1972 (9) TMI 109 - SC - VAT / Sales Tax

Notice under section 12(8) of Orissa Sales Tax Act challenged for lack of stated reasons; allowed due to recorded material.

Whether a tax notice lacking stated reasons is vitiated where the material motivating initiation is recorded elsewhere: the article explains that the ... Whether notice issued under section 12(8) of the Orissa Sales Tax Act, 1947 (Act 14 of 1947) should be quashed on the ground that it does not mention the reasons for the issue of the notice? Held that:- Appeal allowed. As the details of the material which led to the initiation of proceedings under section 12(8) of the Act had been recorded in the relevant case file. The said file, it would appear from the affidavit of Shri Mohanty, was kept available for reference by the High Court at the time of hearing. No reference, it would seem, was however made to that file because the High Court did not feel the necessity of doing so. Issues: Whether a notice issued under section 12(8) of the Orissa Sales Tax Act, 1947 is invalid for failing to state the reasons which led to its issuance.Analysis: Section 12(8) permits the Commissioner to call for a return and proceed to assess where the turnover has escaped assessment or been under-assessed; the statutory phraseology does not expressly require the reasons to be set out in the notice. Precedents under similarly worded income-tax provisions show that the officer issuing the notice must have reason to believe escapement but that the notice need not specify the particulars of that belief. The rules (including Form VI) use the phrase 'Whereas I have reason to believe...' and envisage calling for a return and production of documents; any material held by the authority intended to be used against the dealer at reassessment must, however, be brought to the dealer's notice and an opportunity afforded before such material is relied upon for penalty or final assessment.Conclusion: The notice under section 12(8) need not set out the reasons for its issuance; failure to mention the reasons does not invalidate the notice. This conclusion is in favour of the Revenue.Ratio Decidendi: A notice under section 12(8) of the Orissa Sales Tax Act, 1947 is not invalid merely because it does not specify the reasons for issuance, provided the issuing authority has reason to believe escapement or under-assessment; material intended to be used against the dealer at reassessment must be disclosed to the dealer with an opportunity to explain before being relied upon.