Messrs. Avtar Singh Ranjit Singh vs The Assessing Authority (Excise and Taxation Officer)

Dua and P.C. Pandit, JJ.—All these writ petitions are to be disposed of together since they were heard together and the counsel for the Petitioners addressed main arguments only in one case. In Civil Writ No. 1.38 of 1961 M/S. Avtar Singh Ranjit Singh of Ludhiana have approached this Court under Article 226 of the Constitution challenging the assessment order dated 24th July, 1961.

According to the Petitioner''s allegations as contained in the writ petition during the year 1955-56, the Petitioner-firm used to submit quarterly returns under the Punjab General Sales Tax Act in respect of the sales of sugar and vegetable ghee. It was registered under the said Act as a dealer, the registration number being LUDIII. 6608. The returns were filed with the Assessing Authority in accordance with law and the tax as required was also deposited along with the returns. In the returns submitted by the Petitioner, the turnover was shown to be Rs. 1,30,09,349/10/- but the Petitioner also claimed certain exemptions in the nature of deductions u/s 52) of the Act. The Petitioner was served with a notice in form S.T.XIV on 8th December 1956 issued under Sections 11 and 14 of the Act, requiring him to attend the office of the Assessing Authority on 28th December 1956. The notice is Annexure ''A'' to the petition. The Assessing Authority, however, did not decide the case for the year 1955-56 till 24th July 1961 and did not make up its mind to complete the assessment. another notice (this is how the Petitioner describes the memorandum Annexure ''B'') was then sent to the Petitioner which is dated 13th August 1960. This notice was in respect of assessment for three years vtz. 1955-56, 1956-57 and 1957-58. By means of this notice (which is only communication) the Petitioner was informed that his case would be taken up on 26th August 1960 failing which action shall follow according to law. This communication is annexure ''B''. Similarly, another letter was sent by the Assessing Authority to the Petitioner which is dated 14th May 1961, and this also relates to the three years mentioned above. It is in similar terms as annexure ''B''. The assessment for all the three years was, according to the Petitioner, finalized on 24th July 1961.

After stating these facts, the petition proceeds that the Assessing Authority has not accepted the returns of the Petitioner-firm since -they were not considered to contain correct facts and the true position regarding sales. "The Assessing Authority", to reproduce the exact words of the petition, "has, therefore, made the assessment on the best judgment basis and has determined the gross turnover at Rs. 13,58,349 /10/- by adding Rs. 25,000/ to the total gross turnover as submitted by the Petitioner-firm. I may here mention that I am reproducing the figures as actually contained in the writ petition. The Assessing Authority has, so proceeds the petition, not only disallowed the deductions claimed by the Petitioner in the returns on the ground that they are not genuine transactions but it has also held some of the transactions to be faked. After giving some more details about some figures it is stated in the petition that the Petitioner has also been sent a notice (annexure ''C'') in form S.T.XIV whereby he is asked to pay the balance tax within thirty days of the notice dated 24th July 1961 The assessment order is annexure ''D'' to the petition. After reciting the successive notices, the petition goes on to state that the first notice dated 18th December 1956 informed the Petitioner to produce all the accounts and documents for the purpose of completing the assessment and also for showing that his accounts etc. were correct. He was required to bring any other evidence he wanted to adduce and it was further pointed out that if he failed to comply with the notice the assessment u/s 11 of the Sales Tax Act would be made to the best of judgment of the Assessing Authority without reference to the Petitioner. This notice according to the Petitioner, is contemplated u/s 11(2) of the Act and u/s 11(4) if a registered dealer fails to comply with the terms of the notice issued under Sub-section (2), the Assessing Authority shall within three years after the expiry of the period of the returns assess the dealer to the best of his judgment. According to the petitioner''s construction of this provision of law, the Assessment Authority could not proceed to make best-judgment assessment in respect of the quarter ending 31st March 1956 after 31st March 1959 and as regards the earlier quarters, three years'' period must be considered to have expired long before 31st March 1959 It is also averred that the Petitioner drew the attention of the Assessing Authority to this position by means of a formal application.

