B.N. Mahapatra, J.
1. In this writ petition the petitioner challenges the assessment order dated February 19, 2007 passed by the Sales Tax Officer, Cuttack-1 East Circle (hereinafter referred to as 'the assessing officer') under Rule 12(8) of the Central Sales Tax (Orissa) Rules, 1957 (hereinafter referred to as 'the CST(O) Rules') for the assessment year 2001-02. By the impugned order, the assessing officer has enhanced the gross turnover and net taxable turnover of the petitioner by making addition to the inter-State sale. An extra demand of Rs. 2,99,05,07,587 which includes penalty of Rs. 1,79,43,04,552 has been raised in the said order.
2. The relevant facts which give rise to this writ petition are as follows.
3. The petitioner is a Government of India undertaking and a Government Company incorporated under the provisions of Section 617 of the Companies Act, 1956 having its registered office at G-9 Ali Yaver Jung Marg, Bandra (East), Mumbai-400 051 and Orissa State Office at 304, Bhoi Nagar, Bhubaneswar in the district of Khurda, Orissa. The petitioner-company is engaged in the business of refining and selling of petroleum products like motor spirt (petrol), High-speed Diesel (HSD), Light diesel Oil (LDO), Superior Kerosene Oil (SKO), furnace oil, bitumen, ATF and AV Gas, etc. The petitioner is a registered dealer under the Central Sales Tax Act, 1956 (hereinafter referred to as 'the CST Act') having registration certificate No. CUC-IE-38 within the jurisdiction of the assessing officer.
4. For the assessment year 2001-02, the petitioner in its original return disclosed its gross turnover and net turnover at Rs. 4,05,53,559 and Rs. 3,98,93,806, respectively, which were subsequently revised to Rs. 3,94,97,379 and Rs. 3,79,78,249, respectively, in its revised return. During the year, the petitioner also claimed stock transfer of HSD and SKO from Paradeep terminal to Haldia, Budge Budge and Port Blair. Before the assessing officer the dealer-assessee furnished declaration in form C for inter-State transaction to the tune of Rs. 3,65,45,455, but failed to produce declaration in form C for Rs. 24,48,351. The petitioner even though claimed to have transferred stock of goods to outside the State to the tune of Rs. 8,50,53,19,480, it failed to produce any evidence to that effect along with supporting declaration in form F for which the claim of branch transfers was disallowed. Accordingly, tax was levied at the appropriate rate on the turnover claimed to have been transferred to outside the State on stock-transfer basis. The assessing officer, vide his order dated March 31, 2005 passed under Rule 12(5) of the CST (O) Rules, has determined the gross turnover at Rs. 8,54,58,73,039 and net turnover at Rs. 8,54,43,13,286. On the said net turnover, the assessing officer levied tax to the tune of Rs. 13,85,98,769.94. Since the petitioner has paid tax amounting to Rs. 18,03,333 before furnishing return, the petitioner was asked to pay the balance amount of Rs. 1,66,06,06,474.
5. Against the said order, the petitioner filed first appeal which was dismissed by the Assistant Commissioner of Sales Tax, Cuttack-I Range, Cuttack by order dated February 15, 2006. Being aggrieved by the said order, the petitioner filed second appeal before the Tribunal under Section 23(3) of the Orissa Sales Tax Act read with Section 9(2) of the CST Act on April 26, 2006. The petitioner also filed a petition for stay before the Commissioner of Sales Tax, Orissa. The Commissioner granted full stay of the demand till disposal of second appeal on the basis of required 'F' forms furnished before him.
