1. M/s. Siliguri Battery Company, the petitioner herein, was a registered dealer under the Bengal Finance (Sales Tax) Act, 1941 at the material point of time. The petitioner-company filed returns for the year 1993-94 (April 1993 to March 1994) in time. Return for the last quarter was filed on April 12, 1994. Before initiation of any assessment proceeding the petitioner filed a revised return on May 10, 1994 disclosing certain sales not included in the original returns and paid sales tax on the basis of the revised return. Subsequently assessment proceeding for the aforementioned year 1993-94 was initiated on December 7, 1994 and an assessment order was passed on April 10, 1995. The assessing authority, being the Commercial Tax Officer, Siliguri Charge (in short, "the CTO") accepted returns filed by the petitioner and found that the petitioner paid Rs. 3,841.45 in excess of the payable sales tax. Demand notice in form VII along with copy of the aforesaid assessment order was sent and served on the petitioner.
2. About three years after such assessment order the petitioner received Memo. No. 139 dated January 22, 1998 from the Assistant Commissioner of Commercial Taxes, Siliguri Charge (in short, "Asstt.
Commissioner") asking the petitioner to appear before him on February 16, 1998 with relevant payers and documents in connection with a purported revision case being RC No. SG/895 and SMR-0.1/97-98. It was recited in the said notice that on scrutiny of records some discrepancies were detected in respect of concealment of sales and consequent evasion of tax together with interest. The said memo did not mention or specify the provision under which such notice of purported revision case was issued.
3. The petitioner submitted a written objection on March 16, 1998. By order dated September 15, 2000 the Asstt. Commissioner recorded at one place that "it is hereby ordered that the assessment order stands reopened with a direction to the concerned CTO" and thereafter directed the CTO to take action under Section 20A and to issue a notice to the petitioner giving 20 days' time to answer. Simultaneously the Asstt.
Commissioner himself issued a notice in form VIIE on September 19, 2000 along with a copy of his order dated September 15, 2000.
4. On the strength of the order of the Asstt. Commissioner the CTO, Siliguri Charge, issued a notice dated July 26, 2001 in form VIIE for showing cause why the penalty as proposed therein should not be imposed under Section 20A of the 1941 Act. The CTO thereafter imposed a penalty of Rs. 3,05,025 under Section 20A of the 1941 Act and sent a notice in form VIIF demanding payment of the penalty amount. On receipt of the notice the petitioner by its letter dated March 21, 2002 requested the CTO to supply a copy of his order by which penalty was finally determined and imposed. A copy of the aforesaid penalty order was ultimately received by the petitioner on January 22, 2004. Upon receipt of the said penalty order the petitioner preferred appeal under Section 20(3) of the 1941 Act. While such appeal was pending, a certificate proceeding for realisation of the penalty amount was initiated. On January 28, 2004 the petitioner received the ultimate notice from the Certificate Officer, Siliguri, asking the petitioner to pay the penalty amount on February 6, 2004. The petitioner requested the Certificate Officer to withhold the certificate proceeding till disposal of the petitioner's appeal. As the Certificate Officer did not respond, the petitioner has preferred this application before this Tribunal challenging imposition of penalty under Section 20A of the 1941 Act and consequential certificate proceeding for realisation of the penalty amount.
5. Appearing on behalf of the petitioner Mr. Bose, learned Advocate has submitted that a proceeding under Section 20A of the 1941 Act could not be initiated after assessment proceeding was disposed of. According to him, such a penalty proceeding was to be initiated during pendency of the assessment proceeding. He has referred to Section 20A of the 1941 Act and Rule 55 of the Rules-framed under the 1941 Act (hereinafter referred to as, "the 1941 Rules"). Mr. Bose has placed strong reliance upon a decision of the Calcutta High Court in Bharat Traders v.Commercial Tax Officer, Siliguri Charge reported in [1977] 39 STC 206, and some decisions of this Tribunal in this regard.
We have carefully read and analysed the provisions of Section 20A of the 1941 Act and do not find anything therein wherefrom it can be contended that a proceeding under that section could be initiated only during pendency of an assessment proceeding.