According to the written statement filed on behalf of the Respondents (the Asseesing Authority and the State of Punjab) the Assessing Authority issued a notice in form S. T. XIV to the Petitioner (for the year 1955-56, on 27th August 1958, which was served on the Petitioner) on 28th August, 1958. The Assessing Authority admits to have assessed the Petitioner on best-judgment basis, but the notice having been served on the Assessee within the stipulated period of three years, the best judgment proceedings started within the requisite period and the Assessing Authority was competent to frame assessment for the said year. The written statement then controverts some of the allegations about the dates of appearance of the Petitioner but it is admitted that an application was made on 10th July, 1961 challenging the competency of the Assessing Authority to assess the Petitioner for the years 1955-56, 1956-57 and 1957-58 but the objection was ruled out there and then. It has also been pleaded in the written statement, and it should be observed that the learned Counsel for the Respondents forcefully relied on this plea, that adequate and efficacious remedies by way of appeal and revision under Sections 20 and 21 of the sales Tax Act are available 10 the Petitioner against the order of the Assessing Authority. It has also been emphasised that under the statute the Appellate Authority is empowered the entertain an appeal against the assessment order even without payment of tax if he is satisfied that the dealer is unable to pay the same.

Here, I may mention that annexure ''A'' annexed with the petition purports to relate to two years,and 1955-56 and is dated ''18th December, 1956 and is the usual statutory form of notice i. e. For the S. T. XIV. Annexure ''B'' as already noticed is merely an intimately informing the dealer of the next date (26th August, 1960). The Assessing Authority after examining the Petitioner''s account books and their probative value discredited them on the grounds that the dealer was well-Known for his tax evading activities, his modus operands being to import truck load of goods in fictitious names and to sell them without s bills, as also to show sales in the names of bogus dealers having no stand-ing at all, thereby causing loss of revenue to the State Exchequer. The previous history of the Petitioner firm was expressly stated to be very shabby and the tax evading tactics are stated to have been discussed in detail on the previous years assessment. The Petitioner had also hired a godown outside the Municipal limits of the town for storing such goods as were brought clandestinely and not required to be accounted form then account books ; no intimation whatsoever about these goods was green to the department. As a matter of fact the names of two partners Shri Joginder Singh and Shri Inder Singh had also not been disclosed to the department which came to know them later, though this wass then admitted by Shri Bhagat Singh in his statement dated 23rd April 1955 before Shri H. S. Gill, the then Assessing Authority.

The dealer, according to the impugned order, had also imported gur worth 119 Nags weighing about 140 maunds valuing approximately Rs. 18,000/-, from M/S Bhagat Ram Sunder Lal, Muzzaffarg arh, U. P. and brought in truck No. P.N.E 4216 of the New Sargodha Transport Co Saharnpur. The Assessment order then proceeds to discuss the details of this transact on, as also of certain other transaction of sugar brought from Luksar U.P. not found in the account books. The dealer had also not preserved purchase vouchers in respect of all the purchases in the absence of which correct amount of purchases could not be ascertained, though the particulars in regard to the goods received etc were found entered in the accounts.

The Authority also noted several complaints against the Petitioner for showing huge sales to bogus dealers by obtaining their declarations for claiming deduction, with the object of evading tax Taxable turnover, according to the assessment order for this year, has been determined at Rs. -.. 9,64,098/13/3 and the amount of tax determined is Rs. 25,040,60 uP after deducting the voluntary payment.

I,may here observe that, the writ petitions relating to the three years filed by the present Petitioner have been so mixed up in regard to figures that it was difficult for us to get at the correct position and the learned Counsel at the bar were also unable to depict to us a clear picture in regard to the figures in the years, but this is not very material because the argument addressed by the Petitioner has mainly been confined to the interpretation of the decision of the Supreme Court in Madan Lal Arora Vs. Excise and Taxation Officer, Amritsar, .

