1998 (11) TMI 531 - SC - VAT / Sales Tax

Reopening tax assessments after four-year limit u/s21(2) proviso upheld, reassessment allowed within eight years

The dominant issue was whether, after insertion of the proviso to s. 21(2) (effective 19.02.1991), the assessing authority could reopen an assessment ... Sanction of the Commissioner of Sales Tax - notices for reassessment - Whether the Income-tax Officer could issue a notice of assessment to a person as an agent of a non-resident party under the amended provisions when the period prescribed for such notice had, before the amended Act came into force, expired? - Held that:- Under sub-section (1) of section 21 of the Act before its amendment, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary, assess or reassess the dealer according to law. Sub- section (2) provided that except as otherwise provided in this section no order for any assessment year shall be made after the expiry of 4 years from the end of such year. However, after the amendment, a proviso was added to sub- section (2) under which Commissioner of Sales Tax authorises the assessing authority to make assessment or reassessment after the expiration of 4 years from the end of such year notwithstanding that such assessment or reassessment may involve a change of opinion. The proviso came into force with effect from February 19, 1991. We do not think that sub-section (2) and the proviso added to leave anyone in doubt that as on the date when the proviso came into force, the Commissioner of Sales Tax could authorise making of assessment or reassessment after the expiration of 4 years from the end of that particular assessment year. It is immaterial if a period for assessment or reassessment under sub-section (2) of section 21 before the addition of the said proviso had expired. Here, it is the completion of assessment or reassessment under section 21 which is to be done before the expiration of 8 years of that particular assessment year. Read as it is, these provisions would mean that the assessment for the year 1985-86 could be reopened up to March 31, 1994. Authorisation by the Commissioner of Sales Tax and completion of assessment or reassessment under sub-section (1) of section 21 have to be completed within 8 years of the particular assessment year. We need not refer to the provisions of Income-tax Act to interpret proviso to section 21(2) language of which is clear and unambiguous and so is the intention of Legislature. We are, thus, of the view that High Court was not right in quashing the sanction given by the Commissioner of Sales Tax and notices issued by the assessing authority in pursuance thereto. Appeals allowed. Issues Involved:1. Whether a completed assessment under the U.P. sales tax law can be reopened after the prescribed period when that period was enlarged by amending the law.Issue-wise Detailed Analysis:Issue 1: Reopening of Completed Assessments under Amended LawFacts and Background:In both appeals, the assessments for the year 1985-86 under the U.P. Trade Tax Act, 1948, were completed within the original four-year period prescribed under section 21 of the Act. The period for assessment or reassessment for the year 1985-86 expired on March 31, 1990. The Act was amended by the U.P. Sales Tax (Amendment and Validation) Act, 1991, which extended the period for reassessment to eight years, effective from February 19, 1991. Taking advantage of this amendment, the Sales Tax Officer issued notices for reassessment after obtaining sanction from the Commissioner of Sales Tax, which were challenged by the respondents in the High Court.High Court's Decision:The High Court quashed the sanction orders and notices, holding that the amendment did not apply retrospectively to the assessment year 1985-86, as the period for reassessment had already expired before the amendment came into force.Arguments by Appellants:The appellants argued that the amendment should be interpreted to apply retrospectively, allowing reassessment even after the original period had expired. They relied on the decision in *Commercial Tax Officer v. Biswanath Jhunjhunwala* (1996) 5 SCC 626, which dealt with a similar issue under the Bengal Finance (Sales Tax) Act, 1941, where the amendment was given retrospective effect.Arguments by Respondents:The respondents contended that the amendment could not have retrospective operation and supported their argument with decisions in *Y. Narayana Chetty v. Income-tax Officer* [1959] 35 ITR 388, *S.S. Gadgil v. Lal and Co.* [1964] 53 ITR 231, and *J.P. Jani, Income-tax Officer v. Induprasad Devshanker Bhatt* [1969] 72 ITR 595, which emphasized that amendments should not be applied retrospectively unless explicitly stated.Supreme Court's Analysis:The Supreme Court examined the relevant provisions of section 21 of the Act, including the proviso added by the 1991 amendment. The Court noted that the proviso allowed the Commissioner of Sales Tax to authorize reassessment after the expiration of four years but within eight years from the end of the assessment year. The Court emphasized that the language of the proviso was clear and unambiguous, indicating that it was intended to have retrospective effect.The Court distinguished the present case from the decisions cited by the respondents, noting that those cases involved different statutory provisions and contexts. The Court found the decisions in *Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. S.G. Mehta, Income-tax Officer* [1963] 48 ITR 154 (SC) and *Commercial Tax Officer v. Biswanath Jhunjhunwala* (1996) 5 SCC 626 to be more relevant, as they supported the view that clear legislative language should be given full effect, including retrospective operation.The Court concluded that the proviso to section 21(2) of the Act, effective from February 19, 1991, allowed the Commissioner of Sales Tax to authorize reassessment for the year 1985-86 within eight years, notwithstanding the expiration of the original four-year period. The Court held that the High Court erred in quashing the sanction orders and notices.Conclusion:The Supreme Court set aside the High Court's judgments and allowed the appeals, holding that the proviso to section 21(2) of the U.P. Trade Tax Act, 1948, as amended in 1991, applied retrospectively to allow reassessment within eight years from the end of the assessment year 1985-86.Appeals allowed with costs.