6. During pendency of the second appeal, a notice was issued by the assessing officer under Rule 10 of the CST (O) Rules initiating reassessment proceeding for the assessment year 2001-02 on the ground that there has been escapement of assessment/under-assessment. It was issued to the petitioner on December 30, 2006 along with a letter of the even date stating the reasons for reopening the assessment which are attached to writ petition as annexure 5 series. Thereupon on February 19, 2007 the assessing officer passed an ex parte order under Rule 12(8) of the CST (O) Rules for the said assessment year imposing tax and penalty. In the impugned order, the assessing officer has observed as follows:
From information obtained on transactions of the dealer-company, it is found that the dealer-company has received and dispatched petroleum product such as HSD and SKO as follows:
----------------------------------------------------------Product Received Qty. in KL Despatched in KL----------------------------------------------------------HSD 261565 228535----------------------------------------------------------SKO 356381 310550----------------------------------------------------------But on verification of the assessment record and returns filed under both OST and CST Act for the period under question revealed that the transactions under question have not been reflected in the return submitted and also at the time of assessment, but on the other hand the dealer-company has dispatched huge quantity of goods from Paradeep terminal showing the same as stock transfer. On verification of the returns filed for the year 2001-02 it is found that the dealer has furnished annual revised return as follows:
Inter-State sale - Rs. 3,93,47,379Stock transfer - Rs. 8,50,53,19,480Net turnover of inter-State Sale - Rs. 3,74,78,249Thus the transaction as disclosed in the annual revised return in respect of inter-State sale is for value of Rs. 3,93,47,379 and the amount of Rs. 8,50,53,19,480 shown as stock transfer from Paradeep to outside the State of Orissa. But on the other hand information received from the documents furnished by the dealer before the reporting official revealed that despatches of goods by IOCL through Paradeep port are mostly to other oil companies. The documents which have been obtained reflecting transaction are called ocean loss reports.
On verification of the documents which were obtained reflecting the transaction it is calculated that during the period 2001-02 the dealer-company has delivered goods to the other oil company such as 228535 KL of HSD and 310550 KL of SKO. Since the goods as stated above have been delivered ex-tanker at the port of destination at Haldia, Port Blair to HPCL, BPCL and IBP Co. and the consignees bear the loss in transit proportionately, it is obvious that the goods were shipped for the purpose of delivery to the above companies. The transactions are clearly inter-State sales falling under Section 3(a) of the CST Act. HSD and SKO consigned by the instant dealer from outside the State of Orissa as inter-State purchase have been unloaded and taken delivery at Paradeep port in the State of Orissa and subsequently the same goods have been dispatched to other companies located outside the State of Orissa at Haldia in the State of West Bengal, Port Blair in Andaman which proves break in journey and another inter-State journey is started from Paradeep Port which is a sale in course of inter-State trade and commerce coming under the purview of Section 3(a) of the CST Act.
On examination of the assessment record and documents obtained it is found that the transactions under question are neither reflected in the returns nor disclosed at the time of assessment. Thus, it is understood that the dealer is avoiding to give correct picture of the business transactions and some portion of turnover has been kept out from the returns filed and there is evasion of tax accordingly. Thus, it is concluded that the goods under question have been delivered to ex-tanker at the port of destination at Haldia and Port Blair to other oil companies such as HPCL, BPCL and IBP Co. as inter-State sale and liable for tax. Accordingly the dealer is liable to pay tax towards inter-State sale suppression of 228535 KL of HSD value of Rs. 4,11,36,30,000 and 310550 KL of SKO value of Rs. 2,48,44,00,000 along with penalty under Rule 12(8) of the CST (O) Rules.
Considering the facts as discussed, assessment is made enhancing the gross turnover by adding the value towards the goods which were dispatched from Paradeep and delivered to other oil companies at the port of destination as inter-State sales.
7. Mr. Sanjit Mohanty, learned Senior Counsel, appearing for the petitioner raised preliminary question regarding jurisdiction of assessing officer in reopening the assessment for the year 2001-02 by issuing notice under Rule 12(8) read with Rule 10 of the CST (O) Rules. He submitted that the assessing officer lacks jurisdiction in issuing the notice of reassessment and in passing the reassessment order on the basis of such notice for the year 2001-02.
8. He submitted that Paradeep Port is a lighterage point for berthing of high-capacity vessels from other countries which bring SKO and HSD as well as indigenous products from refineries situated near the coastal ports in the western section and also in the eastern section like Vizag and Chennai for subsequent loading/despatches in smaller vessels to Haldia Port. Big ocean tankers which bring the goods from outside the State of Orissa cannot be sent to Haldia Port in view of low draft condition prevailing at Haldia Port. Hence, the entire load of SKO and HSD is unloaded at Paradeep terminal of Indian Oil Corporation Ltd., and all such companies like Hindustan Petroleum Corporation have their own termination for storage and loading and unloading facilities of oil at Paradeep shore terminal. Out of the said stock, certain quantity of SKO and HSD are used for local sale inside the State of Orissa on which sales tax is paid. Some portion of the SKO and HSD is sold to other oil companies in Orissa.