The Petitioner''s contention in the main is that under the law the Assessing Authority has no jurisdiction to make any order of assessment after the expiry of three years from the last date of the period of return to be furnished by the dealer in question. This argument is based on the construction of the expression used in Sub-sections (4) and (6) of Section 11 of the Punjab General Sales Tax Act. u/s 11(1), the Assessing Authority if satisfied without requiring the regis-tered dealer''s presence or production by him of any evidence that the returns furnished in respect of any period are correct and complete has to assess the amount of tax due on the basis of such returns. Under Sub-section (2) if such Authority is not satisfied without requiring the presence of a registered dealer furnishing the returns or production of evidence in support of the returns being correct and complete he has to serve on such dealer a notice requiring him to attend in person or to produce or caused to be produced evidence in support of such returns. Under Sub-section(3) on the specified day or soon thereafter the Assessing Authority after hearing such evidence as the dealer may produce and such other evidence as the Assessing Authority may require assess the amount of tax due from the dealer. Under Sub-section (4) if a registered dealer having furnished returns in respect of a period fails to comply with the terms of a notice issued under Sub-section (2) '' the Assessing Authority shall within three years after the expiry of such period, proceed to assess to the best of his judgment the amount of tax due from the dealer." Under Sub-section (5) if a registered dealer does not furnish returns in respect of any period prescribed by the date the Assessing Authority ."shall within three years after the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed to assess the best of his judgment, the amount of tax etc." According to Sub-section (6) if upon information received by him the Assessing Authority is satisfied that any dealer has been liable to pay tax under this Act in respect of any period but has failed to apply for registration, the "Assessing Authority shall within three years after the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed to assess to the best of his judgment the amount of tax, if any, due from the dealer in respect of such period and all subsequent periods etc" The main plank of the Petitioner''s attack against the assessment is based on the decision of the Supreme Court in Madan Lal Arora Vs. Excise and Taxation Officer, Amritsar, as mentioned above. The short argument urged is that the expression "proceed to assess to the best of his judgment" as used in subsections (4), (5) and (6) can only mean the actual computation and making of the assessment order itself.

10.The Respondents have on the other hand very forcefully contended that the construction of the relevant Sub-sections of Section 11 as canvassed by the Petitioner is not correct and that the Supreme Court has not-so held Shri Kaushal has in support of his contention referred us to the history of Section 11 of the Punjab General Sales Tax Act. Sub-sections (1) and (2) of Section 11 as originally contained in the East Punjab General sales Tax Act No. XLVI of 1948 are the only Sub-sections in which reference to best judgment assessment has been made. The original Sub-section (1) says that it no returns are furnished by a registered dealer in respect of any period by the prescribed date, or if the Assessing Authority is not satisfied that the returns furnished are correct and complete, the Assessing Authority shall within 12 months after the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed in such manner as may be prescribed to assess to the best of his judgment the amount of tax due from the dealer. In identical terms is Sub-section (2) which deals with dealers generally. In 1952 the Sales Tax Act was amended by Punjab Act No. VI of 1952 and one of the objects inter alia amending the Act is as follows:

Experience has shown that the existing East Punjab General Sales Tax Act, 1918, is detective in several respects and has resulted in the evasion of tax on a large scale. The bill is intended to remove such defects and also to meet certain demands of the mercantile community.

(vide statement of Object and Reasons published in the Punjab Gazette Extraordinary dated 11th July 1952.)

Section 11 of the original Act was amended by means of Section 7 of the .amending Act. By this amendment Sub-section (4) of Section 11 was .made to read as follows:

(4) It a registered dealer having furnished returns in respect of a period fails to comply with the terms of a notice issued under Sub-section (2) the Assessing Authority shall after the expiry of such period assess to the best of his judgment the amount of tax due from the dealer.

