TaxTMI 
TaxTMI 
2023 (3) TMI 5
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....ional and struck down by this Court and confirmed by the Apex Court on 20.04.2000. Under these circumstances, the assessment of the petitioner for the years 1998-99 to 2004-05 was passed exempting the petitioner from levy of sales tax. 2.1 Meanwhile, Entry No.25 was reintroduced vide Karnataka Act No. 3 of 2004 w.e.f. 29.01.2004 with retrospective effect. The said reintroduction of Entry No.25 was once again challenged before this Court and struck down vide judgment dated 19.08.2005 in the case of M/s. PRO Lab, Mangalore & others vs. State of Karnataka - 2005 (59) Kar.L.J.410. The State preferred Civil Appeal 1145/2006 before the Apex Court in which, an interim order dated 19.11.2007 was passed, whereby the revenue authorities were permitted to proceed with the assessment in terms of Entry No.25 but restrained from taking coercive steps against the respondents - assessees in the said appeals. In this context, it is relevant to state that the petitioner - assessee herein was not a party to the said proceedings. 2.2 By final judgment dated 30.01.2015 in the case of State of Karnataka vs. PRO Lab & others - (2015) 81 Kar.L.J. 377, the Apex Court allowed the appeals filed by the ....
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....missioner of CGST vs. M/s.Narbada Industries - CEA 10/2020 & Connected matters Dated 23.05.2022(J & K); (iv) Hungerford Investment Trust Ltd., vs. ITO - (1998) 231 ITR 175 (SC); (v) CIT Bihar & Others vs. Sardar Lakshmir Singh - AIR 1963 SC 1394 (FB); (vi) CIT, Patiala vs. Ambala Flour Mills - AIR 1972 SC 82 (SC); (vii) CIT, UP vs. Mohd. Shakoor Bashir - AIR 1973 SC 2359 (SC); (viii) Rajinder Nath vs. CIT - AIR 1979 SC 1933; (ix) M. CT.Muthuraman vs. ITO Madras - (1968) 69 ITR 432 (Mad.HC); (x) DCIT vs. Simplex Concrete Piles (India) Ltd., - (2013) 11 SCC 373; (xi) Gauri Shankar Choudhary vs. Addl.Commissioner of IT - (1998) 234 ITR 856 (Pat.); (xii) Krishak Bharati Co-operative Limited vs. State of Gujarat - C/SCA/3708/2012 dated 10.01.2023 (Gujarat HC); (xiii) Neelam Motors vs. DCST - W.P.No.14486/2021 & others dated 26.08.2021 (Orissa HC); (xiv) Sky Automobiles vs. DCCT - WP (C) No.2225 / 2017 dated 01.10.2021 (Orissa HC); (xv) K.M.Sharma vs. ITO - (2002) 254 ITR 772 (SC); (xvi) Speces Hotels Pvt. Ltd., vs. DCIT - (2003) 263 ITR 263; (xvii) National Agric....
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.... believe that the whole or any part of the turnover of a dealer in respect of any period has escaped assessment to tax or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable under this Act or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, notwithstanding the fact that the whole or part of such escaped turnover was already before the said authority at the time of the original assessment or reassessment but subject to the provisions of sub-section (2), at any time within a period of eight years from the expiry of the year to which the tax relates, proceed to assess or re-assess to the best of its judgment the tax payable by the dealer in respect of such turnover after issuing a notice to the dealer and after making such enquiry as it may consider necessary. (2) In computing the period of limitation for assessment of the escaped turnover under this section, the time during which an assessment has been deferred on account of any stay order granted by any Court or other authority in any case, or by reason of the fact that an appeal or other proceeding is pending before the ....
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....d "subsection" was in the Proviso but it was replaced by the expression "section", it is contended that this particular amendment will be otiose if it is confined to the assessment year under appeal, for it is said that under no circumstances the Income Tax Officer would have to initiate proceedings for the said year pursuant to an order made by an Appellate Assistant Commissioner. This contention is obviously untenable. The Appellate Assistant Commissioner or the Appellate Tribunal may set aside the notice itself for one reason or other and in that event the Income Tax Officer may have to initiate the proceedings once again in which case Section 34(1) will be attracted. The expression "finding or direction", the argument proceeds, is wide enough to take in at any rate a finding that is necessary to dispose of the appeal or direction which Appellate Assistant Commissioners have in practice been issuing in respect of assessments of the years other than those before them in appeal. What does the expression "finding" in the proviso to sub-section (3) of Section 34 of the Act mean? "Finding" has not been defined in the Income Tax Act. Order 20 Rule 5 of the Code of Civil proce....
