H.R.KHANNA, J. - (1.) WHETHER notice issued under Section 12 (8) of the Orissa Sales Tax Act, 1947 (Act 14 of 1947) (hereinafter referred to as the Act) should be quashed on the ground that it does not mention the reasons for the issue of the notice is the main question which arises for determination in these two appeals, Nos. 1190 and 1191 of 1969, which have been filed by special leave against the common judgment of the Orissa High Court allowing writ petitions filed by the respondents against the appellants.
(2.) FOR sake of convenience we may give the facts giving rise to appeal No. 1190 of 1969 as it is the common case of the parties that the decision in that appeal would govern the other appeal also. The respondent in appeal No. 1190 is a dealer registered under the Act. The matter relates to the assessment for 1963-64. The date of the order of assessment is not on file but it is stated that it was made sometime in the later part of 1964. On 30/03/1967 the Sales Tax Officer, Intelligence Wing, Vigilance, Berhampur made a search of the business premises of the respondent and seized several account books. On the following day further search was made and some additional account books were taken into possession. Later on that day, viz., 31/03/1967 the Sales Tax Officer issued the following notice under Section 12 (8) of the Act to the respondent: "Notice to a dealer under Section 12 (8) of the Orissa Sales Tax Act. To M/s. Utteswar Rice Mills (Dealer) At/P. O. Berhampur, GAI 2127-A (Address) You are hereby required to submit within one calendar month from the date of receipt of this notice a return in FORm IV (enclosed) showing the particulars of your turnover for the year ending 1963-64. In the event of your failure to comply with all the terms of this notice I shall proceed to assess you under Section 12 of the Act to the best of my judgment without further reference to you. Sd/- Illegible Signature Sales Tax Officer Intelligence Wing, Vigilance Berhampur. Place - Berhampur. " Date - 31-3-67. The notice was received by an employee of the respondent. Appearance was thereafter put in on behalf of the respondent before the Sales Tax Officer and a copy of the old return which had been earlier filed in accordance with Section 11 of the Act was again filed before the Sales Tax Officer. According to the respondent, appearance was put in on its behalf on several occasions with a view to know the reason for the issue of the above notice, but the respondent was not informed of that reason. It is further stated that the Sales Tax Officer recorded the statements of a number of witnesses behind the back of the respondent with the intention of making reassessment under Section 12 of the Act. Request was made on behalf of the respondent to the Sales Tax Officer for being furnished with copies of those statements so that the respondent might be in a position to know the reason for the issue of the notice. Copies of those statements were, however, not supplied and the application filed by the respondent for obtaining copies of the statements was rejected by the Sales Tax Officer. It was mentioned by the Sales Tax Officer that the question of grant of copies of the statements would be considered if the statements were used against the respondent. The respondent filed a revision petition against the order rejecting that application, but the revision petition too was dismissed. The respondent thereafter filed petition under Articles 226 and 227 of the Constitution in the High Court on 26/12/1967. The High Court accepted the writ petition on the ground that the Sales Tax Officer had not indicated any reason for issuing notice under Section 12 (8) of the Act. This fact, in the opinion of the High Court, was sufficient to warrant quashing of the notice. The High Court in this context relied upon its earlier decision in the case of B. Patnaik Mines (P) Ltd. v. N. K. Mohanty Sales Tax Officer, reported in ILR (1967) Cut 446. It was held in the earlier case that the Sales Tax Officer had no jurisdiction under Sec. 12 (8) of the Act to issue notice for making a fishing enquiry without indicating therein the reason for the alleged under-assessment. In appeal before us Mr. Ramachandran on behalf of the appellants has referred to the provisions of Section 12 (8) of the Act and has argued that it is not essential to give the reasons in the notice issued under the above provisions of law. The impugned notice, according to the learned counsel cannot be quashed for non-mention of the reasons. The above stand has been controverted by Mr. Gobind Das on behalf of the respondent and, according to him, the failure of the Sales Tax Officer to mention the reasons which led to the issue of the impugned notice would vitiate the notice.
