondent

on or about 11th August 1966 and the position was made clear to him. This personal interview of the representative was followed by a letter of

confirmation dated 23-8-1966. In this letter, while reiterating that they were not in possession of any particulars of sale of material at Bombay, the

petitioners wanted that the details regarding the materials in the possession of the respondent be furnished to them, to enable them to answer the

show cause notice. A reminder was sent on 31-8-1966. There also the position was further elucidated by the petitioners, but with the difference

that they gave the name of the broker through whom the licences were sold as Janab Gafoor Sahib Sunkuarama Chetti Street, Madras 1.

The petitioners were so diligent and sincere to enquire of the respondent whether the ultimate buyers of the licences misused their names and

pretended as if goods were sold in Bombay on behalf of and for the benefit of the petitioners. The petitioners also made out specifically that as they

did not have direct contact with those buyers, any information leading to such sale may be forwarded to the petitioners, so that they could clear the

suspicion in the mind of the respondent and consequentially work up their rights. In spite of such a sincere effort on the part of the petitioner, the

respondent appears to have taken no steps in making any further investigation or securing materials to bring home o the petitioners that the goods

imported under their licences were sold in the State of Maharashtra and within the jurisdiction of the officer concerned.

On the other hand on 4-11-1966, the respondent issued the notice, which is impugned in this writ proceedings, which is practically a repetition of

what he has stated but bereft of the particulars and materials requested for by the petitioners. The respondent, however, would state in the

impugned notice that the petitioners have delivered goods imported in Bombay to local buyers. No attempt has been made to disclose as to who

the buyers were, though such information was asked for. Apparently the respondent obtained information about the value of the licences granted

for the years 1964-65 and 1965-66 from the Imports Control Authorities and incorporated them in his notice under scrutiny by us, and concluded

thus:

From this I infer that you must have been granted import licences for similar value in the past for 1960-61. As these goods have been sold after

clearance in this State I provisionally hold you liable from 1-1-1960..... I propose to pass best judgment order after adding 500% to the C. I. F.

value.

He would add that information of imports has been disclosed to the representatives and he would not agree that notwithstanding the dissolution of

the association of persons, there is no obligation on it to produce the books of account etc., and subject itself to the jurisdiction of the respondent.

Finally the respondent would state that since the petitioners were the owners of the goods as per documentary evidence, as per conditions of

import licence, the responsibility rested with the petitioners and called upon then to show cause why he should not assess them in manner proposed

and why also a penalty under S. 36(2) (a) of the Bombay Sales Tax Act, 1959, be not imposed. He also served a notice under S. 33 of the said

Act calling upon the petitioners to state their objections, if any, and called upon them to attend his office on a notified date. This notice prompted

the petitioners to come up to this court under Art. 226 of the Constitution of India for the issue of a writ of prohibition prohibiting the respondent

from taking any further proceedings in pursuance of his notice dated 2-1-1967.

In the writ petition the petitioners'' case is that there is total absence of jurisdiction in the respondent to initiate proceedings against the

petitioners. This is because the petitioners did not effect any sales as alleged and as only a sale would attract sales tax and as no particulars of such

sales were furnished in spite of several sincere requests made in that behalf, the impugned order is illegal. The petitioners would categorically state

that they had not sold any goods in the erstwhile State of Bombay during the period of about five years prior to the date of dissolution. They would

also raise a legal plea that the petitioners who formed themselves into an association of individuals having been dissolved the assessing authorities

could not take any further action in law to bring to tax any transaction of theirs, even if there were any on the ground that they have escaped

assessment. They claim that the respondent was acting in an arbitrary and high-handed manner in the absence of any material whatsoever and the

proposed levy of penalty is capricious. Apprehending, therefore, that final order would be passed, which would be totally beyond the jurisdiction

of the respondent, a rule nisi in the nature of a prohibition was sought. This court issued the rule nisi and the respondent has filed a counter affidavit.

In the counter the respondent''s case is that this court has no jurisdiction to entertain and hear the petitioner as no part of the cause of action has

arisen within the jurisdiction of this court. He would claim that the petition as framed is not maintainable. On the fact, it is stated that as a mere

proposal has been made under S. 33 of the Bombay Sales Tax Act, 1959, and as it is in the nature of a show cause memo, the petitioners are not

entitled to challenge the said notice as the Act provides for adequate and efficacious remedies to challenge the final assessment orders by way of

appeal, revision etc. The respondent does not admit that the petitioners did not import the goods or did not sell them in the State of Maharashtra or

that the petitioners'' firm was not aware to whom the imported goods were sold. He adds that as lawful custodian of the relevant documents

connected with import licences it was incumbent upon the petitioners to produce the relevant evidence before the respondent to prove that the

petitioners had not imported goods and that they did not sell imported goods in the State of Maharashtra.

