1976 (11) TMI 182 - HC - VAT and Sales Tax

Invalid assessment orders for dissolved firm highlight need for clear statutory provisions

Janki Devi and Others Versus Sales Tax Officer, Ward No. VIII, New Delhi and Another

Janki Devi and Others Versus Sales Tax Officer, Ward No. VIII, New Delhi and Another - [1977] 39 STC 268 (Del) Issues Involved:1. Assessability of a dissolved firm under the Bengal Sales Tax Act, 1941.2. Validity of assessment orders for the years 1961-62, 1963-64, 1964-65, and 1965-66.3. Applicability of the Supreme Court's decision in Murarilal Mahabir Prasad's case.4. Interpretation of the Bengal Sales Tax Act and its provisions concerning dissolved firms.5. Impact of the 1972 amendment to the Bengal Sales Tax Act.Issue-wise Detailed Analysis:1. Assessability of a Dissolved Firm Under the Bengal Sales Tax Act, 1941:The primary issue was whether a dissolved firm could be assessed under the Bengal Sales Tax Act, 1941. The judgment noted that the Supreme Court in previous cases, such as State of Punjab v. Jullundur Vegetables Syndicate and Additional Tahsildar v. Gendalal, had held that a dissolved firm could not be assessed unless there was an express provision in the statute. The Bengal Sales Tax Act, as extended to Delhi, did not have an express provision allowing the assessment of a dissolved firm until the amendment on 28th May 1972. Therefore, the court concluded that there was no power to assess a dissolved firm under the unamended Act.2. Validity of Assessment Orders for the Years 1961-62, 1963-64, 1964-65, and 1965-66:The court examined whether the assessment orders for the years 1961-62, 1963-64, 1964-65, and 1965-66, issued after the firm's dissolution, were valid. It was established that the firm had dissolved on 10th June 1967, and the registration certificate was canceled on 7th October 1967. Since the assessments were made after the firm ceased to exist, the court held that these assessment orders were invalid.3. Applicability of the Supreme Court's Decision in Murarilal Mahabir Prasad's Case:The court considered the relevance of the Supreme Court's decision in Murarilal Mahabir Prasad, where it was held that a dissolved firm could be assessed under the Bombay Sales Tax Acts of 1953 and 1959. However, the court distinguished this case by noting that the Bengal Sales Tax Act did not contain provisions similar to sections 26(3) and 19(3) of the Bombay Acts, which were crucial to the Supreme Court's decision. Therefore, the court concluded that the Murarilal Mahabir Prasad decision was not applicable to the Bengal Sales Tax Act.4. Interpretation of the Bengal Sales Tax Act and its Provisions Concerning Dissolved Firms:The court analyzed the relevant provisions of the Bengal Sales Tax Act, including sections 4, 11, 11A, 16, 17, 20, and rules 39 and 39(1A). It concluded that these provisions did not imply the power to assess a dissolved firm. Rule 39(1A) provided for the joint and several liability of partners for tax payment but did not confer the power to assess a dissolved firm. The court emphasized that the power of assessment and the power to recover tax are distinct, and the former requires explicit statutory authority.5. Impact of the 1972 Amendment to the Bengal Sales Tax Act:The Finance Act of 1972 introduced sections 12A to 12F, specifically section 12F, which allowed the assessment of a dissolved firm by treating it as if it had not discontinued business. The court noted that this amendment filled the legislative gap and provided the necessary authority to assess dissolved firms. However, since the amendment was not retrospective, it did not apply to the assessments made before 1972. The court highlighted that the amendment's introduction indicated the legislature's recognition of the previous lack of authority to assess dissolved firms.Conclusion:The court concluded that the assessment orders for the years 1961-62, 1963-64, 1964-65, and 1965-66 against the dissolved firm of G.L. Amar Nath and Company were invalid. The writ petition was accepted, and the proceedings and assessment orders were quashed. The court left the parties to bear their own costs. The judgment emphasized the necessity of explicit statutory provisions for assessing dissolved firms and the significance of the 1972 amendment in addressing this issue.