Commissioner Of Sales Tax vs Umrao Mirza
1992 Latest Caselaw 97 Del

JUDGMENT

B.N. Kirpal, J.

1. This is a reference made by the Appellate Tribunal, Sales Tax, Delhi, in respect of assessment year 1967-68, requiring the opinion of this Court on a question of law which has been referred.

2. Though the present reference is in respect of the assessment year 1967-68, but in order to decide the same, it is necessary to have the background of the facts as found by the Sales Tax Tribunal in respect of the earlier year, namely, 1966-67.

3. The dealer was carrying on the business of footwear. It had not got itself registered with the sales tax authorities as, according to it, it did not have sales exceeding taxable quantum.

4. In respect of the assessment year 1966-67, an order of assessment was passed whereby the assessing authority held that the assessed had reached the sale figure of Rs. 30,000 on March 31, 1966. This order was set aside in appeal because the appellate authority held that the liability to tax under section 4 of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi (hereinafter referred to as "the said Act"), could arise only if the sale exceeded taxable quantum of Rs. 30,000. As the taxable quantum was not exceeded, the original order in respect of the assessment year 1966-67 was quashed by the Assistant Commissioner.

5. It transpired that on January 20, 1967, some officials of the Sales Tax Department visited the premises of the dealer and seized 26 loose papers. They contained entries from May, 1966 to August, 1966. The said loose papers had not been taken into account when the Assistant Commissioner had disposed of the aforesaid appeal. The Deputy Commissioner of Sales Tax exercised his power of suo motu revision and set aside the order of the Assistant Commissioner and remanded the case to the assessing authority for fresh examination. A revision was filed by the dealer against the said order of the Deputy Commissioner and the Financial Commissioner by his order dated January 28, 1972, allowed the same giving liberty to the department to take recourse to reassessment proceedings on the basis of the seized documents under section 11-A of the said Act.

6.On March 11, 1974, the assessing authority effected reassessment for the year 1966-67. It came to the conclusion that the gross turnover of Rs. 30,000 had been exceeded by the dealer on September 1, 1966. After allowing further statutory period of two months, as envisaged by section 4 of the said Act, the reassessment was completed.

7. In the meantime, the assessing authority in respect of the assessment year in question, namely, 1967-68, passed an assessment order computing the taxable turnover of the dealer at Rs. 99,000. This order was passed on March 11, 1974 and it took note of the fact that in the assessment order for the year 1966-67 full facts of the case had been discussed and the accounted version of the dealer had not been accepted as reliable.

8. Against the order of reassessment for the year 1966-67 and the order of assessment for the year 1967-68, two appeals were filed by the dealer to the Assistant Commissioner. The Assistant Commissioner passed a consolidated order on December 30, 1974. He quashed the assessment for the year 1966-67 on the ground that it was barred by time, but with regard to the assessment for the year 1967-68, the same was upheld with the following observations :

"However, so far as assessment for the year 1967-68 is concerned I have considered the contentions of the dealer that the assessed-appellant has been assessed on excessive turnover and find that in view of the quantum of sale shown in 26 loose papers the determination of sales both for the years 1966-67 and 1967-68 as well as the determination of liability of the dealer with effect from September 1, 1966, is perfectly in order. This determination has reasonable nexus with the contents of loose papers as well as the expenditure incurred by the assessed-appellant.

So this determination is upheld and assessment order for the year 1967-68 is confirmed."

9. The dealer then filed an appeal to the Appellate Tribunal feeling aggrieved by the order of the Assistant Commissioner upholding the assessment for the year 1967-68. The said appeal was allowed by the Appellate Tribunal with the following observations :

"Once the determination of liability for that year was set aside in appeal, section 4 did not make any provision permitting the assessing authority to refix the liability for the same year. This was irrespective of any material being freshly discovered or not. The scope of taking into account that fresh material was under section 11-A for effecting reassessment. During that course, of course, liability could be fixed. However, if the initiation of reassessment proceedings and the resultant order were beyond the permissible period of limitation, the reassessment as well as the fresh determination of liability on that material must stand quashed. This is what has happened in the present case. The Assistant Commissioner has quashed the reassessment for the year 1966-67. The same must be held to cover the liability aspect also.

It, therefore, follows that for the year 1967-68 the assessing authority has to determine the date of liability afresh. Since this was not done, I am constrained to restore the matter to the assessing authority for doing the needful."

10. An application for reference being filed, the Sales Tax Tribunal has stated the case and referred the following question to this Court :

"Whether, on the facts and circumstances of the case the learned Tribunal was justified in holding that quashing of assessment for the period November 1, 1966 to March 31, 1967, as being barred by limitation would ipso facto result in quashing of liability order as well and that the liability is required to be fixed afresh in the next financial year."

11. It has been vehemently contended by Mr. Mathur on behalf of the dealer that the order of reassessment for the year 1966-67 having been quashed, no reliance can be placed on the same, and there should have been fresh determination with regard to liability to tax for the year 1967-68. The learned, counsel submitted that it is only after the taxable turnover for the year 1967-68 was exceeded, could an assessment order be passed and the reliance on the alleged sale figures for the year 1966-67 cannot be placed by the assessing authority.