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....n in the legal terminology. Indeed, learned counsel for the respondent himself will not go so far, for he concedes that the expression "finding" cannot be any incidental finding, but says that it must be a conclusion on a material question necessary for the disposal of the appeal, though it need not necessarily conclude the appeal. This concession does not materially differ from the definition we have given, but the difference lies in the application of that definition to the finding given in the present case. A "finding", therefore, can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. The expression "direction" cannot be construed in vacuum....
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....ivided family or the individual, as the case may be. In such cases though the latter are not eo nominee parties to the appeal, their assessments depend upon the assessments on the former. The said instances are only illustrative. It is not necessary to pursue the matter further. We would, therefore, hold that the expression "any person" in the setting in which it appears must be confined to a person intimately connected in the aforesaid sense with the assessments of the year under appeal. 11. We shall now briefly touch upon the conflict of decisions on the question. The Full Bench of the Allahabad High Court in Lakshman Prakash case overruled the decision of the Division Bench in Pt. Hazari Lal case . A Division Bench of the Madras High Court, consisting of Rajagopalan and Balakrishna Ayyar, JJ., in Simrathmull v. Additional Income Tax Officers, Ootacamund, took the same view as the Full Bench of the Allahabad High Court in Lakshman Prakash case . But a Division Bench of the Calcutta High Court, consisting of Bose, C.J., and Mookerjee, J., in Brindaban Chandra Basak v. Income Tax Officer though it had not finally expressed any opinion that, was inclined to accept the view ....
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....n or order" should be pertaining to the assessee. 4. Reliance is placed on the judgment given in the case of Hungerford Investment Trust Ltd. v. I.T.O., [1998] 231 ITR 175 (SC) where the provisoo to subsection 3 of section 34 of the Income-tax Act were interpreted by the apex Court. It was found that if the person is intimately connected with the assessee he would be covered by the phrase "assessee or any other person". The decision given in Income-tax Officer v. Murlidhar Bhagwan Das, [1964] 52 ITR 335 (SC), was accepted and applied. In Murlidhar's case, [1964] 52 ITR 335 (SC), the words "assessee or any other person" were interpreted to mean a person who would be liable to be assessed for a whole or part of the income under appeal or revision. 5. In the case of S. Zoraster & Company (Supplies) Pvt. Ltd. v. State of Rajasthan, [1995] 99 STC 281, the High Court of Rajasthan held that the extended time for reassessment to give effect to an order of competent court, would mean an order passed under the sales tax law and not under any other Act. 6. In S.C. Prashar v. Vasantsen Dwarkadas, [1963] 49 ITR 1 (SC), Godbole (P.V.), Income-tax Officer v....
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....ng or direction or order has been given in the case of any other person. It may be observed that the proceedings can be taken in consequence of or to give effect any finding, direction or order made under sections 20, 22, 22-A, 23, 24, etc. If a judgment or order has been given by the High Court or Supreme Court then also there is no problem. The word "any person" which has been used in the proviso though is similar to the provisions of the Income-tax Act, but may have a different concept in sales tax law. If a judgment, is given by the Supreme Court or by the High Court of that very State, the judgment being binding could be a ground for reopening the assessment or making the assessment of escaped turnover. But if the judgment itself has been given, in some other case unconnected with the assessee, then it cannot be interpreted with the word "any person" referred under the proviso to section 12-A(2) should even extend the limitation of eight years as prescribed under section 12-A(1). It is stated that the appeal against the order passed under section 25-A are pending. Under the proviso to section 12(B) (sic), the time limit prescribed under section 12(1) or 12(2) is not a....
