TaxTMI 
TaxTMI 
1978 (12) TMI 173
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 44,205.27. On the basis of this "suppression", the Joint Commercial Tax Officer made an addition of Rs. 50,000 towards omission of sale of cotton-seeds, and assessed the assessee on a total and taxable turnover of Rs. 15,46,162.26 and Rs. 4,39,767.20 respectively. Though there is a specific reference to the sum of Rs. 1,33,858.18 as being closing stock, which was however taxed as if it was the last purchase, the assessee did not take objection to the inclusion of the said amount as part of the turnover, before the Appellate Assistant Commissioner before whom an appeal was filed. The dispute before him related only to the addition of the sum of Rs. 60,000 and also the penalty that was levied, in a sum of Rs. 1,326. The Appellate Assistant Commissioner by his order dated 27th June, 1967, held that there was overwhelming evidence against the assessee and that his plea that the entries found in the anamath accounts had been brought to regular books of account was of no value. He, therefore, confirmed the turnover as fixed and the penalty as levied. The assessee thereafter filed an appeal before the Sales Tax Appellate Tribunal. Before the Tribunal the assessee disputed two items of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er with an application for condonation of delay. From the order of the Sales Tax Appellate Tribunal it appears that no order had been passed on the said application for refund. The question that arises for consideration in the present case is whether the Tribunal was justified in allowing the assessee to agitate the dispute regarding the sum of Rs. 1,33,858.18 being the value of cotton in closing stock as on 31st March, 1963. The contention urged on behalf of the revenue is that this sum could not have been disputed before the Sales Tax Appellate Tribunal as the matter had not been agitated before the Appellate Assistant Commissioner. The learned Additional Government Pleader referred to several decisions of this Court in this behalf. On behalf of the assessee the contention was that the disputed turnover of Rs. 1,33,858.18 could not be agitated before the Appellate Assistant Commissioner, as the relevant decision of the Supreme Court was available only subsequently and that having regard to the powers of the Sales Tax Appellate Tribunal as embodied in the statute, it was open to the assessee to raise the point for the first time before it. There is no dispute about the fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad. As there was no error apparent on the face of the record, the writ petition was dismissed. The assessee had filed also a tax revision petition against the order of the Tribunal and this case is reported in Easun Engineering Co. Ltd. v. Government of Madras[1974] 33 S.T.C. 350. After referring to the facts, which have already been mentioned above, this Court pointed out as follows: "On the facts, the Tribunal is right in saying that the assessee challenged the assessment in relation to the said sum of Rs. 30,00,000 and odd for the first time only in January, 1967, by filing an appeal before it. If really the assessee was aggrieved against the assessment in respect of that turnover it should have included that turnover also in his appeal before the appellate authority, or should have taken the permission of the Appellate Assistant Commissioner to expand the appeal by including the disputed turnover of Rs. 30,00,000 and odd. But no such step was taken. We are, therefore, of the view that the Tribunal was right in rejecting the appeal as not maintainable." The same question again came up before this Court in State of Madras v. Spencer and Company Limited[1974] 34 S.T.C. 249. Tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The same view has been taken in a later decision to which one of us was a party, and which is reported in State of Tamil Nadu v. K.R. and P. Shanmugavel Nadar[1977] 39 S.T.C. 391; [1976] C.T.R. (Mad.) 536. There also it was held that if a turnover had not been disputed before the Appellate Assistant Commissioner, but was disputed for the first time before the Tribunal, it is as if an appeal is preferred to the Tribunal directly from the assessment order in so far as that turnover is concerned and that it is not permitted by law. Thus, consistently, this Court has been taking the view that the assessee could not agitate the objection which had not been raised before the Appellate Assistant Commissioner. Consequently, it followed that in the present case the assessee could not have raised the objection regarding the sum of Rs. 1,33,858.18 before the Appellate Tribunal. The Tribunal is, therefore, wrong in dealing with this turnover. The Andhra Pradesh High Court in a Full Bench in State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill[1977] 39 S.T.C. 57 (F.B.). has also taken the same view. Our attention was drawn by the learned Additional Government Pleader to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cover the turnover now in dispute, the assessee would be justified in agitating the matter before the Tribunal. It is not possible to accept this submission. The competence