6. Section 20A of the 1941 Act and the relevant rule being Rule 55C of the 1941 Rules are quoted below: 20A. Penalty for concealment of sales, furnishing of incorrect particulars, etc.--(1) If the Commissioner in the course of any proceedings under this Act, is satisfied that any dealer-- (b) has furnished incorrect statement of his turnover or incorrect particulars of his sales in the returns submitted under Sub-section (2) of Section 10 or otherwise, with intent to reduce the amount of the tax payable by him under this Act, the Commissioner may, after giving such dealer a reasonable opportunity of being heard, by an order in writing direct that he shall, in addition to any tax or penalty already levied and payable by him under this Act, pay by way of penalty a sum not less than one and a half times but not exceeding thrice the amount of the tax, if any, which would have been avoided by him if such concealed sales or particulars thereof were not taken into account, or such incorrect statement of turnover or particulars of sales were accepted as correct, in assessing the tax payable by him under this Act.
(2) Any penalty imposed under Sub-section (1) shall be paid by the dealer into a Government Treasury or the Reserve Bank of India by such date as may be specified by the Commissioner in a notice issued for this purpose and the date to be so specified shall not be less than fifteen days from the date of service of such notice: Provided that the Commissioner may, for reasons to be recorded in writing extend the date of such payment or allow the dealer to pay the penalty imposed in such number of instalments as the Commissioner may determine.
(3) Any amount of penalty that remains unpaid after the date specified in the notice referred to in Sub-section (2) or, where such date has been extended under the proviso to that sub-section, after the expiry of the extended time, shall be recoverable as an arrear of land revenue payable to the Collector.
Explanation.--In this section 'Commissioner' includes an Additional Commissioner of Commercial Taxes appointed under Section 3A and a person appointed to assist the Commissioner under Sub-section (1) of Section 3." "Rule 55C.--(1) When it appears necessary to the Commissioner or Additional Commissioner of Commercial Taxes appointed under Section 3A or to any person appointed to assist the Commissioner under Sub-section (1) of Section 3 to impose penalty under Section 20A, he shall cause a notice in form VIIE to be served on the dealer on whom penalty is proposed to be imposed, requiring filing of written objections against such proposed imposition of penalty, and production of such books of account, registers and evidence as the dealer may like to produce to support his objection and the said authority shall ordinarily fix a date not less than twenty days after the date of issue of the notice for filing of objection and production of books of account, registers and evidence. The notice shall also contain a gist of the order proposed to be passed against such dealer.
(2) After hearing the objections, if any, preferred by such dealer in pursuance of the notice referred to in Sub-rule (1) and after considering the evidence produced in support thereof, the authority referred to in Sub-rule (1) shall determine the amount of penalty payable by such dealer and serve a notice in form VIIF upon such dealer specifying the date, not less than fifteen days after the date of service of such notice, by which the payment shall be made.
7. Section 20A of the 1941 Act postulated that the Commissioner was to be satisfied in course of any proceeding under the said Act that the dealer had concealed sales or particulars thereof or had furnished incorrect statement of his turnover or incorrect particulars of his sales in the return submitted under Sub-section (2) of Section 10 or otherwise with intent to reduce the tax payable by him under the said Act. Once such satisfaction was reached in course of any proceeding, a penalty proceeding could be initiated as an independent separate proceeding at any time thereafter but not beyond the prescribed time, if any. Penalty proceeding under Section 20A could also be heard simultaneously with the assessment proceeding in which jurisdictional foundation was recorded, but that does not imply that it could not be initiated after completion of such assessment proceeding. Rule 55C of the 1941 Rules bears out that a penalty proceeding was an independent proceeding commencing with the notice in form VIIE. Section 20A or Rule 55C did not contain any restriction that penalty proceeding would have to be initiated along with any other proceeding. Only prerequisite was that necessary satisfaction for initiating a penalty proceeding was to be reached in course of "any proceeding".
8. As already stated Mr. Bose has referred to the judgement of the Calcutta High Court in Bharat Traders [1977] 39 STC 206. According to us, the said judgment does not support the contention of Mr. Bose.
9. In Bharat Traders [1977] 39 STC 206 (Cal) the concerned Commercial Tax 'Officer issued a notice under Section 14(1) of the 1941 Act to the dealer asking him to produce books of account. In course of scrutiny of books of account produced by the dealer, the CTO therein recorded a finding that the dealer understated his taxable sales in the return and decided to initiate a proceeding under Section 20A against the dealer for submitting false returns. The dealer challenged the said notice in the Calcutta High Court contending, inter alia, that the words "any proceeding" in Section 20A contemplated only assessment proceedings and not any other proceeding. The High Court did not accept the said contention and expressly held that "any proceeding" in Section 20A means more than one proceeding and could be any lawful proceeding under the said Act including proceedings by way of appeal, revision and/or review. It was further held therein that once the satisfaction was reached, a penalty proceeding could be initiated even before the proceeding, in course of which required satisfaction was reached, was completed.
