1976 (3) TMI 177 - SC - VAT and Sales Tax

Suo Motu Power of Deputy Commissioner: Clarification on Rectifying Errors in Assessment Orders

The Supreme Court clarified that the Deputy Commissioner's suo motu power under section 32 of the Act is broad and can rectify errors in assessment ... What is the scope of the suo motu power under section 32 of the Act? Whether the Deputy Commissioner rightly refused to exercise discretion under section 32 of the Act in favour of the appellants? Held that:- Appeal dismissed. The suo motu power of revision of the Deputy Commissioner is of wide amplitude and can be exercised in favour of the revenue as well as the taxpayer in order to correct any error or illegality committed by the assessing authority in his order of assessment. The Deputy Commissioner rightly refused to exercise his revisional jurisdiction in favour of the appellants and the High Court was right in reversing the order of the Appellate Tribunal in so far as it related to the appellants' claim to the aforesaid exemption. Issues:1. Scope of suo motu power under section 32 of the Act2. Refusal by the Deputy Commissioner to exercise discretion under section 32 of the ActDetailed Analysis:1. Scope of suo motu power under section 32 of the Act:The case involved an appeal against the judgment and order passed by the High Court of Madras in a tax matter. The appellants, dealers in refrigerators and spare parts, submitted a return for the year 1964-65 under the Madras General Sales Tax Act, showing a total taxable turnover. The assessing authority made an addition to the turnover, and a penalty was proposed by the Deputy Commissioner. The appellants objected to the penalty and claimed exemption for certain transactions. The Deputy Commissioner revised the assessment and imposed a penalty, refusing the claimed exemption. The Sales Tax Appellate Tribunal allowed the appeal, canceled the penalty, and granted an exemption. However, the High Court partially allowed the revision petition, setting aside the exemption granted by the Tribunal. The key issue was the interpretation of the suo motu power of the Deputy Commissioner under section 32 of the Act, which allows for the revision of orders or proceedings. The Supreme Court held that the Deputy Commissioner's power of revision is broad and can be exercised in favor of both the revenue and the taxpayer to rectify any errors or illegalities in the assessment order.2. Refusal by the Deputy Commissioner to exercise discretion under section 32 of the Act:The second issue was whether the Deputy Commissioner was justified in refusing to exercise his revisional power in favor of the appellants. The Court noted that the appellants had not raised the issue of exemption for works contracts during the assessment proceedings, nor did they appeal against the assessment order. The Court emphasized that the appellants did not claim exemption at any stage until the penalty notice was issued. The Court also rejected the appellants' argument that they were under a mistaken impression regarding the nature of the transactions, citing previous court rulings on works contracts. Ultimately, the Court upheld the Deputy Commissioner's decision to deny the claimed exemption and agreed with the High Court's decision to reverse the Tribunal's order regarding the exemption. The appeal was dismissed with costs, finding no merit in the appellant's arguments.