of an appeal is different from the power of the court to mould the relief. In the present case the appeal itself would be incompetent in view of the decisions mentioned already. Even though the court may have power to mould the relief, taking into account the subsequent events, still so long as the appeal itself is not maintainable, the power to mould the relief cannot be exercised. It is not, therefore, necessary to refer to those decisions any further. The learned counsel for the assessee drew our attention to another decision of the Supreme Court in Commissioner of Income-tax v. Mahalakshmi Textile Mills Limited[1967] 66 I.T.R. 710 (S.C.); A.I.R. 1968 S.C. 101. In that case, which arose under the Indian Income-tax Act of 1922, the assessee carrying on the business of a spinning mill had incurred Rs. 93,215 in introducing what is called "Casablanca conversion system" replacing certain roller stands, etc., which were functioning or in use previously. The assessee had claimed "development rebate" with refe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reme Court points out that the right of the assessee to the relief is not restricted to the plea raised or contention urged by him before the lower authorities. As it is not a case of a wholly new point being taken before the Tribunal, the said decision has no application to the present one. To sum up, in my view, the assessee would not be justified in raising any dispute for the first time before the Sales Tax Appellate Tribunal without raising such a dispute before the Appellate Assistant Commissioner. Though the powers of the Sales Tax Appellate Tribunal may be wide, still those powers could only be exercised in an appeal which is competent. As the appeal on this point could not be raised before the Sales Tax Appellate Tribunal, the appeal on this point would not be competent, and the Tribunal could not have dealt with the. said point in its order. The Tribunal is, therefore, in error in deleting the sum of Rs. 1,33,858.18 from the taxable turnover. It is indeed unfortunate that the levy of tax on the turnover in question, which is not taxable according to the decision of the Supreme Court in State of Madras v. Narayanaswami Naidu[1968] 21 S.T.C. 1 (S.C.). has, in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The Tribunal, after discussing the case, held that the assessee could raise the dispute for the first time before it and decided the point in favour of the assessee. It is this order which is challenged before us. The only question that arises for consideration in this revision petition is whether the assessee could raise any point for the first time before the Appellate Tribunal without raising it before the Appellate Assistant Commissioner. From what has been stated above, it would be clear that as a result of the order of remand by this Court, the appeal came back before the Tribunal for decision afresh. It would, therefore, be a case in which an assessee was seeking to raise a point for the first time in a pending appeal. The present case would, therefore, be identical with the one that we have just now considered in T.C. No. 118 of 1971. The arguments in this case are similar to what we have already considered in T.C. No. 118 of 1971. For the reasons mentioned therein. I am of the view that the Sales Tax Appellate Tribunal acted erroneously in so far as it allowed the assessee to agitate the point for the first time before it without raising the point before the Appellate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es for recovery of tax arrears. Meanwhile, the assessee can exercise the right of objecting to the assessment by way of appeal. Under the Act, the initial appeal against an assessment is to an authority called the Appellate Assistant Commissioner. The Act defines his powers and the kind of orders he can pass while disposing of the appeal. Depending on the results of this appeal, an assessee can file a further appeal to an appellate body called the Sales Tax Appellate Tribunal. Their powers, in appeal, are also well-defined by the Act. The relevant section, for instance, mentions in what different ways the Tribunal can give a disposal to the appeal before them. Their appellate orders, subject to review in some cases, are final. But on pure questions of law, they may be challenged in revision before this Court. Elsewhere in the Act, there are provisions to counteract suppression, evasion and avoidance. The Act also provides for an effective surveillance of the assessments by a network of revisional authorities. Thus, the assessing authorities can reopen assessments and bring to charge escaped turnover. The Deputy Commissioner and the Board of Revenue can call for the assessment recor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come Tax (Ex parte Elmhirst)[1933-37] 20 Tax Cas. 381. is a case in point. The matter arose before the court for the issue of a writ of prohibition to prohibit the Commissioners for the Special Purposes of Income Tax from proceeding with their hearing of an appeal against a particular additional assessment made against a taxpayer. Having filed the appeal, but half way through the hearing, the taxpayer applied for