10. In the said case the High Court expressly repelled the contention that the notice for penalty proceeding could not be issued after completion of the assessment proceeding. In support of its view the High Court quoted the following observations of the Supreme Court in D.M. Manasvi v. Commissioner of Income-tax, Gujarat ...The issue of notice is a consequence of the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner and it would, in our opinion, be sufficient compliance with the provisions of the statute if the Income-tax Officer or the Appellate Assistant Commissioner is satisfied about the matters referred to in Clauses (a) to (c) of Sub-section (1) of Section 271 during the course of proceedings under the Act even though notice to the person proceeded against in pursuance of that satisfaction is issued subsequently.
11. In Bharat Traders [1977] 39 STC 206 (Cal) the High Court concluded "...From the observations of the Supreme Court made in the subsequent decision, referred to above, it follows that a penalty proceeding can be started both before and after the completion of the assessment proceedings but the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner must be made during the course of such a proceeding...".
12. The Calcutta High Court, in fact, overruled the submission that a notice for penalty proceeding under Section 20A of the 1941 Act could not be issued after completion of the assessment proceeding. However, the High court quashed the notice in the said case on the view that steps under Section 14(1) of the 1941 Act were prelude to an assessment proceeding and was not a proceeding itself and as such the satisfaction recorded at the stage of Section 14 could not be said to be a satisfaction reached in course of a proceeding under the Act of 1941.
13. Mr. Bose has referred to several orders of this Tribunal by which penalty proceedings under Section 20A were quashed on the ground that the proceeding was not initiated in course of an assessment proceeding.
All those orders were passed on the belief that the Calcutta High Court in Bharat Traders [1977] 39 STC 206 took such a view. With due respect we are unable to agree with such view or belief. The judgment in Bharat Traders [1977] 39 STC 206 (Cal) was misconstrued in those orders. We have already analysed the said judgment to explain the ratio of the said decision. Moreover those orders passed on the basis of the judgment of the High Court in Bharat Traders [1977] 39 STC 206 (Cal) did not lay down any law to follow.
14. Although the aforesaid contention of Mr. Bose fails, there are certain other major infirmities and irregularities in initiating the penalty proceeding under Section 20A of the 1941 Act. It appears that the penalty proceeding has been initiated because in the assessment order dated April 10, 1995 assessing officer has recorded that concealment of turnover was unearthed in course of investigation and without taking note of the fact that such finding of turnover concealment was not made in course of an assessment proceeding or any other kind of proceeding under the provisions of the Act. It has been held by the Calcutta High Court in Bharat Traders [1977] 39 STC 206 that a finding recorded during any investigation prior to initiation of assessment proceeding could not amount to a satisfaction recorded in course of a proceeding. In the present case before initiation of assessment proceeding the petitioner submitted a revised return disclosing all turnover and paying tax thereon. When the assessment proceeding was initiated, there was neither any concealment nor anything due on account of tax. The assessing officer in fact found that the petitioner paid tax in excess and directed refund of the excess amount.
15. Suo motu revision was undertaken by the Asstt. Commissioner on the proposal of the Commercial Tax Officer. The Asstt. Commissioner ordered that the assessment order stood reopened with a direction to the Commercial Tax Officer to invoke the power under Section 20A(l) of the Act of 1941. The Asstt. Commissioner proceeded mechanically on the basis of a fact recited in the assessment order without taking into account the other relevant facts particularly the filing of revised return and payment of tax before initiation of any assessment proceeding. The Asstt. Commissioner also has not arrived at any independent satisfaction regarding concealment of taxable turnover upon consideration of the undisputed facts and materials on record. It is well known that when the requisite satisfaction has not been arrived at in course of a proceeding, a penalty proceeding under Section 20A of the Act of 1941 cannot be initiated.
16. Besides, the Asstt. Commissioner did not act with proper application of mind. He opened his order with a recital that the suo motu revision was under Section 80 of the West Bengal Sales Tax Act, 1994, although he was considering a case under the 1941 Act. He also mechanically signed a notice dated September 19, 2000. Inapplicable parts were not scored out and the notice did not make any sense. It is the incumbent duty of an officer issuing a notice to see that the notice is properly written and conveys the real meaning and purpose of the notice before he puts his signature thereon.
17. In view of the fact that the requisite satisfaction as required under Section 20A(l) was not reached in course of any "proceeding" under the 1941 Act, initiation of a penalty proceeding under the same section cannot be sustained.
18. Accordingly the penalty proceeding under Section 20A of the 1941 Act and the impugned penalty order and the demand notice are all quashed and set aside.