R.K.Shoes vs State and Others

Petitioner filed return under sec. 7 (1) of J&K General sales Tax Act. (Act hereafter) for the year 198283 disclosing sale to the tune of

Rs.40573.85P. He, however, did not produce account books alleging that fire broke out in the shop premises on 4. 9. 1983 in which all account

books, including goods worth Rs. 50,000/ and currency notes of the same value were gutted. Petitioner in support of that fact filed police report of

police station City Jammu. Assessing Authority passed order on January 27, 1987 assessing taxable turnover at Rs. 3.25 laces as against sales of

Rs. 40573.85P depicted by the petitioner in annual return. Assessing authority also imposed interest of Rs. 37267.50. Petitioner filed appeal

against the said order before Die. Sales Tax Commissioner Jammu who on 27.8.1087 set aside the order of assessment with direction that devolve

assessment be made in the case after obtaining relevant material/evidence if any, for completion of assessment for the year 198383 and affording

opportunity of being heard. It appears that commissioner sales tax soul motto issued notice to the petitioner under sec.12 of the Act and directed

him to appear before him on 11.12.1989 and further to file objection as he was not satisfied about the correctness and property passed by the

appellate authority. He however on 16.2.1990, after hearing the parties held that no interface was called for in the appellate decision and thus

discharged the notice. Assessing authority was also directed to proceed with denovo assessment as per direction of the Appellate authority.

Thereafter the assessing authority on 29.5.1990 issued notice to the petitioner for raising assessment for the year 198283 and again did not agree

with the contention of the petitioner but determined the taxable turnover at Rs.2.40 lacs and further imposed interest and surcharge. Against that

order petitioner field appeal before Dy. Commissioner sales tax (Appeals) who vide order dated 22.6.1991 reduced the taxable sales to

Rs.96000/ petitioner also raised the plea regarding limitation which was rejected by the appellate authority.

Petitioner has challenged the above said orders of the assessing authority and of the appellate forum mainly on the ground that they have erred to

law in not accepting his plea that no assessment could be raised as the time allowed by the act to pass order after the appellate order had elapsed.

According to him under sec.7 (15) of the Act order had elapsed. According to him under sec.7 (15) of the act order of fresh assessment in

pursuance of appellate order can only be passed within two years from the end of financial year in which the appellate order is passed and the first

appellate order in the case was passed by the appellate authority on 27.8.1987. He has further sated that limitation will start to run from 1.4.1987

and assessment in pursuance to appellate order could have only been raised against him from 31.31.1989. The assessment order has been passed

on 14.11.199. And as such the same is clearly barred by limitation. It is proved in the petition that the assessment order dated 14.11.1990 be

quashed being barred by limitation and consequently the demand notice dated 27.6.1991 be also quashed.

Reply affidavit has been filed by the respondents stating therein that the present petition is not maintainable because the petitioner has not

exhausted all the remedies available to him under the Act and further that the assessment order has already been modified by the appellate

authority reducing the taxable turnover. They have denied the allegations of the petitioner and further submitted that by virtue of fresh assessment

which was made under law order dated 14.11.1990 has been issued and said order was within time and not barred by limitation. They have

further averred that denovo assessment was made in pursuance of the order passed by the appellate authority and it could not be said to be barred

by limitation under subsec. 15 of sec. 7 of the Act.

Petitioner has filed rejoinder reiterating his earlier contentions.

I have heard the learned counsel for the parties. The first point raised by Shri Dutt learned counsel appearing for the Petitioner is that the

petitioner had genuinely and rightly filed the return for the year 198283 pointing out taxable sales to the extent of Rs. 40473. 85p but the assessing

authority determined it wrongly which ultimately reduced to the amount of Rs. 96000/from Rs. 2,40,000 by the appellate authority. According to

him fire broke out in the premises of the petitioner on 4.9.1983 and the sale shown by the petitioner for subsequent year i.e. 198384 to the extent

of Rs.16753.95p was accepted by the assessing authority and there was hardly any reason for that authority, as well as appellate authority, to

enhance the amount pertaining to the period 198283 Mr. Sharma learned counsel for the respondents, on the other hand, has contended that the

assessing authority firstly assessed such turnover to Rs. 3. 35 lacs but on remand said amount was recoded to Rs. 2.40 lacs. He has further

pleaded that appellate authority after considering all the facts and circumstances however, reduced the above said amount to Rs. 96000/and

petitioner shall not have any grievance about it especially when he failed to produce any account books in that regard.

Account books in the present case are not available as the same were admittedly gutted in fire, which broke out in the premises of the Petitioner

on 4.9.1983. Under such circumstances it was not possible to make guess of the sales conducted by the petitioner during 198384. Petitioner filed

the return mentioning particular amount of sales, which was not accepted by the assessing authority and determined taxable turnover to Rs. 3.25

lacs. Said amount was later on reduced by that authority himself and it not explained or shown as to what yardstick he applied in coming to that

conclusion. Appellate authority thereafter reduced taxable amount to Rs. 96000/ and he also did it on surmises and conjectures. When the

authorities admitted the fact of the whole record having teen gutted in fire there was hardly any reason not to believe the petitioner regarding the

sales conducted by him during the relevant period. Following observations of the Division Bench of this Court in case, International Forest

company vs Commissioner Income Tax Patiala, 101ITR (1973) 721 are most relevant in this regard which read as under:

We would also like to observe that even if the Incometax Officer considered the material placed before him by the assessee to be unreliable

keeping in view the comparative statement of accounts of the previous years, he could not proceed to make an arbitrary addition and base his

conclusion purely on guesswork. He ought to have related his estimate to some evidence or material on the record as it is now well settled that if

the profits shown by the assesses in his return are not accepted it is for the taxing authorities to prove that the assessee made more profits there

must be something more than bare suspicion to support the assessment. When the returns and the books of a/c are rejected, the estimate must be

related to something more than mere suspicion.