Identical expressions appear in Sub-sections (5) and (6). Then came the amendment of the year 1955 by means of the East punjab General -Sales Tax Amendment Act No. Iv of 1955. It is by virtue of this .amendment that Sub-sections (4), (5) and (6) of Section 11 were given their present shape. It is unnecessary to reproduce them in extenso as the only expression round which the controversy centres, viz. "proceed to assess to the best of his (assessing authority''s) judgment", has already been reproduced above.

It has been submitted that the object of amending section ll was, inter alia, to detect and remedy evasion of tax and, therefore, in case of ambiguity or doubt in the statutory language, a construction which achieves and advances this object and tends to effectively remedy the defect sought to be removed deserves to be adopted. Reliance has in this connection been placed on Statutory Construction (Interpretation of Laws) by Crawford (1940 edition) at page 619 for the proposition that the amendatory Act should be construed to repress the evil under the old law and to advance the remedy provided by the amendment. The counsel has also cited The State of Uttar Pradesh Vs. C. Tobit and Others, , and has further quoted the observations of Bose J. in Biswambhar Singh and Others Vs. The State of Orissa and Another, at p 146, Para 32, column 2. Now, though Bose J., prepared the minority judgment in that case this view, it is argued, does not go against the majority judgment. The counsel has also submitted that when a provision is made for imposing liability on tax-payers guilty of fraud or contumacious conduct, the statutory words, capable of both wider and narrower meaning, should not be construed so as to defeat the legislative purpose, and, this, notwithstanding the general rule that in case of doubt a fiscal statute calls for a favourable interpretation to the tax-payer. In support of this submission C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, , has been cited.

In developing this argument the Respondents have contended that the word "assessment" has no precise meaning and it is not necessarily equivalent to the mere computation of tax or assessment order. For this purpose, reference has been made to (1934) 2 ITR 71 (Privy Council) (1938) 6 ITR 414 (Privy Council) and also to C. A. Abraham''s case(4).

Madan Lal Arora''s case(1) according to the Respondents, is not an authority for the view that the actual assessment order must be passed within three years as contemplated by Section 11(4), (5) and (6). Had the Supreme Court intended to lay down such a clear-cut proposition of law, then, so argues the counsel, one would have expected it to be stated much more clearly and succinctly, for the Supreme Court does not, normally, declare the law in doubtful or unprecise language, and, it would certainly not have been necessary for that Court to refer to the terms of the last notice served on 18th August 1959. Emphasis has in this connection been laid on the opening para of the Supreme Court judgment. The correctness of this Court''s decision in Nathu Ram''s case has also been questioned and reliance has for the contrary view been placed on M/S Jiwan Singh and Ors. v. Excise and Taxation Officer (1960) 62 P.L.R. 562. Our attention has further been drawn to rules 32 and 33 of the E. P. General Sales Tax Rules and it has been urged that reading the whole of Section 11 with the rules, by serving notice u/s 11(5) and (6), the authority should be deemed to proceed to assess to the best of his judgment, since there is no other notice for best-judgment assessment provided under the rules. u/s 11(4), it is emphasised no notice for proceeding to assess to the best of judgment is required, and, this, according to the Respondent, lends support to his contention.

It has also been submitted that in this case assessment was not on best-judgment basis and only some items in the return were objected to. This, according to Shri Kaushal, does not constitute best-judgment assessment. Para 3 of the assessment order (Annexure ''D'') has particularly been relied upon by the Respondents. Support has been sought for this submission from Raghu Nath Mahadeo Vs. The Commissioner of Income Tax, and some other cases. In answer to this contention the Petitioner has referred to para 5 of the written statement where it is stated that the Petitioner''s books having not been accepted to be reliable, the authority assessed the Petitioner on best-judgment basis.