9. The learned Counsel appearing for the petitioner further submitted that the petitioner claimed exemption from payment of tax on the ground that inter-State transfer of goods was not by reason of sale, but by way of stock transfer. This claim of the petitioner was prima facie accepted by the Commissioner of Sales Tax while granting full stay in exercise of powers conferred under Section 23 of the OST Act, on the basis of required 'F' forms being furnished before him, pending disposal of the second appeal. He further submitted that in view of acceptance of form F and the fact that the matter is now pending adjudication before the Tribunal on the question whether it is an inter-State sale liable for tax or a branch transfer, notice under Rule 12(8) of the CST (O) Rules as well as order of reassessment is without jurisdiction.
10. The learned Counsel further submitted that proceeding under Rule 10 read with Rule 12(8) of the CST (O) Rules cannot be initiated for the assessment year 2001-02 for which the second appeal is pending before the Tribunal. According to him, assessment proceeding was deemed to be continuing while second appeal against assessment order as well as against first appellate order was pending before the Sales Tax Tribunal for adjudication. Appeal is a continuation of the assessment proceeding. Hence, assessment has not yet attained finality and as a result, the net turnover has not yet been determined. Therefore, initiation of proceeding by issuing notice under Rule 12(8) read with Rule 10 of the CST (O) Rules for reopening assessment for the year 2001-02 on the ground that turnover has escaped and/or has been under-assessed and passing of ex parte order of reassessment under Rule 12(8) of the CST (O) Rules, is without jurisdiction. His further contention is that since assessment proceeding is deemed to be continuing till disposal of the second appeal and the appellate authority has the power of enhancement, the interest of the Revenue is safeguarded. In the event of any escapement of turnover from the original assessment order the same can be taken care of by the appellate authorities for the purpose of enhancement. In that view of the matter, initiation of reassessment proceeding under Rule 12(8) of the CST (O) Rules during pendency of the second appeal is without jurisdiction.
11. In support of his contention he relied on the following judicial pronouncements:
(a) Tel Utpadak Kendra v. Deputy Commissioner of Sales Tax : 1983(13)ELT1651(SC) .
(b) State of Tamil Nadu v. Arulmurugan and Company .
12. He also relied on the decision of the honourable Supreme court in the case of Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax reported in : [1964]51ITR557(SC) and in the case of Jay-anarayan Kedarnath v. Sales Tax Officer reported in [1988] 68 STC 25 (Ori) : 64 [1987] CLT 705 (Ori) in support of his contention that a turnover cannot be said to escape assessment if proceeding in respect of assessment is pending and no final order of assessment was made therein. He further contended that reassessment is nothing but a fresh assessment of turnover which is comprehensive and results in nullifying the results of the earlier assessment order. In support of this contention, he relied on the following judicial pronouncements:
(a) Deputy Commissioner of Commercial Taxes v. H. R. Sri Ramulu : [1977]2SCR593 .
(b) Hind Wire Industries Ltd. v. Commissioner of Income-tax : [1995]212ITR639(SC) .
(c) Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali, H.M. Abdulali : [1973]90ITR271(SC) .
13. He also cited the decision of the honourable apex court in the case of Sales Tax Officer v. Uttareswari Rice Mills reported in : [1973]89ITR6(SC) for the purpose of construction of the provision.
14. Per contra, learned Counsel for the Revenue submitted that the scheme of the Act in respect of the first appellate order is that only the assessee has a right to make an appeal and not the department. He seriously challenged the contention of the petitioner that the first appellate authority has the power to enhance or reduce the assessment under appeal or that the Revenue has an opportunity to enhance the assessment for the reasons for which assessment has been reopened. According to him, if the contention of the petitioner is accepted it will amount to giving the department a right to appeal against the order of assessment in question which is not contemplated in the scheme of the Act. In support of his contention, the learned Counsel relied on the decision of the honourable Supreme Court in the case of Commissioner of Income-tax v. Amritlal Bhogilal and Co. reported in : [1958]34ITR130(SC) .