Again in Omar salary Mohammed Sait v. Commissioner of Income tax, their lordships of the Supreme Court said that the conclusion reached by

the Tribunal should, not be colored by any irrelevant consideration or matters of prejudice, that on no account whatever should the Tribunal base

its findings on suspicions, conjectures or surmises, nor should it act on the evidence at all or on improper rejection of material and relevant

evidence or partly on evidence and partly on suspicions, conjectures or surmises and if does anything of the sort, its findings even though on

questions of fact, will be liable to be set aside by the court.

In view of the for foregoing discussion and on a careful review of the entire record, we are of the opinion that there was no legal material on record

to justify the addition of Rs. 2,27,354 to the trading result of the assessee and the Tribunal was not also right in law in sustaining this addition.

Considering abovesaid observations of the Division Bench and the facts placed on record I think there was no ground for the assessing

authority, as well as appellate authority; to make addition to the turnover of sales. The amount shown by the petitioner in the annual return is

required to be accepted.

The other point canvassed before me by Mr. Dutt is that in accordance with sec. 7 (15) of the Act order of fresh assessment in pursuance of an

order under sections 11 & 12 or an order of the court has to be made before expiry of two years from the end of financial year in which the order

is passed but in the present case assessing authority has passed such order after expiry of two years of the passing of appellate order end, as such,

he had no jurisdiction to raise assessment. According to him appellate authority passed the order on 27.8.1987 whereas assessing authority made

fresh assessment on 14.11.1990 and the said order bring without jurisdiction is required to be quashed. Mr. Sharma in this regard has pleaded that

after the order of appellate authority matter remained pending with the sales Tax Commissioner in revision which authority decided the said revision

on 16.2.1990 and as such the assessing authority passed the order within a period of two years. I have considered these arguments of either side.

Section 7 (15) of the Act reads as under:

Notwithstanding anything contained in subsection (14) of this section an order of fresh assessment in pursuance of an order under section 11, 12

or an order of the Court may be made before the expiry of 2 years from the end of financial year in which such order is passed.

Now we have to look to the provisions contained in section 11 & 12 of the Act. Section 11 refers to appeals whereas section 12 pertains to

revision powers of Sales Tax Commissioner. So far question of right to file appeal is concerned that is not disputed. Appellate authority passed

order in the case on 27.8.87. No revision was filed against the order of appellate authority under sec. 12 of the Act. Commissioner Sales Tax

however, suo mote, issued notice to the petitioner. The order of the Commissioner Sales Tax dated 16.2.1990 reads as under:

The appellate decision in the above mentioned case was scrutinized in order to ensure its propriety and legality. The learned Appellate Authority

vide his order dated 27.8.1987 remanded the case for denovo assessment after setting aside the assessment order dated 17.1.1987. The dealer

was also served with a notice dated 30.11.1989 giving him an opportunity to file objections if any. Sh. Subhash Dutt Advocate was present on the

date fixed. On hearing the Assessing Authority 'K' circle and counsel for the petitioner, and also perusing the record of the case, I feel that no

interference is called for in the appellate decision dated 27.8.1987 The notice under section 12 of the J&K GST Act dated 30.11.1989 is

accordingly discharged and the Assessing Authority is directed to proceed with the denovo assessment as per directions of the learned Appellate

Authority.

9 It comes out from the above &aid order of the Sales Tax Commissioner that he declined to interfere with the finding of the appellate authority

and discharged the notice issued by him. He further directed to proceed with denovo assessment as per directions of the appellate authority. The

words, ""In pursuance of"" and ""such order"" are very pertinent in section 7 (15) of the Act. It denotes that fresh assessment is required to be made in

pursuance of an order under section 11 or 12 before expiry of two years from the end of financial year in which such order is passed. Respondents

in Para 5 of their objections have also stated so:

In reply to Para 5 it is submitted that the petitioner's appeal against the order passed by the respondent No. 1 being order dated 27.1.87 was set

aside by the appellate authority and it was ordered that the denovo assessment be made and in compliance to the directions issued by the

Appellate Authority a denovo assessment was made after collecting the relevant material and evidence.

Fresh assessment, therefore, was required to be made in pursuance of the, order of appellate authority as pointed out by the revisional authority

also. Limitation would, therefore, start from the date such order of the appellate authority was passed. Appellate authority passed order on

27.8.1987. Financial year has to be treated from 1st of April, 1988. The Assessing Authority was required to make fresh assessment before two

years of that date i.e. 31.3.1990. It has, however, done so on 27.11.1990. Such order being passed after permissible time was thus without

jurisdiction and same cannot be maintained.

The other objection taken by the respondents that petitioner had alternative remedy of approaching the revision authority under sec. 12 of the

Act seems to be bereft of any force of law as availability of remedy of revision against assessment does not constitute adequate alternative remedy

which would bar for filing a writ petition, same view has been taken by Bombay High Court in case Khatan Jhankar Ltd. vs R. S. Pathania,

reported in Taxman Vol. 61 at page 175.

For the aforesaid reasons this petition is allowed and the assessment order made by Assessing Authority, respondent No. 1 and also the

demand notice issued by him, are quashed. Consequently order of the appellate Authority dated 22.6,1991 is also quashed.