leave to withdraw his appeal. The Special Commissioners, however, refused the application, and expressed their determination to proceed with the appeal. On his motion before the court, a rule nisi for prohibition was issued in the first instance. Discharging the rule later, Lord Hewart, C.J., laid down what the nature of an appeal was in tax matters. He observed: "In my opinion, the argument of the learned Attorney-General is absolutely correct, and the argument upon the other side is manifestly based, as he said, upon a misapprehension that an appeal under the Income Tax Act, 1918, is the same in substance as an appeal where two private persons are engaged in litigation. It is of course totally different." The Lord Chief justice relied on an earlier decision of the Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....exercise in the interpretation of the Income Tax Acts then in force in the United Kingdom, but as a broad principle of fiscal jurisprudence. The relevant sections in the Tamil Nadu General Sales Tax Act, 1959, providing for appeals do not militate against the application of the principle gleaned from the English authorities. Appeals under the Act are provided in two sections-section 31 and section 36. Both these sections are enacted in two distinct parts. One part enacts who, and in what circumstances, can prefer an appeal. The other part enacts what is the scope of the orders which the appellate authority can pass while disposing of the appeal. Section 31(1), for instance, provides that any person objecting to an assessment order under section 12 may appeal to the Appellate Assistant Commissioner. Section 31(3) says that in disposing of an appeal, the Appellate Assistant Commissioner may, if the appeal is against the order of assessment, confirm, reduce, enhance or annul the assessment, set aside the assessment and direct the authority to make a fresh enquiry, or pass such other order as he may think fit. Section 36(1) provides for a further appeal to the Sales Tax Appell....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may annul the assessment. He may set aside the assessment and direct the assessing authority to make a fresh assessment, He may make any other order which he may think fit. Likewise, under section 36(3)(a)(i), (ii) and (iii), the Tribunal while disposing of an appeal, in the case of an order of assessment may either confirm the assessment, or reduce the assessment, or enhance the assessment, or annul the assessment, or set aside the assessment and direct the assessing authority to make a fresh assessment, or make such other order as may be thought fit. These words of enumeration, in effect, render the appellate jurisdiction plenary in character in the case of assessments, thus illustrating the familiar adage that an appeal is but a retrial or a rehearing. What is more, the different ways of its exercise, as laid down in the two sections, are wholly uncorrelated to the nature and extent of the assessee's particular objection in his appeal memorandum. For instance, an assessee may object in the appeal to a small part of the assessed turnover, and not to the whole of it. But the jurisdiction of the Appellate Assistant Commissioner or the Tribunal is not on that account confined to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imated sales turnover in cotton-seeds, and (ii) Rs. 1,33,858.18 representing part of the purchase turnover in cotton, figuring as closing stock. The assessee appealed to the Appellate Assistant Commissioner objecting to the inclusion in the assessment of Rs. 50,000. That was all there was to his appeal. He asked for no other relief. The Assistant Commissioner, however, dismissed the appeal. Thereupon, the assessee appealed to the Tribunal, objecting again to the inclusion of Rs. 50,000. Utilising the opportunity, he also questioned before the Tribunal the assessment made on the other amount, Rs. 1,38,858.18 representing cotton purchases. The Tribunal entertained the appeal, and while disposing of the appeal, deleted Rs. 1,33,858.18, but not the sum of Rs. 50,000 from the assessed turnover. In this revision before this Court brought by the Deputy Commissioner it is contended that the Tribunal exceeded the limits of its appellate jurisdiction in entertaining and granting relief to the assessee as respects Rs. 1,33,858.18. The argument was also put in another way, to the effect that it was not open to the assessee to object to Rs. 1,33,858.18 for the first time in the appeal bef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, section 36(3)(a)(i) leaves no room for any doubt whatever. The section. indubitably, invests the Tribunal with jurisdiction to pass any order reducing the assessment, including a reduction that would cover an objection not raised by the assessee in the appeal before the Appellate Assistant Commissioner. Both on principle and on the words of the statute, therefore, I can find no error whatever in the Tribunal's dealing with the subject of Rs. 1,33,858.18 while considering and disposing of the assessee's appeal. I am supported in my conclusion by a decision of the Supreme Court in Commissioner of Income-tax v. Mahalakshmi Textile Mills Ltd.