15. In the above backdrop, questions which fall for consideration by this Court are as follows:
(i) Whether proceeding under Rule 12(8) of the CST (O) Rules can be initiated on the basis of any new materials which was not the subject-matter before the assessing officer at the time of original assessment?
(ii) Whether, on the facts and circumstances of the case, proceeding under Rule 12(8) read with Rule 10 of the CST (O) Rules can be initiated for the assessment year 2001-02 which was earlier completed and second appeal arising out of such assessment order is pending before the Tribunal?
(iii) Whether appellate authorities exercising their power to enhance the assessment while disposing of the appeal arising out of an assessment order can take into consideration any fresh or new material which was not before the assessing officer and subsequently comes to light only after completion of the assessment order ?
16. To deal with the above questions, it is necessary to appreciate what is contemplated in Rule 12(8) of the CST (O) Rules and the reason on the basis of which the assessing officer initiated reassessment proceeding and reopened the completed assessment. Rule 12(8) of the CST (O) Rules is reproduced below:
(8) If for any reason the turnover of a dealer for any period has escaped assessment or has been under-assessed, the Commissioner may, at any time within five years from the expiry of the year to which the period of assessment relates, call for a return after complying with the provisions of Rule 10, assess the amount of tax due from the dealer and may also direct, in cases where such escapement or underassessment is due to the dealer having concealed particulars of his turnover or having without sufficient cause furnished incorrect particulars thereof, that the dealer shall pay, by way of penalty, in addition to the tax assessed under this sub-rule, a sum not exceeding one-and-a-half times of the said tax so assessed:Provided that the period of limitation fixed in Sub-rule (7) shall not apply to assessments under this sub-rule or to enhancement of assessment or order of fresh assessment made or passed in appeal or revision.
17. Thus, Rule 12(8) of the CST (O) Rules contemplates that there must exist reason for belief that the turnover of a dealer for any period to which the Act applies has escaped assessment or has been under-assessed. When such a reason exists, the sales tax authority may at any time within five years from the expiry of the year to which the said period relates call for a return after complying with the provisions of Rule 10 and proceed to assess the amount of tax due from the dealer. The sales tax authority may also direct in cases where escapement or under-assessment is due to the dealer having concealed particulars of his turnover or having without sufficient cause furnished incorrect particulars thereof the dealer shall pay penalty in addition to the tax assessed. Such penalty shall not exceed to one-and-a-half times the amount of the tax so assessed.
18. The petitioner has been informed of the reason for reopening of assessment for the year 2001-02 under the CST Act by the assessing officer in his letter dated December 30, 2006. The said letter is set out hereinbelow:
Office of the Commercial Tax Officer : Cuttack I East Circle,
Cuttack
No. 5259/CT dated December 30, 2006
To
M/s. Indian Oil Corporation Limited
Sikharpur, Cuttack bearing TIN-21181202651
Orissa State Office, 304, Bhoi Nagar, Unit-IX
Bhubaneswar-751 022
Sub : Reasons for reopening of assessment for the year 2001-02 under the CST Act.
A notice under Rule 10 of the CST (O) Rules, 1957 for the year 2001-02 is enclosed. Reasons for re-opening the assessment are as stated below:
(a) It has come to the notice that you have brought in 261565 KL of HSD and 356381 KL of SKO during the year 2001-02 to the lighterage terminal at Paradeep. During the same period you have dispatched 228535 KL of HSD and 310550 KL of SKO to outside the State of Orissa.
(b) Information received further shows that during the year, you have sold goods in course of inter-State trade or commerce from Paradeep Lighterage Terminal to other oil companies.
(c) The returns for the year 2001-02 under the CST Act do not appear to reflect these transactions of lighterage terminal. The same were also not disclosed during the assessment completed for the year.
