R.C. Lambi vs Commercial Tax Officer

Sri Dattu, learned High Court Govt. Pleader was directed to take notice re-rule. The writ petition is disposed of on merits after hearing both sides. In the writ petition, which was filed on 3-8-1987, the prayers in the petition are:

(1) To stay the recovery proceedings under Section 13(3)(b) of the Karnataka Sales Tax Act for the alleged arrears of tax;

(2) To issue a writ of mandamus directing the respondent to consider and dispose of the application for rectification filed under Section 25-A of the Karnataka Sales Tax Act, dated 16-7-1987.

The writ petition was dismissed for non-prosecution on 14-9-1987. Later an order was made by the respondent on 26-9-1987 rejecting the application for rectification. An application is made for amending the prayer in the writ petition and to permit the petitioner to challenge the said order dated 26-9-1987-Annexure-F.

Heard Sri Dattu, learned High Court Govt. Pleader on this application. Sri Dattu opposes this application on two grounds, namely, that the amendment changes the nature of the writ petition and introduces a fresh cause of action; secondly, that the order under Section 25-A is appealable under the Act and hence no writ petition can lie against the said order.

The reasons for disposing of the main matter including the challenge made to the order rejecting the rectification application as per Annexure-F would constitute reasons for allowing this application. Hence, no separate order is necessary on this I.A.

Some facts chronologically leading to the filing of the application for rectification are necessary to be stated: An assessment was made by the respondent ex-parte, on 29-10-1982 for the period 7-3-1980 to 17-11-1980. It is necessary to state that in the return filed in Form No. 4 by the petitioner for the above period, a claim for exemption was made under Section 5(4) of the Act in report of the turnover of Rs. 4,58,617-56 Ps. It is seen from the record of assessment that in the statements filed for each month in Form No. 3 the details of turnover in respect of sales to the registered dealers and in respect of which exemption was claimed under Section 5(4) of the Act, were furnished. However, the exemption in respect of this turnover was rejected by the Assessing Officer in his order. Item No. 6 in the said order refers to "Disallowing the claim of exemption of 5(4) goods determined as taxable at 4%".

It is not in dispute that the exemption relates to the turnover in Cotton, Groundnut and Karadi seeds which are declared goods.

The appeal filed by the assessee against the assessment order before the Deputy Commissioner (Appeals), Hubli, was dismissed by order dated 26-2-1984. The appeal came to be dismissed since there was inordinate delay in filing the appeal. Against this order, an appeal was filed before the Karnataka Appellate Tribunal in STA No. 119/1984. The Tribunal also dismissed the appeal and upheld the order made by the Deputy Commissioner of appeals.

Against this order, the petitioner-assessee preferred a STRP before this Court in STRP No. 30/1987. The said STRP was withdrawn by the learned counsel for the petitioner and accordingly, petition was dismissed as withdrawn by order dated 11-9-1987. The order reads thus:

"Sri B.V. Katageri, learned counsel appearing in support of the petition submitted that the petitioner has sought for rectification of the order at the hands of the assessing authority and that he does not press this petition. His submission is placed on record and the petition dismissed as not pressed."

The application for rectification to which there was a reference in the above order had been filed before the respondent on 25-8-1986 as could be seen from the original records. The said application was followed by two other applications for the same prayer. The second one was filed on 10-7-1987 enclosing a certificate issued by the Secretary, APMC, Dharwar and a revised return in respect of the same subject matter. As could be seen from the said return, the assessee has given the break up for the disputed turnover, namely; the sales to the registered dealers. In amplification of his claim made under Section 5(4), the certificate granted by the APMC showed the sales affected by the petitioner during 7-3-1980 to 17-11-1980 as evidenced by the "Asami Patties" shown in Sl. Nos. 1 to 810 as sales made by the petitioner on behalf of the Agriculturists and in his capacity as Commission Agent.

Along with that application dated 16-7-1987, the petitioner produced the "Ritha Patties" from the APMC, Dharwar and also furnished a list of selling commission transactions evidencing the sale by the petitioner to the registered dealers in support of his claim for exemption under Section 5(4).

As already stated an order is now made by the respondent on 26-9-1987 rejecting the application for rectification. The respondent has given two reasons for rejecting the application, (Annexure-F).