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....ly within the time prescribed under section 12-A(1) and if it is in the case of the same assessee or person then, proviso to sub-section (2) of section 12-A thereof extends the time-limit for initiation of the assessment/reassessment of that assessee. The petitioners may file their objections to the respondent who may decide the same following the observations made above. 16. Petitions stand disposed of. 17.Petitions disposed of. (v) In Hungerford Investment Trust Ltd., case supra, the Apex Court held as under:- 15. The scope of this second proviso to Section 34(3) was examined by a Constitution Bench of this Court in the case of S.C. Prashar v. Vasantsen Dwarkadas [(1963) 49 ITR 1 : AIR 1963 SC 1356]. This Court, examining the second proviso to sub-section (3) of Section 34 which came into effect from 1-4-1952, said that it patently introduced an unequal treatment in respect of some out of the same class of persons. Those whose liability to pay tax was discovered by one method would be proceeded against at any time and no limitation would apply in their case and in the case of others the limitation laid down by sub-section (1) of Section 34 would appl....
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....sessment on the assessee in individual capacity on the basis of the original return filed by him. This was held to be barred by limitation. 18. In the subsequent case, however, of ITO v. Murlidhar Bhagwan Das [(1964) 52 ITR 335 : AIR 1965 SC 342] a Constitution Bench of this Court considered the ratio laid down in S.C. Prashar case [(1963) 49 ITR 1 : AIR 1963 SC 1356]. This Court observed (ITR p. 346) that the expression "any person" in the second proviso to Section 34(3) in its widest connotation may take in any person, whether connected or not with the assessee, whose income for any year has escaped assessment; but this construction cannot be accepted. For the said expression is necessarily circumscribed by the scope of the subject-matter of the appeal or revision, as the case may be. That is to say, that person must be one who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. "If so construed, we must turn to Section 31 to ascertain who is that person other than the appealing assessee who can be liable to be assessed for the income of the said assessment year. A combined read....
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....een filed by one Rangalal Jajodia who died before the assessment order was made. The assessment order showed the name of the assessee as the estate of late Shri Rangalal Jajodia by legal heirs and representatives (these being the son, the (second) wife and her children. No notice, however, was served on the wife. Therefore, in appeal, a necessary direction was given that notice should be given to her and after hearing her assessment should be made. Interpreting the second proviso to Section 34(3) this Court said that she was not a stranger to the assessment, she was not merely intimately connected with the assessment. She was in fact an assessee. Therefore, the second proviso to Section 34(3) would apply. 22. In the case of CIT v. Mohd. Shakoor Mohd. Bashir [(1973) 4 SCC 107 : 1973 SCC (Tax) 393 : (1973) 89 ITR 57] one Zahur Bux who was the sole owner of the business gifted his business to his two sons Mohd. Shakoor and Mohd. Bashir. Zahur Bux died thereafter. The two sons submitted their returns of income in respect of the business. The Income Tax Officer, however, rejected their returns and proceeded to assess all the heirs of Zahur Bux as an association of persons. In a....
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.... there were several exceptions. If the assessment had to be made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order of the Appellate Assistant Commissioner or of the Appellate Tribunal or of the Commissioner in revision or of an order made in a reference, the assessment could be made even after the expiry of the four years. The exception applied to an assessment made against the assessee or any person in consequence of, or to give effect to any finding or direction contained in the order of any superior tribunal, or the High Court or this Court. This Court in S.C. Prashar v. Vasantsen Dwarkadas [49 ITR 1] held that the second Proviso to Section 34(3) of the Income Tax Act, 1922, insofar as it authorised the assessment or reassessment of any person other than the assessee after the expiry of the period of limitation specified in Section 34 in consequence of or to give effect to a finding or direction given in an appeal, revision or reference arising out of the proceeding in relation to the assessee violated the provisions of Article 14 of the Constitution and was invalid to that extent. 12. In a later case Inc....
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....n do what the Income Tax Officer can do and can also direct the Income Tax Officer to do what he has failed to do. 14. Debi Parshad had submitted the returns, and Debi Parshad appealed against the order of assessment. He could, in the circumstances of the case, not be called a stranger to the assessment. The income earned by the assessee was assessed to tax as income of an association of persons, of which on the finding of the Income Tax Officer, Debi Parshad was a member. In making a direction against Debi Parshad the Tribunal did not exercise his powers qua a stranger to the assessment proceeding. Civil Appeal Nos. 1280-82 of 1966 must therefore fail. 15. The Appellate Assistant Commissioner had directed that the income in the three assessment years be assessed in the hands of the family of Debi Parshad, apparently on the view that Debi Parshad represented the Hindu Undivided family of which he was a member. The Tribunal set aside the direction to assess the income of the Ambala Flour Mills in the hands of Debi Parshad personally for in their view Debi Parshad was a stranger to the proceeding for assessment. The High Court held that the order of the Appellate As....