The aforesaid position indicates that there is escapement of assessment during the year. Besides the books of account and documents on which you may rely in support of the contentions, you are required to produce the 'tanker-wise ocean loss report', bill of lading and 'proration report' in respect of all receipts/dispatches made at/from the Lighterage terminal at Paradeep including complete accounts of receipt and disposal of goods received at the terminal and all the documents and records relating thereto.
Sd/-
Sales Tax Officer,
Cuttack I East Circle, Cuttack.
19. The above letter shows that return for the year 2001-02 filed under the CST Act does not appear to reflect the transactions of inter-State sale effected by the petitioner from Paradeep terminal to other oil companies. It is further alleged that the same were also not disclosed during the assessment earlier completed for that year. For the above reasons, the assessing officer came to the conclusion that turnover relating to some inter-State sales escaped assessment from the original assessment for which action under Rule 12(8) of the CST (O) Rules was taken and notice under Rule 10 of the said Rules was issued for the year 2001-02.
20. In the present case, reassessment proceeding has been initiated under Rule 12(8) of the CST (O) Rules. The provisions contained in Rule 12(8) of the CST (O) Rules and Section 12(8) of the OST Act are substantially similar. Law is well-settled that the assessing officer must have to record prima facie reasons in some form before initiation of proceeding under Section 12(8) of the OST Act. He must at least indicate the basis for such prima facie satisfaction that there has been escapement of assessment or under-assessment. In absence of such a recording of satisfaction, the initiation of proceeding under Section 12(8) is not sustainable in the eye of law. [See Suburban Industries Kalinga Private Limited v. Sales Tax Officer, Bhubaneswar [1993] 90 STC 280 (Ori), State of Orissa v. Ugratara Bhojanalaya [1993] 91 STC 76 (Ori), Indure Limited v. Commissioner of Sales Tax [2006] 148 STC 61 (Ori) and D. Ch. Guruvalu Son & Co. v. Sales Tax Officer, Koraput-II Circle, Dist: Rayagada reported in [2008] 14 VST 509 (Ori) : [2008] 1 OLR 18 (Ori)].
21. The letter of the assessing officer (annexure 5 series) as quoted above clearly reveals that the assessing officer has indicated reason for reopening of the assessment and the same has been communicated to the assessee.
22. The provisions of Rule 12(8) of the CST (O) Rules contemplate that action in this rule shall be initiated within five years from the relevant year in which escapement is alleged. In the present case, the original assessment was completed on March 31, 2005 vide annexure 3 without taking into consideration the allegation on the basis of which the reassessment proceeding has been initiated as the said allegation subsequently came to light after completion of original assessment. The basis of reassessment is indicated in annexure 5 and also contained in the reassessment order. Petitioner's return was not scrutinised taking into consideration the said allegation while the original assessment order was passed. Thus, the subject-matter of the said allegation was neither before the learned first appellate authority nor before the learned Sales Tax Tribunal. The subject-matter involved in original assessment order dated Mach 31, 2005 which was before the learned Tribunal is not the same subject for which reassessment proceeding was initiated and reassessment completed. Thus, the condition precedent to initiate proceeding under Rule 12(8) of the CST (O) Rules was satisfied in the present case.
23. We are of the considered view that proceeding under Rule 12(8) of the CST (O) Rules can be initiated on the basis of any new materials which was not the subject-matter before the assessing officer at the time of original assessment.