[1967] 66 I.T.R. 710 (S.C.); A.I.R. 1968 S.C. 101. That case arose under the Indian Income-tax Act, 1922. The assessees before the Supreme Court were running a mill for manufacture of cotton yarn. They fitted in their plant, during the relevant period, some improved designs of machine parts going by the name of "Casablanca conversion system", replacing a few outdated parts. The expenditure in bringing about this replacement was Rs. 93,215. Treating it as an outlay on capital account, the assessee asked for development rebate, which, under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t based on the doctrine of stare decisis, it becomes necessary to examine the three cases cited in argument. They are reported in Easun Engineering Co. Ltd. v. Government of Madras[1974] 33 S.T.C. 350., State of Madras v. Spencer and Co. Ltd.[1974] 34 S.T.C. 249. and State of Tamil Nadu v. K.R. and P. Shanmugavel Nadar[1977] 39 S.T.C. 391; (1976) C.T.R. (Mad.) 536. For convenience of discussion, I shall refer to them, shortly as the Easun case(1), the Spencer cases and the Nadar cases, respectively. In the Easun case(1), the assessee appealed. to the Appellate Assistant Commissioner objecting to the inclusion of Rs. 2,38,472 in their assessed turnover. This was the only amount they objected to in the appeal. The Appellate Assistant Commissioner upheld their objection and allowed the appeal in toto. But the assessee preferred a further appeal to the Tribunal. In the context of what went before, the question was whether this further appeal was competent. This Court held it was not. The gist of their reasoning was that the Appellate Assistant Commissioner's order which allowed the assessee's appeal in whole left no scope whatever for a further appeal to the Tribunal. In the Spencer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e facts were different, for in these cases the assessees concerned were, in a real sense, aggrieved by the adverse orders of the Appellate Assistant Commissioner. And yet the Easun decision[1970] 26 S.T.C. 486; [1974] 33 S.T.C. 350. was followed in the Spencer case[1974] 34 S.T.C. 249., without noticing the distinction. In the Nadar case[1977] 39 S.T.C. 391; (1976) C.T.R. (Mad.) 536., the distinction was pointed out, but the Bench said that it did not make for any difference in the conclusion. Again, in the two earlier cases the question of the Tribunal's appellate powers was not examined in the light of the authority of the Supreme Court in Commissioner of Income-tax, Madras v. Mahalakshmi Textile Mills Limited[1967] 66 I.T.R. 710 (S.C.); A.I.R. 1968 S.C. 101.Indeed, the case did not figure at all in the discussion. In the Nadar case[1977] 39 S.T.C. 391; (1976) C.T.R. (Mad.) 536., however, the Supreme Court's observations were cited in argument. But the Bench was inclined to distinguish and isolate the authority of that decision as one of limited validity, appertaining, strictly, to the position of the Income-tax Appellate Tribunal. In this stage of the authorities, it is difficul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ally, if not word for word, the Income-tax Act and the Sales Tax Act contain identical provisions regarding appeals before the Appellate Assistant Commissioner and the Appellate Tribunal. It seems to me, therefore, an error to say that they are not in pari materia. In the Nadar case[1977] 39 S.T.C. 391; [1976] C.T.R. (Mad.) 536., the Supreme Court's decision was almost regarded as a decision turning on the particular facts of the case, raising the limited question as to what was the subject-matter of the appeal before the Tribunal. One part of the Supreme Court's reasoning, no doubt, lends credence to this view, for, they observed: "Whether the allowance was admissible under one head or the other of sub-section (2) of section 10, the subject-matter for the appeal remained the same." Having regard to the nature of the controversy in that case, this passage might even be regarded as furnishing the ratio decidendi in that case. But the binding nature of the law laid down by the Supreme Court is not limited to the actual decision in any given case, but applies to the court's dicta as well, and even to their obiter. Earlier in this judgment I had quoted another passage from the decis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e power to do so. But if the law were that, the result could hardly be helped, although it would be monstrous, in any case, to let the State retain a tax which it had no right to levy in the first place. But my construction of section 36 mercifully avoids the contradictions of such a situation. I like to imagine that it provides another excellent reason for its acceptance in addition to those that I have earlier elaborated. For the reasons stated above, I dismiss this tax case, but, in the circumstances, without costs. T.C. No. 37 of 1972.-In disposing of this tax case, my learned brother has adopted his judgment in T.C. No. 118 of 1971, and on that basis, he has allowed this case in the petitioner's favour. With respect, I do not agree with this conclusion, having regard to considerations which had persuaded me to take a different view in T.C. No. 118 of 1971. I would accordingly dismiss this tax case, and affirm the decision of the Tribunal, but I do so without costs. Order of Reference The order of the Court was pronounced by SETHURAMAN, J.