He would maintain that he justified in making the proposal as he did and such a proposal to assess even a dissolved association is competent under

S. 19(3) of the Act read with S. 18 thereto. The respondent''s specific case is that the onus is upon the petitioners to establish that there was no

sale in the State and her had the necessary jurisdiction to issue the order and there has not been a violation of the principles of natural justice.

In rely the petitioners contending contra state that under Art. 226(1-A) of the Constitution of India a part of the cause of action has arisen in the

State of Tamil Nadu and the notice initiating the impugned proceedings were all received by the respondent in the State of Tamil Nadu and

therefore this court has jurisdiction to entertain the writ petition and pass necessary orders thereon. They deny that no writ can lie against the

person of the respondent and that the action proposed by the respondent is wholly without jurisdiction and therefore a writ of prohibition is the

only effective remedy, though other alternative remedies are available under the Act after an illegal order of assessment is passed. The petitioners

would reiterate that they requested both orally and in writing for the transmission of any material available with the respondent regarding the alleged

sale of goods and on such a revelation the petitioners would be in better position to answer the show cause memo. The petitioners would add that

they have given all the particulars relating to the sale of their licences, the name of the brokers with whom they negotiated and having denied that

they had anything to do with the later importation or the sale thereof, the respondents cannot assume jurisdiction without initially establishing that

there was a sale of goods within the meaning of the Act by the petitioners in the State of Maharashtra.

Mr. K. K. Venugopal, learned counsel for the petitioners, says that the writ is maintainable under Act. 226(1-A) of the Constitution and that the

action proposed by the respondent against the association of persons which has been dissolved is ab initio illegal and unsustainable. He would say

that a writ of prohibition would lie when there is total absence of jurisdiction and a petitioner in such circumstances need not wait till a final order to

assessment is made and exhaust all statutory remedies since it would be practically suffering an order known to be against law and passed without

jurisdiction. He other legal contention is that the association of persons once it is dissolved, no proceedings either in the nature of a proposal or by

way of final order of assessment under the Bombay Sales Tax Act, 1959, can be made.

There the assumption of jurisdiction on the foot that the respondent has the right to do so is wholly without legal basis and is therefore

unsustainable. On merits he would say that the respondent has not proved or attempted to place any material which might provoke a reply from the

petitioners in the matter of the actual sale or disposal of goods by the petitioners as a dealer in the State of Maharashtra. The learned counsel for

the respondent maintains that under the provisions of the Bombay Sales Tax Act, the proceedings are well-founded and in any event a writ of

prohibition in the circumstances of the case is not the proper remedy.

We shall immediately dispose of the contention regarding the maintainability of the writ petition. It is by now well settled that a writ of prohibition

will issue in a case where it has been reasonably established that the assessing authority or the authority which issues the impugned order acted

without jurisdiction and without any necessary power statutorily derived, to act in the manner it did. It is fundamental to except an assessing

authority to find material on which to act and which as it were forms the jurisdictional fact on the bed rock of which its exercise of power depends.

An arbitrary and naked attempt on the part of the Revenue to attempt to bring to tax dealings which never took place and which have not been

prima facie established to have taken place has to be checkmated even as its threshold of operation.

In such circumstances it is not necessary for an aggrieved person to suffer an order which can reasonably be stated to be without jurisdiction and

later on exhaust the statutory remedies provides under a fiscal enactment. If a litigant were to be driven to his unfortunate and illogical limit, then

court should be encouraging the exercise of power by authorities when there is obviously none and such encouragement is against all fundamental

canons of administration of justice. In the instant case the correspondence reveals that there was sincere attempt on the part of the petitioners to

get information from the respondent who was only functioning under the sales tax legislation, as to whether any sale was effected in the name of the

petitioners or on their behalf. The impugned notice would state that the petitioners have delivered the imported goods to the local buyers. When

repeatedly asked who those local buyers were, no information was furnished. The petitioners emphatically deny that there was any sale of any

commodity, and in fact, challenged the Revenue to the effect that such names, which could be easily found by the authorities, could be ascertained

and transmitted to them, so that they could explain the proposed action. In spite of the fact that the Revenue was incessantly referring to the fact

that the imports made were ""disposed of"" ""sold and delivered to the local buyers"", ""goods have been sold after clearance in this State"" there was

absolutely no further attempt excepting the bare allegations as above, to substantiate that there was indeed a sale factually and legally. For a sale it

is obvious that there are two parties, namely, the purchaser and the seller, and it is impracticable to allege that there was a sale without identifying

such sale as an act as between an identifiable buyer and an identified seller.