24. The second question which now falls for consideration by this Court is whether the assessing officer is justified to reopen the assessment for the year 2001-02 which was earlier completed and second appeal arising out of such assessment order is pending before the learned Tribunal. According to the learned Counsel for the petitioner, the appeal filed before the Tribunal is a continuous process of assessment. Before disposal of the second appeal by the Tribunal no proceeding under Rule 12(8) of the CST (O) Rules can be initiated for that year. In support of his contention, he relied on the judgment of the honourable Supreme Court in the case of Tel Utpadak Kendra [1981] 48 STC 248. In that case the honourable apex court held that when the appellate jurisdiction of superior authority is invoked against an order and that authority is seized of the case it is not permissible for a subordinate authority to claim to exercise its jurisdiction to revise that very order. It is further held by the honourable apex court that when an appellate authority is considering a second appeal against the first appellate order it is examining an order which can be broadly described as an order of assessment. It is a final order disposing of an appeal which in a sense is a continuation of assessment. This order has been rendered by the honourable Supreme Court considering the provisions of the Bombay Sales Tax Act, 1959 which constitutes the Tribunal as an appellate as well as revisional authority over the Commissioner. The honourable apex court held that the Tribunal is the supreme appellate authority as well as the revisional authority under that Act. It cannot be divested of its jurisdiction to decide the correctness of an order. It cannot be frustrated in the exercise of that jurisdiction merely because of subordinate authority, the Commissioner has also been vested with jurisdiction over that order. There is no dispute over the proposition of law laid down in that judgment. In that case, their Lordships held that when jurisdiction of superior authority is invoked against an order and when that authority is seized of the case it is not permissible for the subordinate authority to claim exercise of jurisdiction to revise that very order. In the present case, the assessing officer is not revising the original assessment order. What he is doing is that he is passing a separate order assessing the turnover which has escaped assessment from the original assessment order. It is completely a new subject-matter and Tribunal is not seized of that matter since that subject was not touched in the original assessment order.
25. The other case relied on by learned Counsel appearing for the petitioner is Ghanshyamdas : [1964]51ITR557(SC) . In that decision, the honourable apex court held that a turnover cannot be said to escape assessment if proceedings in respect of the first assessment were pending and no final order of assessment was made therein. A proceeding is said to be pending as soon as it is commenced and until it is concluded before the final order of assessment, it could not be said that the entire turnover or part thereof of a dealer had escaped assessment.
26. Similarly, in Jayanarayan's case [1988] 68 STC 25 ; [1987] 64 CLT 705, the honourable Full Bench of this Court while considering Section 12(8) held that keeping the assessment proceeding incomplete the assessing officer had no jurisdiction to take recourse to power conferred upon him under Section 12(8) of the OST Act. In the said case, this Court held that the scheme of the provisions of Section 12(8) applies to case where the turnover of a dealer for any period has escaped assessment or has been underassessed. It is obvious from the language and scope of Section 12(8) that it is a special provision dealing with assessment of escaped tax even though the escapement may be the result of a mistake committed by the assessing officer himself. According to the said judgment at the first instance regular assessment has to be completed within the prescribed period of three years and thereafter proceedings under Section 12(8) could have been initiated within the period of limitation. There is no dispute regarding the proposition of the law that escapement of assessment cannot be predicted unless the original assessment is completed. Original assessment does not include order of appellate authorities. It is only the original assessment order passed by the assessing officer. Thus, the above two cases do not lend any support to the case of the petitioner. On the other hand, those cases support the case of the Revenue.
27. Further, if the above contention of the petitioner is accepted a hazardous situation would arise where an appeal relating to a particular assessment year would be disposed of after five years from the end of the financial year in which the escapement or under-escapement is alleged. This is because the limitation of five years for initiating proceedings under Rule 12(8) of the CST (O) Rules runs from the end of the relevant year in which escapement or under-assessment is alleged. In that event, no proceeding under Rule 12(8) of the said Rules can be initiated even in a case where there is escapement of assessment or under-assessment. This is certainly not the intention of the Legislature.
28. The honourable apex court in the case of Sales Tax Officer v. Uttareswari Rice Mills : [1973]89ITR6(SC) while analysing the provisions of Section 12(8) of the OST Act held that approach in this matter has to be practical and not pedantic. Any view which would make the opening words of Section 12(8) unworkable has to be avoided. In the said judgment, the observations of the judicial committee which dealt with the language of Section 34 of the Indian Income-tax Act, 1922 have been quoted. Section 34 of the Income-tax Act, 1922 is similar to Section 12(8) of the OST Act. According to the judicial committee in interpreting provisions of this kind, the rule is that that construction would be preferred which makes the machinery workable. In that case, the honourable apex court upheld the action of the assessing officer in initiating reassessment proceeding under Section 12(8) of the OST Act after completion of the original assessment. Thus, this decision of the honourable apex court even though cited by the learned Counsel for the petitioner it helps the case of the Revenue.