Finally, stress has been laid on the contention that there being an equally adequate and effective alternative remedy available under the Sales Tax Act this Court should not, on the facts and circumstances of the present case, permit the Petitioner to by-pass those remedies and invoke the extraordinary and discretionary writ jurisdiction under Article 226 of the Constitution. Considerable stress has in this connection been laid by the Respondents on the contention that the Petitioner had been securing adjournment after adjournment for the ostensible purpose of enabling him to produce material for assisting the Assessing Authority to make a fair and just assessment but in reality this was a part of well-planned delaying tactics, to let the time expire because in the end the Petitioner just absented himself, and, now, he is trying to take advantage of the delay occasioned by him. It is strongly urged that the Petitioner is not entitled to approach this Court for a discretionary prerogative writ and should be left to seek the normal remedy provided in the statute. In aid of this submission reliance has been placed on the Supreme Court decision in C. A. Abraham''s case(6) and also on the Bencn decision of this Court In the case of M/S. Jiwan Singh and Sons(7). Support has in addition been sought from the discussion in A.V. Vcnkateswaran v. Ranchand AIR 1961 S.C. 1966 at p. 1510. The Petitioner has urgued in reply that the absence of Assessing Authority''s jurisdiction is patent and manifest and there is also manifest injustice as the Petitioner is being taxed illegally and unjustfy.

I have devoted my most earnest attention to the arguments addressed at the bar and have scrutinised the records in their light. In my view, the facts and circumstances disclosed do not justify interference by this Court at this stage under Article 226 of the Constitution and that the Petitioner must be left to seek redress in accordance with the usual mode prescribed by the Legislature under the Sales Tax Act.

The Act in question appears to me to provide a complete machinery for assessment of tax and for obtaining relief in respect of any illegal or improper order, and, the aggrieved party should not, save in exceptional cases, where the imposition is clearly without jurisdiction or patently contrary to law, and further when there is nothing in the conduct of the Petitioner which would justify refusal of the discretionary relief under Article 226 of the Constitution, be permitted to abandon resort to or by-pass that machinery and invoke this Court''s extraordinary jurisdiction. In the case in hand, I am neither convinced that the Petitioner''s assessment is clearly without jurisdiction or manifestly contrary to law ; nor have I been favourably impressed by the Petitioner''s conduct.

Now, there is lot to be said for the view canvassed by the Respondents regarding the meaning, scope and effect of the expression "proceed to assess to the best of judgment" as used in Section 11(4), (5) and (6) of the Act. The historical, background of this section seems to me to furnish quite a lucrative source of information indicative of the object sought to be achieved and the mischief sought to be remedied by amendment which gave this section its present shape. Statutory interpretation does not appear to me to be an exact science and it perhaps calls for judicial discretion and judicial statesmanship of a high order, If the two rules intended to aid the discovery of legislative intent the "mischief rule" would seem to claim preference over the two rigid literal-ness rule "which lets the chips fall where they may." The Petitioner''s view, it may here be mentioned, was also placed before us in Civil Writ No. 1646 of 1961 (heard alongwith the present one) but in that case the learned Counsel appearing for the Assessee, after making an unsuccessful attempt to develop it, ultimately submitted that it was a question of face in each case as to at what stage the Assessing Authority proceeds to assess to the best of his judgment. This would suggest that the legal position canvassed by the Petitioner in this case is not so patently clear and settled as is represented by Shri Sibal, and, indeed, the foregoing discussion also, leads me to the same conclusion. In Civil Writ No. 1646 of 1961; too, I felt disinclined to interfere on the writ side. In the case in hand I find no distinctive feature as to why a different view should be taken. The problems and difficulties involved in the assessment and collection of taxes are matters of common knowledge, and, this Court would normally be disinclined to permit Assessees, who, according to the department, have been indulging in tax evading activities, to by pass the normal statutory process and to seek relief direct from this Court on the writ side. I have, therefore, no hesitation in declining relief to the Petitioner in the present proceeding, and disallowing this petition, which I hereby do, with costs.