Case Note & Summary
These appeals by special leave arose from a common judgment of the Orissa High Court which allowed writ petitions filed by the respondent-assessee and quashed a reassessment notice issued under Section 12(8) of the Orissa Sales Tax Act, 1947. The respondent was a registered dealer and the matter related to assessment year 1963-64. The original assessment order was made sometime in late 1964. On 30 March 1967, the Sales Tax Officer, Intelligence Wing, Vigilance, Berhampur searched the business premises of the respondent and seized account books; a further search on 31 March 1967 yielded additional books. On the same day, 31 March 1967, the Sales Tax Officer issued a notice in the prescribed form under Section 12(8) read with Rules 22, 23 and 28(2) stating that he had reason to believe that the turnover for the year ending 1963-64 had escaped assessment or been under-assessed and requiring the respondent to file a return and show cause why penalty should not be imposed. The respondent appeared and sought the reasons for the notice and copies of witness statements recorded behind its back; the Sales Tax Officer rejected the application for copies and the revision petition was dismissed. The respondent then filed a writ petition under Articles 226 and 227 of the Constitution, and the High Court quashed the notice on the ground that the Sales Tax Officer had not indicated any reason for issuing it. The Supreme Court allowed the appeals and set aside the High Court's order. The main question was whether a notice under Section 12(8) must mention the reasons for the belief of escaped turnover. The Court held that although the section opens with 'if for any reason', the authority must have reason to believe, but it is not necessary to incorporate those reasons in the notice itself; to require that would be reading something into the statute. The Court relied on Commissioner of Income Tax, Bengal v. Messrs Mahaliram Ramjidas and followed K.S. Rashid and Son v. Income Tax Officer and S. Narayanappa v. Commissioner of Income Tax, Bangalore, and overruled B. Patnaik Mines (P) Ltd. v. N.K. Mohanty Sales Tax Officer. The Court further held that if the Sales Tax Officer intends to use material against the dealer, he must bring it to the dealer's notice and give adequate opportunity to explain before using it, but that stage arises after the notice and not at the notice itself. The mention of penalty in the notice did not invalidate it because penalty is considered only at the time of reassessment order and requires a separate show-cause opportunity. The existence of reason for belief remained a sine qua non for the notice and the appellant had placed material on record to establish it. Accordingly, the appeals were allowed.
Headnote
A) Sales Tax - Reassessment Notice - Section 12(8), Orissa Sales Tax Act, 1947 - A notice for reassessment of escaped turnover or under-assessment need not state the reasons which led the authority to believe that turnover escaped assessment. The Supreme Court held that the statutory requirement is the existence of reason for belief, but the notice itself is procedural and to require incorporation of reasons would be reading a condition into the statute. Overruled B. Patnaik Mines (P) Ltd. v. N.K. Mohanty Sales Tax Officer. (Paras Not mentioned) B) Natural Justice - Opportunity to Meet Material - Section 12(8), Orissa Sales Tax Act, 1947 - If the Sales Tax Officer proposes to use material such as seized account books or witness statements against the dealer, the dealer must be informed and given adequate opportunity to explain and answer that material before assessment. The Court held that non-disclosure at the notice stage does not prejudice the dealer because proceedings begin only after service of notice and the dealer can be heard later. (Paras Not mentioned) C) Penalty Proceedings - Mention of Penalty in Notice - Section 12(5) and 12(8), Orissa Sales Tax Act, 1947 - The mention in the notice that penalty may be imposed does not invalidate the notice. The question of penalty arises only at the time of making reassessment order, and the Sales Tax Officer must give the dealer an opportunity to show cause why penalty should not be imposed. Held that the notice is not invalid on this ground. (Paras Not mentioned) D) Statutory Precondition - Existence of Reason - Section 12(8), Orissa Sales Tax Act, 1947 - The existence of reason to believe that turnover escaped assessment or was under-assessed is a sine qua non for issue of notice. In the present case, the appellant brought material on record to indicate such reasons existed, satisfying the precondition. Held that the notice was validly issued. (Paras Not mentioned)
Issue of Consideration
Whether a notice issued under Section 12(8) of the Orissa Sales Tax Act, 1947 is invalid for not mentioning the reasons for the belief that turnover escaped assessment or was under-assessed; whether the Sales Tax Officer must disclose statements recorded behind the assessee's back before reassessment.
Final Decision
Appeals allowed; High Court judgment set aside; notice under Section 12(8) upheld as valid; reasons for issue need not be stated in notice; assessee entitled to opportunity before material used against him; mention of penalty does not invalidate notice.
Law Points
- Reassessment notice under Section 12(8) Orissa Sales Tax Act
- 1947 need not state reasons for belief
- existence of reason is sine qua non
- assessee entitled to opportunity before use of material
- mention of penalty does not invalidate notice
- notice valid if material exists to support reason