29. We are, therefore, of the considered view that for a particular year proceedings under Rule 12(8) of the CST (O) Rules can be initiated on the basis of the subject-matter which was not before the assessing officer at the time of original assessment in respect of which any appeal is pending either before the first appellate authority or second appellate authority. In the present case, as stated above, since the assessing officer has issued notice under Rule 12(8) of the CST (O) Rules on the basis of some new/fresh material alleging escapement of turnover relating to inter-State sale from the original assessment he was fully justified to take action under the said rule and issue notice under Rule 10 of the CST (O) Rules and to complete the reassessment on the basis of such notice.
30. The third question which falls for consideration by this Court is whether appellate authorities at the time of disposing of the appeal arising out of an assessment order, in exercise of their power of enhancement of assessment can take into consideration any fresh or new material which was not before the assessing officer, but it comes to light only after completion of the assessment order? The learned senior counsel appearing on behalf of the petitioner submits that since the appellate authority has the power to enhance the assessment, any material which comes to the light after completion of the original assessment by the assessing officer, can be utilised by the appellate authorities for the purpose of enhancement of the assessment. This is a fallacious proposition. So far as the first appeal is concerned, there is no provision in the statute empowering the assessing officer to file an appeal before the first appellate authority. There is also no provision under the Statute to make the assessing officer a party in the first appeal filed by any assessee. There is no provision under the sales tax statute enabling the assessing officer to bring any new/fresh adverse material to the notice of appellate authority which comes to his possession after completion of original assessment order. Under the statute, the appellate authorities are also not vested with any power/authority to accept and consider any such new/fresh adverse material while disposing of appeal for the purpose of enhancement. Thus, there is no scope for the assessing officer to bring any new/fresh material which subsequently comes to his possession relating to escaped turnover or the fact of under-assessment to the notice of the first and second appellate authorities for their consideration while disposing of the appeal.
31. It will also amount to judicial impropriety on the part of an appellate authority to consider any material which is not the subject-matter before the assessing officer. Both the first and the second appellate authorities are empowered to decide in appeal the issues adjudicated in the assessment order. They cannot decide any issue which was not considered by the assessing officer in the assessment order. Thus, the subject-matter on the basis of which reassessment proceeding is initiated being not before the assessing officer cannot be considered by the appellate authorities for the purpose of enhancement.
32. In the case of State of Tamil Nadu v. Arulmurugan and Company [1982] 51 STC 381 [FB], the Madras High Court held that an appeal is continuation of the process of assessment. It can enhance the assessment taking advantage of the opportunity afforded by the tax-payers' appeals even though the appeal itself has been mooted only with a view to reduction in the assessment. While deciding an appeal, the first appellate authority as well as the second appellate authority, exercises their power to enhance the assessment only on the subject-matter dealt with by the assessing officer. They cannot enhance the assessment on the basis of a new material which was not before the assessing authority while passing the original assessment order. Therefore, this decision of the Madras High Court is of no help to the petitioner.
33. We are therefore of the considered view that the appellate authorities while disposing of the appeal arising out an assessment order cannot take into consideration any fresh or new material which was not before the assessing officer but subsequently comes to light after completion of the assessment for the purpose of enhancement of the assessment.
34. The further contention of the learned Counsel for the petitioner is that reassessment is nothing but a fresh assessment of turnover which is comprehensive and it results in nullifying the earlier assessment order. In support of his contention, he cited the decision of the honourable apex court in the case of Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu : [1977]2SCR593 . The question that arose for consideration before the honourable apex court was about the starting point for computing the period of four years for the purpose of limitation in the event of an order having been made under Section 12A of the Act. Whether it was the initial assessment order or the order made under Section 12A? In this context, the honourable apex court held that the period of four years should be calculated from the date on which the order under Section 12A of the Act was made. While coming to this conclusion, their Lordships found that in that case the assessment orders made under Section 12A were comprehensive orders and were not confined merely to the matters which had escaped assessment earlier. In the present case, by exercising power under Section 12(8) of the CST (O) Rules, the assessing officer has confined assessment to the matters which had escaped assessment earlier as evident from the concluding part of the impugned order. In that view of the matter, this case is not applicable to the present case.