What has been repeated in this case is that the respondent was assuming that the petitioners have sold the imported goods in the State of

Maharashtra, to local buyers. If really goods which were imported under various manifests and which ought to have gone out of the port through

an accredited process were the subject-matter of a sale between one party and the other, it would not have been difficult for the Revenue discover

at least one of such sales, its nature, contents, description and character. Beyond saying that the petitioner sold to local buyers, there was no

disclosure as to who the buyer was, where the sale was effected, when and by whom and to whom. It is in such circumstances, that the petitioners

are seeking for the issue of a writ of prohibition.

As pointed out by the Allahabad High Court in The State of U.P. and Another Vs. Duli Chand Kashi Prasad, .

A writ in the nature of prohibition issues to restrain a quasi-judicial authority from exceeding the bounds of its jurisdiction. It may be issued at the

threshold of the enquiry before it or soon after it has given a decision on the issue of its jurisdiction. It issues at the threshold of the enquiry before it

is there is parent want of jurisdiction. If the jurisdiction depends on the existence of certain facts, it is generally proper that the court should not

interfere with the enquiry until it has decided the issue of jurisdiction, for then full facts, relating to its jurisdiction would be before the court. It may

be that if there is prima facie no evidence to give it jurisdiction the court may in a suitable case interfere at the threshold of the enquiry"".

We respectfully adopt the observations made by the learned Judges. We are of the view that in the absence of any disclosure of acceptable

material or reasonable data to entertain a doubt at least that the goods were sold in the State of Maharashra, then it is proper for this court to stop

the enquiry at its threshold even at its inception, for neither the jurisdictional fact which would vest the Revenue with the power to proceed is

present or the normal facet of jurisdiction to exercise a power is apparent in the proceedings. We are unable to appreciate the line of argument of

the learned counsel for the respondent that this application is premature. This argument ignores the plain intention of the notice which calls upon the

petitioners to prove the negative to show that they did no effect a sale and in its absence to submit to the heavy assessment and the consequential

penalty indicated therein. This places upon the assessee considerable hardship, harassment and liability, for if it is established that there was no sale

and the inchoate and incomplete materials of the assessing authority is a myth, then it would constitute in present an encroachment on and an

infringement of the petitioners'' right which entitles them to immediately appeal to the appropriate court for redress--see the observations of the

Supreme Court in The Bengal Immunity Company Limited Vs. The State of Bihar and Others, . We are therefore unable to accept the argument

that this writ petition is not maintainable because an alternative remedy is available and the respondent is outside the jurisdiction of this State.

One other incidental contention is that this court has no jurisdiction to issue a writ because no part of the cause of action has arisen within the

jurisdiction of this court. We do not agree. Under Art. 226(1-A) of the Constitution of India, the High Court has the power to issue directions,

orders or writ to any Government, authority or person provided the cause of action for the issuance of such a rule under Art. 226(1-A) wholly or

in part, arises, notwithstanding that the seat of such Government or authority or the residence of such persons is not within those territories. What

then is the cause of action that is referred to in this sub-clause of Art. 226 of the Constitution?

Cause of action"" has always been understood as referable to the bundle of facts in a legal proceedings and if a limb of that bundle of facts is

available, seen or discernible in one particular place which is a seat of the High Court, then such High Court has the power to exercise all the

powers conferred on it under Art. 226(1-A) notwithstanding the fact that the authority against whom the ultimate rule has to be issued and whose

act has created a cause of action as a whole or in part, is situate outside its territorial limits. The person primarily affected by the respondent issuing

the notices from time to time to the petitioners and calling upon them to produce the accounts of their business carried on in the State of Tamil

Nadu and against by proposing to assess them to the best of his judgment on the assumption of certain jurisdictional facts, is the addressee of such

notice and such affection relates to the bundle of facts in the totality of the lis or proceeding concerned, and such impact necessarily gives rise to a

causes of action, though it may be in part. It is established that in fiscal laws of proposal to assess forms part and parcel of the machinery of

assessment and thus understood, the service of notice to assess and calling upon the petitioner to explain has given rise to a cause of action as is

popularly and legally understood and the machinery of assessment has been set in motion and the impact of that motion is felt by the petitioners

within the territorial limits of this State. We have therefore no hesitation in holding that a part of the cause of action has arisen in the State of Tamil

Nadu.