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....see being deemed as a person who shall be bound by any finding in such proceedings. It cannot be said that the uncle's action at the earlier stages did not have anything to do with the assessee or his rights. There is therefore sufficient nexus between the earlier proceedings in which the uncle of the assessee was representing the Hindu undivided family and the assessee himself. In those proceedings which of course ultimately went against the assessee certain findings were given. But the finding given is such that it was apposite in the circumstances then confronting the parties. As pointed out by the Supreme Court in Income-tax Officer v. Murlidhar Bhagwan Das [[1964] 52 I.T.R. 335, 345, 346 (S.C.).] ; "The expression 'direction' in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other Tribunals can issue under the powers conferred on him or them under the respective sections. Therefore, the expression 'finding' as well as the expression 'direction' can be given full meaning, namely, that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a directio....
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....e question whether the proviso should be struck down as unconstitutional as it is not supported by the well-known theory of reasonable classification. It is, however, to be remembered that in Prashar v. Vasantsen Dwarkadas [[1963] 49 I.T.R. (S.C.) 1.] the majority were mainly concerned in applying the principle and text of the proviso to any person, meaning thereby an utter stranger to the earlier appeal or revisional proceedings. In that context it was held that the provisions of the second proviso to section 34(3) in so far as they authorised the assessment or reassessment of any person other than the assessee beyond the period of limitation specified in section 34 in consequence of or to give effect to a finding or direction given in an appeal, revision or reference arising out of proceedings in relation to the assessee, violated the provisions of article 14 of the Constitution of India and were invalid to that extent. As already stated by us, the ratio in the series of cases reported in 49 I.T.R. concerned itself to the consideration of the question whether an utter stranger in the sense an assessee who had no connection whatsoever with the earlier appeal or revisional proceedi....
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....earned judges have only struck down that part of the proviso which enables a notice to issue 'to any person' on the ground that it is violative of article 14. The precise question which we have before us does not appear to have been the subject of decision in the case." 11. In fact, in this case, the classification which, according to the learned judges, is indeed a subclassification, envisaged in the proviso is rational and permissible. The learned judges also referred to the earlier decisions of that court in A. Thangal Kunju Musaliar v. M. Venkatachalam Potti [[1956] 29 I.T.R. 349 : [1955] 2 S.C.R. 1196.] and Balaji v. Income-tax Officer, Special Investigation Circle, Akola [[1961] 43 I.T.R. 393 (S.C.).] , and expressed positively their view that the proviso cannot in to to be struck down as offending article 14. Though, no doubt, this view was expressed by the minority in Income-tax Officer v. Murlidkar Bhagwan Das [[1964] 52 I.T.R. 335 (S.C.).] , yet it has a special signification in that the learned judges of the Supreme Court were indeed interpreting what was the purport and scope of the decision in Prashar v. Vasantsen Dwarkadas [[1963] 49 I.T.R. (S.C.) 1.] . ....
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....) 1.], Commissioner of Income-tax v. Sardar Lakhmir Singh [[1963] 49 I.T.R. (S.C.) 70.] and P.V. Godbole v. Jagannath Fakirchand [[1963] 49 I.T.R. (S.C.) 88.] : "In the three cases decided by the Supreme Court, which we just now referred to, it was held that the second proviso in so far as it affected 'any person', meaning a third party or a stranger to the appeal or revision or a person who is not the assessee and who is not the appellant or the revision-petitioner, offended article 14 and would, therefore, to that extent, be void......We would, therefore, hold that the expression 'any person' in the setting in which it appears must be confined to a person intimately connected in the aforesaid sense with the assessments of the year under appeal." 14. We are, therefore, of the opinion that, having regard to the decisions of this court and the view expressed by the Supreme Court itself in the later decisions, it cannot be said that the proviso has been struck down by the Supreme Court without any reservation or limitation whatsoever. On the other hand, the dicta referred to by us earlier and the interpretation placed upon the decisions in the series of cases report....