35. In the case of Hind Wire Industries Ltd. : [1995]212ITR639(SC) the question before the honourable Supreme Court was with regard to the period of limitation prescribed under Section 154(7) of the Income-tax Act, 1961. While considering the provisions of said section, the honourable apex court held that Section 154(7) of the Income-tax Act prescribes limitation of four years for exercising power of rectification of mistake and such period has to be computed from the date of the order sought to be amended. In that case the honourable apex court held that the word 'order' in the aforesaid expression 'from the date of order sought to be amended', has not been qualified in any way and it does not necessarily mean the original order. It can be any order including the amended or rectified order. Hence, when the I.T.O. has not taken into consideration the shift allowance available to the assessee and hence the assessment order was rectified and thereafter the assessee again applied for rectification of the rectified order claiming depreciation allowance at higher rate than it was allowed to him, the assessee's claim cannot be disallowed on the ground that the second application for rectification was filed after four years from the date of original assessment order. The period of four years shall be counted from the date of the fresh assessment order passed on first application of rectification sought by the assessee. Thus, the facts of that case were completely different from the facts of the case at hand and it is of no help to the petitioner.
36. In the case of Commissioner of Sales Tax v. H.M. Esufali, H.M. Abdulali : [1973]90ITR271(SC) the question before the honourable apex court was whether there is reasonable nexus between the basis adopted by the assessing authority and the estimate of escaped turnover made by him. The honourable apex court held that there was such nexus. Further, a question came up for consideration as to whether in a reassessment under Section 19(1) of the Act the Sales Tax Officer was not competent to make best judgment assessment as no such power was conferred on him under the said section. In that case, on the basis of suppression of sale for continuous 19 days, i.e., September 1, 1960 to September 19, 1960, the assessing officer held that throughout the year the dealer was indulged in clandestine business activities and has estimated the turnover on best judgment for the whole year while completing reassessment. The said reassessment was held valid by the honourable apex court. In that context, the honourable Supreme Court held that what is found to be true in the assessment also must be held to be true in reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under Section 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer the assessing officer does not merely assess him on the escaped turnover but he makes the assessment on the total estimated turnover. In the present case, while making reassessment under Rule 12(8) of the CST(O) Rules, the assessing officer has not assessed the petitioner on his total estimated turnover. He has only assessed the escaped turnover and did not assess the turnover once again which he had already assessed in the original assessment order as evident form the concluding part of the impugned assessment order. Hence, this case is also of no help to the petitioner.
37. Apart from that, none of the issues involved in this case was considered by the honourable apex court in the above three cases.
38. In the present case, the stand of the Revenue is that subsequent to the completion of the original assessment, it came to the notice of the assessing officer that there were some inter-State transactions effected by the petitioner-company during the period 2001-02. But on verification of the assessment record, prima facie the assessing officer found that the same has not been disclosed in the return and also at the time of assessment. Hence, he came to the conclusion that there was reason to believe that the dealer had been under-assessed due to default in disclosing the true and correct picture of business transactions during the year in question. Petitioner's case is that the alleged transactions were already disclosed by the petitioner-company as its branch transfer. These are purely disputed questions of facts. Such factual disputed questions cannot be adjudicated by this Court in exercise of its writ jurisdiction. The writ petition is therefore not maintainable.
39. In the present case, the challenge is not only to the notice issued under Rule 12(8) of the CST (O) Rules but also to the order of assessment made on the said notice. Since the assessment had already been made, challenge to the legality of the notice is really without any relevance. Further, the order of assessment can be assailed in the statutory appeal provided. After completion of the assessment, challenge to the legality of the notice does not survive consideration because the question whether the notice had any legal foundation could have been decided in appeal against assessment. Nevertheless, as the petitioner has requested to adjudicate that aspect, therefore, we have done it, though in the normal course that could have been the subject-matter of appeal against the order of assessment. Since the preliminary issue has been decided in the manner aforesaid, nothing survives for adjudication in the writ petition, which is accordingly dismissed. However, it is open to the petitioner to prefer statutory appeal against the assessment order along with petition for condonation of delay. If such an appeal is filed, the appellate authority shall consider the question of delay taking into consideration that the writ petition was pending in this Court since March 20, 2007. No cost.
A.K. Ganguly, C.J.
40. I agree.