On other contention which is substantial is that the impugned notice cannot be proceeded with and no action thereunder can be taken because

the petitioners were originally an association of persons and as they were dissolved on 9-61965, the notice under consideration dated 2-1-1967 is

without jurisdiction and cannot be pursued. It is common ground that beyond Ss. 18 and 19 of the Bombay Sales Tax Act, 1959, there is no

express provision in the Act which would enable the Revenue to proceed against a dissolved firm or a dissolved association of persons. ""Dealer

has been defined in S. 2(11) of the Act as meaning any person who for commission, remuneration or otherwise carries on the business of buying or

selling goods in the State.

We have already expressed the view that there is no materials for us to hold that the petitioners either brought or sold goods in the State of

Maharashtra. Even assuming that the impugned notice presumes that the petitioners are dealers, which include an association of individuals, the

question is whether after dissolution of such an association, proceedings can be initiated against the quondam association through its members.

Learned counsel for the respondent relied upon sub-section (3) of S. 19 of the Act which provides as follows---

Where a dealer, liable to pay tax under this Act, is a firm, and the firm is dissolved, then every person who was a partner shall, be jointly and

severally liable to pay to the extent to which he is liable u/s 18, the tax (including any penalty) due from the firm under this Act or under any earlier

law, up to the time of dissolution, whether such tax (including any penalty) has been assessed before such dissolution but has remained unpaid or is

assessed after dissolution.

It is contended that this sub-section read with S. 18 of the Act provides sufficient authority to the respondent to issue the notice against the

petitioners notwithstanding the dissolution of the association of persons. It is a common norm of fiscal law that if a person''s dealings or transactions

can be brought into the net of taxation, then the concerned fiscal enactment should expressly provide for such bringing to tax the dealing or the

transaction concerned and an assessment or taxing of that deal or act on the part of a person cannot be assumed or presumed by necessary

implication. In fact, the law is well established that if there is a doubt whether a particular person is liable to tax at all under a tax law, then the

benefit of such doubt should go to the proposed assessee. We have not been shown any provision in the Bombay Sales Tax Act, expressly

conferring authority on the Revenue which could prompt the respondent to assess or propose to assess a defunct firm or a dissolved association of

individuals. Sub-sec. (3) of S. 19 is sought to be pressed into service. This sub-section is not a charging section. It merely declares the liability of

the quondam members whether assessment has been made before such dissolution or assessed after dissolution. It is this last expression in this

sub-section which is very strongly relied upon.

On a fair reading of this sub-section we are unable to conclude that this by itself is sufficient to infer an express power in the statutory authority to

assess an association of persons after dissolution. This sub-section is only declaratory of the liabilities of the erstwhile members of an association of

individuals, but it does not proprio vigore give an indication that a dissolved firm or association of individuals could be taxed notwithstanding

dissolution. Under the Madras Act there was not such provision originally, but now a new section has been introduced as 19-A. Sub-clause (a) of

S. 19-A of the Madras General Sales Tax Act, expressly provides for such tax liability on a dissolved association of persons even after dissolution,

but for the pre-dissolution period as if no such dissolution had taken place. Clause (b) of S. 19-A of the Madras General Sales Tax Act is in pari

materia with sub-clause (3) of S. 19 of the Bombay Sales Tax Act, 1959.

We shall presently consider the necessity for the introduction of S. 19-A in the Madras General Sales Tax Act 1959 by Amending Act XII of

1968. At this stage, however, it is sufficient for us to say that wear unable to agree with the learned counsel for the respondent that sub-clause (3)

of S. 19 read with Sec. 18 of the Act is sufficient indication that a person who is a dissolved association can be subjected to tax under such

provisions. The net result of the discussion is that there is no express provision in the Bombay Act which enable the respondent to issue a notice

and proceed thereafter to assess an association of persons which has been dissolved on the date of such issuance of notice. No doubt, the liability

of the quondam members may be there. But in the absence of a charging section, the respondent cannot assume jurisdiction and issue a notice

proposing to assess on the best of this judgment.

That an association of persons which is also a legal entity like a partnership firm cannot be proceeded against after dissolution, for its pre-

dissolution transactions is now very clear from the decision of the Supreme Court in State of Punjab Vs. Jullunder Vegetables Syndicate, . In that

case, a partnership firm was dissolved on 11-7-1953. On 3-9-1955 the Sales Tax Officers made an assessment in the firm under the provisions of

the East Punjab General Sales Tax Act, 1948. At the relevant time there was no provision expressly empowering the assessing authority to assess

a dissolved firm in respect of its turnover before its dissolution. In those circumstances the Supreme Court held that the assessment was bad and

observed as follows:--

In interpreting a fiscal statute the court cannot proceed to make good the deficiencies, if there be any, in the statute. It shall interpret the statute as

it stands and in case of doubt it shall interpret it in a manner favourable to the tax payer. In considering a taxing Act, the court is not justified in

straining the language in order to hold a subject liable to tax.