-As we have differed in our conclusion regarding the assessability of the sum of Rs. 5,32,910.05, we formulate the following q....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... levy of penalty of Rs. 1,326. It appears that State of Madras v. T. Narayanaswami Naidu(1) decided by the Supreme Court in or about April, 1967 was not made available to the Appellate Assistant Commissioner, who decided the appeal at or about that time. No doubt, it is true and in fact, it is conceded before me that as per the ratio in State of Madras v. T. Narayanaswami Naidu(1), the assessee would not be liable to tax on the turnover of the closing stock of cotton which was included in the assessable turnover by the assessing officer. The Appellate Assistant Commissioner, who was called upon to consider the propriety of the addition of Rs. 50,000 in respect of the suppression of sales of cotton-seeds and also on the levy of penalty, dismissed the appeal on 27th June, 1967. A further appeal was preferred to the Sales Tax Appellate Tribunal on 25th August, 1967. Apparently, the decision in State of Madras v. T. Narayanaswami Naidu(1) was by then reported or came to the knowledge of the assessee. He, therefore, questioned the appellate authority's order on three grounds: (1) He disputed the addition of Rs. 50,000, (2) he questioned the levy of penalty of Rs. 1,326 and (3) he als....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this Court on a further revision case, T.C. No. 51 of 1966, the subject-matter was remanded for fresh disposal by the Tribunal on the question which arose before them. When the matter went back to the Tribunal, the assessee for the first time sought to raise an additional ground after securing an order from the Tribunal to excuse the delay in taking up such an objection and that additional ground taken up in C.T.M.P. No. 7 of 1971 filed on 30th January, 1971, before the Appellate Tribunal related to the inclusion of the turnover of Rs. 2,96,629.60 which in turn was referable to sales of miscellaneous goods like machinery, parts and waste-paper. The Appellate Tribunal on remand considered the additional ground which was raised for the first time before them relating to the sales of miscellaneous articles and deleted a sum of Rs. 2,11,374.08 from the taxable turnover. In relation to the main subjectmatter in the appeal, they reduced the rate of tax to 1 per cent on a turnover of Rs. 5,29,416.05 and upheld the rate of 7 per cent on Rs. 236.52. The department represented by the Deputy Commissioner, Madurai Division, has filed the present T.C. No. 37 of 1972 questioning the right of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e learned Government Pleader and which were decided by Division Benches of this Court are not apposite for consideration and according to V. Balasubrahmanyan, J., "the triune of Bench decisions of this Court relied on by the Government Pleader cannot be said to have foreclosed further discussion of the subject", and he would also say that it seemed to him with respect that the real function of a tax appeal has not been examined in the cases cited. I am unable to agree with V. Balasubrahmanyan, J. As Lord Eldon said: "It is better the law should be certain than that every judge should speculate upon improvements in it." As the principle of stare decisis is based on expediency and public policy and as above all a single judge is bound by a decision of a Division Bench and as expediency again compels Division Benches to follow the ratio of other Division Benches of the same court, I feel that the decision of V. Balasubrahmanyan, J., cannot be accepted by me on that ground alone. V. Sethuraman, J., on the other hand, did adhere to the salutary rule of stare decisis and disagreed with the Appellate Tribunal and allowed the tax cases. He relied on the decisions in Easu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... relief cannot be exercised." I agree with this dictum. Maintainability of an appeal is one thing and moulding the relief in an appeal in accordance with the supervening circumstances is another. I agree with Sethuraman, J., that as the disputed turnover was not objected to before the first appellate authority it cannot be agitated once over in an incompetent appeal before the Tribunal. Again Sethuraman, J., rightly distinguished the case in Commissioner of Income-tax v. Mahalakshmi Textile Mills Ltd.[1967] 66 I.T.R. 710 (S.C.); A.I.R. 1968 S.C. 101., which arose under the Indian Income-tax Act, 1922. The Supreme Court in that case while considering the scope of sub-section (4) of section 33 of the Indian Income-tax Act referred to its language which says that the Appellate Tribunal is competent to pass such orders on the appeal as it thinks fit. The Supreme Court was emphatic that all questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal and grant relief to him on another ground if it is justified. I am unable to agree that this decision would in any way help the assessee for the powers of the Sales Tax Appellate Tr....