(3.) THERE is, in our opinion considerable force in the stand taken in this respect by the learned counsel for the appellants. Section 12 of the Act deals with assessment of tax. Sub-sections (5) and (8) of the above Section read as under: "(5) If upon information which has come into his possession, the Commissioner is satisfied that any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless without sufficient causes failed to apply for registration, the Commissioner shall, after giving the dealer a reasonable opportunity of being heard, assess, to the best of his judgment, the amount of tax, if any, due from the dealer in respect of such period and all subsequent periods and the Commissioner may direct that the dealer shall pay, by way of penalty, in addition to the amount so assessed, a sum not exceeding one and a half times that amount: Provided that no penalty shall be levied for the quarter during which the dealer first or again becomes liable to pay tax under this Act. (8) If for any reason the turnover of a dealer for any period to which this Act applies has escaped assessment or has been under-assessed or where the tax has been compounded when composition is not permissible under this Act and the rules made thereunder the Commissioner may at any time within thirty-six months from the expiry of the year to which that period relates call for a return under sub-section (1) of Section 11 and may proceed to assess the amount of tax due from the dealer in the manner laid down in sub-section (5) of this section and may also direct, in cases where escapement or under-assessment or composition is due to the dealer having concealed particulars of his turnover or having without sufficient cause furnished incorrect particulars thereof, that the dealer shall pay, by way of penalty, in addition to the tax assessed under this sub-section, a sum not exceeding one and half times of the said tax so assessed." The Orissa Sales Tax Rules, 1947 (hereinafter referred to as the rules) have been framed by the State Government in exercise of the powers conferred by Section 29 of the Act. According to sub-section (1) of that section, the State Government may subject to the condition of previous publication make rules for carrying out the purposes of the Act. Sub-section (2) of that section mentions the subjects, without prejudice to the generality of power given by sub-section (1), regarding which rules may prescribe. Section 29-A requires that all rules made under Section 29, and notifications issued under Section 3-B, sub-section (1) of Section 5 and Section 6 shall, as soon as possible after they are made or published, as the case may be, be laid before the Assembly for a total period of fourteen days which may be comprised in one more session. Rule 23 may be reproduced below: "23. Calling for return when turnover has escaped assessments or has been under-assessed - (1) If for any reason the turnover of sales or the turnover of purchases of a dealer has escaped or has been under assessed or has not been assessed due to the tax having been compounded when composition is not permissible under the Act and these rules and it is proposed to assess it the Commissioner shall serve on the dealer a notice in Form VI within one calendar month from the date of receipt of such notice. (2) Such notice may also require the dealer to attend in person or by his agent at the office of the authority issuing the notice on the date specified therein and to produce or cause to be produced the accounts and documents specified in the notice." The relevant part of Form VI referred to in rule 23 is in the following words: JUDGEMENT_171_3_1973Html1.htm Section 12 (8) of the Act reproduced above may be analysed as under: (i) There must exist reason for the belief that (a) The turnover of a dealer for any period to which the Act applies had escaped assessment or has been under-assessed; or (b) the tax has been compounded when composition is not permissible under the Act and the rules made thereunder. (ii) In cases mentioned in clause (i) the sales tax authority may at any time within 36 months from the expiry of the year to which the above mentioned period relates call for a return under Section 11 (1) of the Act. (iii) After taking the steps mentioned in clauses (i) and (ii) above, the sales tax authority may proceed to assess the amount of the tax due from the dealer in the manner laid down in Sec. 12 (5) of the Act. (iv) The sales tax authority may also direct in cases where escapement or under-assessment or composition is due to the dealer having concealed particulars of his turnover or having without sufficient cause furnished incorrect particulars thereof that the dealer shall pay penalty in addition to the tax assessed. (v) Such penalty shall not exceed one and a half times the amount of the tax so assessed. Although the opening words used in S. 12 (8) are "if for any reason" and not "if the sales tax authority has reason to believe", the difference in phraseology, in our opinion, should not make much material difference. A reason cannot exist in vacuum. Somebody must form the belief that reason exists and looking to the context in which the words are used, we are of the view that it should be the sales tax authority issuing the notice who should have reason to believe that the turnover of a dealer has escaped assessment or has been under-assessed. The approach in this matter has to be practical and not pedantic. Any view which would make the opening words of Sec. 12 (8) unworkable has to be avoided. It may be noted in this context that in Form VI appended to the rules, which has been prepared in pursuance of Rule 23, the words used are "whereas I have reason to believe that your turnover ... ...has escaped assessment ... ... ... " ;