(1) As on the date of passing the ex-parte order on 29-10-1982, there is no sufficient proof to show that the Section 5(4) goods on which the tax as levied disallowing exemptions are Cotton, Groundnut and Karadi seeds only. Moreover, you had failed to utilise the opportunities given to you in this regard.

(2) At this stage, your production of sale patti and certificate from the APMC, Dharwad amounts to production of additional evidence, which was not produced before passing the ex-parte order."

This order is challenged by the petitioner in this writ petition.

It is argued by Sri Katageri, learned counsel for the petitioner that though the petitioner did not produce the proof in support of his claim under Section 5(4) of the Act during the assessment proceedings, he sought for a rectification of the Assessment under. Section 25-A and produced all the necessary documents in proof of the sales to registered dealers which entitled for total exemption of the tax. It is, therefore, argued by the learned counsel that on the facts and circumstances of the case even though the appeals before the Deputy Commissioner on merits had been dismissed on ground of delay, the assessing officer was well within his powers to rectify the assessment so far as the claims for exemption was concerned and should have given him the necessary relief. Having failed before the Respondent, it is urged by the learned counsel that the said order deserves to be quashed by this Court.

So far as the second ground is concerned, it is argued by Sri Katageri that production of proof in support of the claim which was made before the Assessing Officer, both in Forms 3 and 4, along with the application for rectification, cannot be rejected out-right as constituting additional evidence.

He has relied upon the decision of the Supreme Court in Mahendra Mills Limited v P.B. Desai, Appellate Asst. Commnr. of I.T., AIR 1975 SC 910, which in turn makes a reference to Maharana Mills (Private) Ltd. v I.T.O., Porgandar, (1959)36 ITR 350.

The argument of Sri Dattu, learned HCGP, opposing tie writ petition is that permitting the assessee to produce additional material in support of his claim for exemption, at a later stage after the assessment is over and along with the application for rectification, will amount to permitting the assessee to produce fresh material in support of his claim. Any consideration of such material would fall, according to the learned counsel''s submission, outside the record of assessment and would also be a matter which does not fall within the purview of the rectification of mistakes, as provided under Section 25-A of the Act.

Sri Dattu also relies upon the Maharana Mill''s case in support of his contention that the additional material produced along with the rectification application, cannot be construed as forming part of the record of assessment, as explained in the very same case. Therefore, both the petitioner as well as the department rely upon Maharana Mill''s case in support of their contentions. It is, therefore, necessary to reproduce the relevant portion from the Supreme Court Judgment in Maharana Mill''s case, 36 ITR at page 357 wherein their Lordships have explained what constitute "the record" within the meaning of Section 35 of the Income Tax Act.

The words used in section are "apparent from the record" and the record does not mean only the order of assessment but it comprises all proceedings on which the assessment order is based and the Income-tax Officer is entitled for the purpose of exercising his jurisdiction under Section 35 to look into the whole evidence and the law applicable to ascertain whether there was an error."

The enunciation of the phrase, "apparent from the record" found in the above decision was with reference to the provisions of Section 35 of the I.T. Act, under which the rectification of the "mistakes apparent from the record" was permitted. The words, "apparent from the record" was interpreted to mean, not only the order of assessment but it comprises all proceedings on which the assessment order is based and the Income-tax Officer is entitled for the purpose of exercising his jurisdiction under Section 35, to look into the whole evidence and the law applicable to ascertain whether there was an error.

For this purpose the Supreme Court approved the action of the Income Tax Officer to find out whether there is a mistake apparent from the record not only from the relevant assessment order, but he can also look into the assessment orders for the earlier years. No doubt, this observation was made in the context of the rectification which was sought to be made by the Income-tax Officer on the facts of that case, which required re-determination of the written-down value.

However, one observation which needs to be carefully considered for application to the facts of the present case is, the assessing officer is permitted to look into the whole evidence and the law applicable to ascertain whether there was an error.

I have carefully considered the submissions of Sri Katageri and Sri Dattu, I have also perused the assessment records and considered the events thereafter chronologically, culminating in the rejection of the application for rectification as per Annexure-F. No doubt, the assessee has been guilty of laches and negligence throughout, right from the stage of assessment proceedings and later in filing the appeal on merits before the Deputy Commissioner. He did not produce the proof in support of his claim even though several opportunities were given before the assessment was completed. It is also true that the certificate from the APMC, and the list of commission agents to whom the sales were effected were produced, for the first time, along with the rectification application.

