1955 (10) TMI 23 - HC - VAT and Sales Tax

Court clarifies limitation period for assessment under Bihar Sales Tax Act

Gajo Ram Basant Ram and Another Versus The State of Bihar

The court held that the Commissioner's order sanctioning a review of assessment did not contravene the proviso to section 10(6) of the Bihar Sales Tax ... - Issues Involved:1. Whether the order of the Commissioner dated 23rd September 1948, sanctioning review of assessment, contravenes the proviso to section 10(6) of the Bihar Sales Tax Act, 1944.2. Whether the assessment for the period prior to 1st July 1947 was barred under the proviso to section 10(6) of the Bihar Sales Tax Act, 1944.Issue-Wise Detailed Analysis:Issue 1:The first issue revolves around the interpretation of the proviso to sub-section (6) of section 10 of the Bihar Sales Tax Act, 1944, in relation to the review of assessment orders. The specific question is whether the order of the Commissioner dated 23rd September 1948, sanctioning a review of assessment for five quarters, is bad in law for contravening the proviso to section 10(6).The facts reveal that the assessee firm was assessed for five quarters, and the Deputy Commissioner sought the Commissioner's sanction for review after more than three months had passed since the original assessment orders. The Commissioner granted the sanction, and the subsequent review resulted in a higher tax assessment. The assessee's application for review against the Commissioner's sanction was rejected by both the Board of Revenue and the High Court.The core argument of the assessee was that the limitation period mentioned in the proviso to section 10(6) should also apply to the power of review under section 20(4). The assessee relied on analogous provisions from the Indian Income-tax Act and the Bihar Agricultural Income-tax Act, which impose time limitations on revisions and assessments.However, the judgment clarifies that the Bihar Sales Tax Act, 1944, does not contain provisions similar to sections 26 and 27 of the Bihar Agricultural Income-tax Act or sections 34 and 35 of the Indian Income-tax Act. Furthermore, section 20(4) of the Bihar Sales Tax Act states that the power of review is 'subject to such rules as may be prescribed,' not to the 'other provisions of the Act.' The judgment emphasizes that the general rule confines the operation of a proviso to the clause it directly precedes, and the proviso to section 10(6) should be interpreted as relating to original assessment orders only.The judgment concludes that the limitation period in the proviso to section 10(6) does not control the power of review under section 20(4). Therefore, the order of the Commissioner dated 23rd September 1948, sanctioning a review of assessment, does not contravene the proviso to section 10(6) of the Bihar Sales Tax Act, 1944.Issue 2:The second issue concerns whether the assessment for the period prior to 1st July 1947 was barred under the proviso to section 10(6) of the Bihar Sales Tax Act, 1944. The facts involve an unregistered dealer whose papers were seized, leading to assessments for periods ending 31st December 1945 and 31st December 1947. The Commissioner set aside these assessments and ordered fresh assessments, which were consolidated and resulted in a higher tax assessment.The key question is whether the limitation period in the proviso to section 10(6) applies to the appellate or revisional authority's power to direct fresh assessments. The judgment reiterates that the proviso to section 10(6) is restricted to original assessment orders and does not apply to orders made by appellate or revisional authorities under section 20.The judgment highlights the absurdity that would result if the limitation period applied to appellate or revisional authorities. For instance, if the appellate authority sets aside an assessment after the two-year period, it would be unable to direct a fresh assessment, rendering its powers under section 20 nugatory. The judgment emphasizes the need to distinguish between original assessment orders and fresh assessments directed by appellate or revisional authorities to avoid such absurdities.The judgment concludes that the proviso to section 10(6) does not bar assessments for periods prior to 1st July 1947 when directed by appellate or revisional authorities. Therefore, the assessment for the period prior to 1st July 1947 is not barred under the proviso to section 10(6) of the Bihar Sales Tax Act, 1944.Conclusion:Both references are answered against the assessee, affirming that the Commissioner's order sanctioning a review of assessment does not contravene the proviso to section 10(6), and the assessment for the period prior to 1st July 1947 is not barred under the same proviso. The opposite party is entitled to their costs, with the hearing fee assessed at Rs. 150 in each case.