Though under the partnership law a firm is not a legal entity but only consists of individual partners for the time being, for tax law, Income Tax as

well as sales tax, it is a legal entity. On the dissolution of the firm it ceases to be a legal entity, and on principle, thereafter, unless there is a statutory

provision permitting the assessment of a dissolved firm, there is no longer any scope for assessing the firm, which ceases to have legal existence.

There cannot be distinction on principle between an assessment made on a firm under a proceeding initiated before its dissolution and one made in

a proceeding started after the dissolution. In either case, unless there is an express provision no assessment can be made on a firm which has lost

its character as an assessable entity.

The above decision was the primary cause for the introduction of the new Section 19-A in the Madras General Sales Tax Act.

Reference was also rightly made by the learned counsel for the petitioners to the provisions of the Income Tax Act only to sustain his argument

that there should be a specific provision in a fiscal enactment enabling the assessing authority to assess a dissolved firm and bring to tax its dealings

during its pre-dissolution period. Though an argument was hesitantly raised by the counsel for the respondent that a father and a minor son cannot

from an association of persons within the meaning of the Bombay Sales Tax At, 1959, yet this was not seriously pressed in view of the ratio in M.

M. Ipoh Vs. Commissioner Of Income Tax, Madras., , which was confirmed later by the Supreme Court in M.M. Ipoh and Others Vs.

Commissioner of Income Tax, Madras, , wherein such a situation has been held to be valid and such a union has been treated as an association of

persons.

Thus, even the second contention raised by the learned counsel for the petitioners that no proceedings as initiated by the respondent can be

furthered is well-founded. It is not in dispute that the alleged dealings were of the quondam association of persons. A notice is served on one of its

members. Unless there is a provision which enables the respondent to assess a dissolved association of person, he cannot proceed and machinery

of assessment against two members of the quondam association merely on the strength of Section 19(3) of the Bombay Sales Tax Act, 1959.

Section 19(3) is comparable to the ultimate process which the Revenue can issue against an assessee; but if the assessee himself cannot be brought

to book, then no question of issuing any process does arise. The second contention also has to be upheld.

On the facts we are fully satisfied that there is absolutely no materials which enabled the respondent to issue the impugned notice. A sale

cannot be assumed. The petitioners cannot be called upon to prove the negative. There is no provision in the Bombay Sales Tax Act which throws

the burden of proof on the proposed assessee. It is not urged to be so. Merely because the petitioners held the import licences it does not follow

that they imported the goods at Bombay by themselves and sold the goods in the State of Maharashtra. We have already considered this aspect in

detail. Excepting for the vague and imaginary conclusions arrived at by the respondent, he was unable to confront the petitioners with any particular

data or material to substantiate his apprehension that the petitioners sold goods in his State. It is only such a factual sale within the jurisdiction that

would vest him with authority to proceed under the Bombay Sales Tax Act, 1959. No attempt has been made by the respondent to secure such

information even though he was challenged by the petitioners to prove the positive. Factually also the petitioners should succeed. As pointed out by

Shelat J. in The Barium Chemicals Ltd. and Another Vs. The Company Law Board and Others, .

Before the discretion conferred by S. 237(b) of the Companies Act, 1956 to order an investigation can be exercised, there must exist

circumstances which in the opinion of the authority suggest what has been set out in sub-clauses (i), (ii) or (iii). If it is shown that the circumstances

do not exists or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid thing, the opinion is

challengeable on the ground of non-application of mind or perversity or on he ground that it was formed on collateral grounds and was beyond the

scope of the statute.

With respect we restate the rule to suit the facts of this case as follows. Before a proposed notice of assessment on the best judgment formula can

be issued, the fiscal authority should establish that there exist circumstances which in its opinion suggest that there has been a sale or a purchase by

a dealer under the Bombay Sales Tax Act, 1959. But if it is shown that circumstances do not exists or that they are such that it is impossible for a

reasonable and a prudent and well instructed person to form an opinion therefrom suggestive of a sale under the Sales Tax Act, then the opinion

and the consequential action is challengeable on the ground of non-application of mind or on the ground that it was formed on collateral grounds.

Thus, therefore, the notice issued, without even the requisite materials to act, is beyond the scope of the respondent.

For all the above reasons this writ petition has to be allowed. It is accordingly allowed with costs. Counsel''s fee Rs. 250.

Petition allowed.