The application for rectification was filed on 25-8-1986. From the chronology of events, it is seen that the said application was filed after the appeal was dismissed by the Karnataka Appellate Tribunal. STRP No. 30/1987 was filed thereafter before this Court on 19-5-1987. The said STRP No. 30/1987 was not pressed and the reason for withdrawing the application was that the petitioner wanted to pursue his application for rectification before the assessing officer, which had been filed by them. It is, therefore, the contention of the petitioner that all the necessary documents in support of his claim for exemption were produced before the respondent, on a consideration of which the petitioner would be entitled to the total exemption of the turnover under Section 5(4) of the Act.

Section 5(4) of the Act entitles exemption of the turnover of a dealer, if it is proved to the satisfaction of the assessing officer, that his transactions are to a registered dealer and done in the capacity as a selling commission-agent. He also relies upon the provisions of Section 11 and the exemption from levy so far as the agriculturists are concerned, which is provided in Section 2(k), the definition of a "Dealer."

Relying on these provisions, the argument of the learned counsel is that the petitioner having sold the agricultural produce as agent of the agriculturists principals and to the registered dealers, his claim for exemption would fall squarely within the provisions of Section 5(4) of the Act.

Sri Dattu does not dispute that on the facts of the present case, if the proof in support of the claim made under Section 5(4) produced by the petitioner before the assessing officer, though at a later stage, is considered on its merits, the petitioner would be entitled to the total exemption of this turnover as per his claim made in the return. The approach of this Court in matters relating to deductions, exemptions, etc.,-such as production of "C" Forms at a belated stage, such claims are considered liberally even at the stage of STRPS. In a number of cases this Court has directed the assessing officer to receive "C" Forms, and directed the assessing officer to grant the relief flowing-therefrom.

On the facts of the present case, it cannot be disputed that the petitioner did make a claim for exemption in respect of the entire turnover, both in his monthly statement filed in Form 3, and in the annual return made in Form 4. As already stated, the petitioner is guilty of laches and negligence, since he did not produce the proof in support of his claim before the assessment order was made.

Therefore, the question that arises for consideration by this Court in this petition filed under Article 226 is, whether it calls for interference with the order of rejection of the application for rectification on any justifiable grounds in exercise of my powers under Article 226.

Since on the facts of the present case the petitioner would have got exemption, but for his failure to produce the necessity proof, in my opinion, the assessee should not be deprived of the same benefit, though he did not produce the same in time. The argument of the learned Government Pleader is that permitting such evidence to be produced at a later stage would be acting contrary to the provisions of Section 25-A and would be permitting assesses like the present petitioner to revive their claims for rectification after the assessment order is over and that therefore this Court should not shown any indulgence either on facts or on law.

It is no doubt true that the proof in support of the sales to registered dealers was produced at a later point of time. But it cannot be disputed that a claim for exemption was registered in the monthly returns filed during the year, and also in the annual return-Form No. 4. Therefore, any evidence which is required to be looked into by the assessing officer for the purpose of rectifying the order of assessment having regard to the claim made in the course of the assessment and in the return filed, cannot be rejected, as material extraneous to and falling outside the scope of the proceedings of assessment.

That the claim for exemption was made in the course of assessment proceedings, namely, in the monthly statements filed and also in the return filed in Form No. 4 and that the proof produced along with the application for rectification was in relation to and in respect of the said claim for exemption cannot be disputed. Though the denial of exemption is attributable to the laches on the part of the assessee in this case, the assessing officer, has, on a technical view of the matter rejected the application for rectification. On the facts of the present case, having regard to the fact that the assessee had registered his claim for exemption in the course of the proceedings of assessment and for the reasons aforementioned, I am of the opinion that the respondent erred in rejecting the rectification application for the reasons stated in his order.

Having regard to the facts and circumstances of the case, and the fact that the assessee would be entitled to exemption of the entire disputed turnover, I am of the view that in order to give relief to the petitioner in a case like this, it is permissible to bend the law, and this is a case in which extraordinary jurisdiction under Article 236 should be exercised in the ends of justice.

Therefore, for the reasons stated above, the writ petition is allowed and the order made by the respondent dated 26-9-1987 (Annexure-F), is quashed, and he is directed to receive the documents and other materials produced along with the applications for rectification and consider them in accordance with law and give the necessary relief to the petitioner.

In the circumstances of the case, I direct the petitioner to pay a cost of Rs. 1000/- to the Department.