M/s. Kishore and Company, Belgaum and Others vs The Commercial Tax Officer (Cross-verification), Enforcement, Dharwad and Others

The petitioners challenge Annexures-E to E3, the statements recorded by the Inspecting Officers of the 1st respondent herein, who conducted the inspection of the premises of the petitioners. It is alleged that during the inspection it was discovered that there was concealed trade. Statements were recorded from the petitioners. On the basis of the statements recorded, the 1st respondent quantified the tax payable by the petitioners and collected the same by cheques. Subsequently, the statements were forwarded to the respective Assessing Officers who completed the assessments and quantified the tax payable. The cheques collected on 8-10-1992 at the time of inspection were appropriated against the tax liability arising out of the assessment.

The short point raised by the petitioners is as regards the validity of the collection of cheques by the Inspecting Officers at the time of inspection.

It is not in dispute that the assessment can be completed only by the Assessing Officer and after complying with the requirements of law laid down by the Karnataka Sales Tax Act and it is not in dispute that any demand of recovery can be made by the Assessing Officers only on the basis of the sales tax assessed. Otherwise it will be recovery of the tax without any authority of law. In the instant case, the 1st respondent, who allegedly conducted an enquiry, admittedly is not the Assessing Officer. If, as a matter of fact, the Inspecting Officer is not the Assessing Officer, he had no authority to collect the tax which he has quantified as due. The liability to pay tax arises only after the so-called statements are forwarded to the Assessing Officers and who, after due enquiry and conforming to the requirement of law laid down by the Karnataka Sales Tax Act, assess the tax liability. Therefore, there could not have been any collection of tax on the date of inspection, i.e., on 8-10-1992, even assuming that it was discovered that there is an incidence of tax payable on the discovery made.

The learned Government Pleader, Mr. K.M. Shivayogi Swamy strongly contended that the action of the 1st respondent is justified. According to him, the assessees at the time of inspection, voluntarily gave statements admitting their tax liability. They drew cheques in the name of the Assessing Officers and that the Inspecting Officers only acted as agents of the Assessing Officers and they forwarded the statements as also the cheques received by them to the Assessing Officers. According to him, their exercise comes within Section 12-B of the Act.

I do not think that this contention can be accepted. Section 12-B(1) of the Act contemplates the submission of advance monthly returns by the assessees. Along with the same, the assessee may pay the tax also. A liability to pay tax arises only if the advance monthly return has not been submitted. In this case, admittedly, the assessees have submitted advance monthly returns and on the basis of which the tax has been levied as well. What is now discovered on the basis of the statements given by the assessees is the tax liability. If the statements given by the assessees are not found to be accepted, following the words of Section 12-B(3), the Assessing Officer has to examine the same and assess the tax liability thereafter. Even here the Inspecting Officers do not get a right to quantify the tax payable. The cheques drawn by the petitioners in the name of the Assessing Officers are treated as payment of tax for the liability that might arise after the statement is examined subsequently. That would arise only if, as a matter of fact, the Assessing Officer, exercises his right to assess the dealer provisionally for the tax as is due. This has not been done in this case. Therefore, obviously, Section 12-B cannot have any bearing nor it can support the contention of the State. I am of the view that there was no authority on the part of the Inspecting Officers to have collected the tax basing on the statements given by the assessees. They do not have any "pleading guilty jurisdiction". Collection of the amount towards tax is, therefore, not authorised by law. It is, therefore, invalid.

I am informed by the learned Government Pleader that the assessment process is completed and the petitioners are found liable to pay tax and the amounts thus paid on 8-10-1992 have been appropriated towards the tax payable. If that is the position till the passing of the assessment order, the retention of the money by the Department from the date of recovery as unauthorised, in such an event Section 13-A of the Act would be attracted and the petitioners can claim compensation by way of payment of interest. The interest payable at the relevant time was 9%. For any period subsequent to 1-4-1996 when the rate of interest was substituted by 12%, the rate of interest payable shall be 12%. I am informed by the learned Counsel for the petitioners that similar is the view expressed by this Court in W.P. No. 31843 of 1997, DD: 12-11-1997 and W.P. No. 1061 of 1988, DD: 18-12-1990, which I am informed, was confirmed by a Division Bench of this Court. The writ petitions are disposed of as above.