12. In our opinion, there is a clear fallacy in the conclusion of the Tribunal and the contention of the learned counsel for the dealer.

13. The charging section is section 4 of the said Act with regard to those dealers who are carrying on business, where the Act was in force. What is relevant is section 4(2) of the said Act. The same is as follows :

"4 (1) .............................

(2) Every dealer to whom sub-section (1) does not apply, shall, if his gross turnover calculated from the commencement of any year exceeds the taxable quantum at any time within such year, be liable to pay tax under this Act, on the expiry of two months from the date on which such gross turnover first exceeds the taxable quantum, on all sales effected after such expiry."

14. The aforesaid sub-section makes a person liable to pay tax on the happening of a contingency, namely, gross turnover must exceed the taxable quantum. The liability to pay tax arises after expiry of two months from the date on which such gross turnover is first exceeded. According to sub-section (5) of section 4 of the said Act, taxable turnover, inter alia, means in relation to the respondent Rs. 30,000. Section 4 does not contemplate any order being passed by the assessing authority on the taxable quantum being exceeded by the dealer. The liability to pay tax is fixed by the statute itself. The liability arises on the taxable quantum being exceeded by a person.

15. Once the liability to pay tax arises, assessment is made under section 11 of the Act. Assessment can be made whether or not a dealer files the returns.

16. As we read sections 4 and 11 it appears to us that it is incumbent on a dealer to get itself registered and then to file a return once the liability to pay tax arises. It is within the knowledge of the dealer whether his gross turnover has exceeded the taxable quantum or not. Once the taxable quantum is exceeded, then under section 4(2) of the said Act, the liability to pay tax arises on the expiry of two months from the date when such taxable quantum is exceeded.

17. Under section 7 a dealer is required to get himself registered compulsorily and thereafter under section 10(2) he is required to file a return of tax. Even if no return of tax is filed under section 11, assessment can be framed.

18. In the present case, what has happened is that the sales tax authorities, namely, the assessing authority and the Assistant Commissioner in respect of the assessment year 1967-68 found as a fact that the taxable turnover had been exceeded by the dealer on September 1, 1966. The dealer, therefore, became liable to pay tax with effect from November 1, 1966. The reassessment made in the year 1966-67 was quashed on the ground that the same was barred by time. Nevertheless the Assistant Commissioner while quashing the assessment for the year 1966-67 held, independently, while dealing with the appeal for the year, 1967-68 that the 26 loose sheets which had been recovered from the premises of the dealer clearly showed its liability to pay tax with effect from September 1, 1966. As is evident from the passage from the order of the Assistant Commissioner, which has been quoted above, on merits the Assistant Commissioner found that the liability to tax had arisen for the assessment year 1966-67. It is for this reason that the assessment for the year 1967-68 was upheld by the Assistant Commissioner.

19. The aforesaid finding of fact arrived at by the Assistant Commissioner has not been set aside by the Tribunal. The Tribunal seems to have proceeded on the basis that section 4 required an order to be passed determining the liability to pay tax. As we have already indicated, the language of section 4 does not contemplate any such order being passed. Section 4 determines specifically as to on the happening of which event the liability to pay tax arises. The determination of the liability arises not because of passing of an order but arises by virtue of the Act itself.

20. The matter may be looked into from another angle also. Assuming that for the year 1966-67 there was no assessment order passed or any proceeding taken against the dealer. For the year 1967-68 after the books of account were produced and the assessing authority found that, in actual fact, the dealer's gross turnover had exceeded the taxable quantum in the earlier year, namely, 1966-67, then there can be no doubt that an assessment for the year 1967-68 could be made. This being so, we see no reason as to why the position would alter merely because for a technical reason reassessment for the year 1966-67 was quashed. The mere fact that the assessment for the year 1966-67 could not legally be made because it had become barred by time, does not mean that while dealing with the assessment for the year 1967-68, the assessing authority could not determine that the liability of the dealer to pay tax had, in fact, arisen in the year 1966-67. This is the finding which had been arrived at in the present case, and which was upheld by the Assistant Commissioner.

21. The Tribunal completely misdirected itself on facts and in law when it observed that the order of assessment for the year 1966-67 having been quashed on the ground that it was time barred, "the same had the effect of eliminating that determination of liability as well". The further finding that "till, therefore, fresh liability in the present year 1967-68 was determined, no assessment could take place" is without any legal basis. The determination of liability, as we have already held, is by virtue of the Act itself and not by virtue of any order passed by the assessing authority. The liability is determined when the taxable quantum is exceeded. It is not determined when any order is passed. The taxable quantum in the present case was exceeded with effect from September 1, 1966 and the question of any fresh liability being determined for the year 1967-68 could not in law arise.

22. For the aforesaid reasons, the question of law is answered in the negative and against the dealer.

23. There will, however, be no order as to costs.

24. Reference answered in the negative.