A.K. Ganguly, J.
1. The subject matter of challenge in this writ petition is the initiation of a reassessment proceeding by the Sales Tax Officer (hereinafter called, 'S.T.O.-') by a notice dated 23.9.98 purported to have been issued under Section 12(8) of Orissa Sales Tax Act (hereinafter referred to as 'O.S.T. Act'). The impugned notice was issued in a statutory form, being Form VI under Orissa Sales Tax Rules (hereinafter referred to as the 'O.S.T. Rules'). The material part of the recital contained in the said notice is as follows :-
FROM VI
Notice to a dealer under Sections 11(1) and 12(5), 12(8) of the Orissa Sales Tax Act.
The Indure Ltd., (dealer)Banoharpali (address)Whereas it appears to me that your gross turn over in the year immediately preceding the commencement of the Orissa Sales Tax Act 1947 during the period not exceeding 12 months ending on...has exceeded 25,000 but that you have nevertheless without sufficient cause failed to apply for registration under Section 9 of the Act.
Whereas it appears to me that in accordance with the provisions of Sub-section (5) of Section 4 of the Orissa Sales Tax Act, you have become liable to pay tax on sales and/or purchases from the date of commencement of the business but that you have nevertheless without sufficient cause failed to apply for registration under Section 9 of the Act.
Whereas I have reason to believe that your turnover of sales and/or purchases for the quarter/year ending 94-95 on which tax payable under the Orissa Sales Tax Act, 1947 has escaped assessment/has been under assessed/has not been assessed due to the tax having been compound when composition is not permissible.
You are hereby required to submit within one calendar month from the date of receipt of this notice a return in Form IV (enclosed) showing the particulars of your turnover for the quarter ending....
You are also hereby required to attend in person or by agent at my office at...on 22.1.99 at 11.00 A.M. and thereto produce or cause to be produced the accounts and documents specified on the reverse....* and also to show cause why in addition to the amount of tax that may be assessed on you a penalty not exceeding one and a half times that amount should not be imposed on you under Sub-section (5), Sub-section (8) of Section 12 the Act.
In the event of your failure to comply with all the terms of this notice I shall proceed to assess you under Section 12 of the Act to the best of my judgment without further reference to you.
Place- Sd/-Date-23.9.98 Sales Tax officer,Sambalpur III Circle,Jharsuguda/Particulars of accounts and documents required-
(a) Book of account for the period mentioned overleaf in general and records of sales in particular.
(b) A statement classifying sales under Sub-clause (a) of Clause A of Sub-section (2) of Section 5.
(c) Accounts and documents relating to the financial transaction of your business including bank pass-books for the relevant period.
(d) Duplicate copies of cash receipts or bills showing the sale of tax-free articles and declarations from purchasing dealers as required by Sub-rules (1), (2) and (3) of Rule 27.
(e) Proof in support of deductions claimed according to item (iii) of Sub-clause (a) of Clause A of Sub-section (2) of Section 5.
Along with the writ petition a certified copy of the order sheet has also been annexed. The learned counsel for the Revenue also produced the records of the case.
2. From perusal of the records it appears that on 24.10.98, an order was recorded directing issuance of notice under Section 12(8) of O.S.T. Act for 94-95 fixing the date to 25.11.98. On the margin of the order sheet there is a note to the following effect:-
Objection raised by the A.G., Audit is put up for perusal and order.
3. Relying on these documents, the learned counsel for the assessee urged the following contentions :
(i) no reason was recorded either in the file nor any reason was disclosed in the notice which purported to re-open the assessment.
(ii) while the notice in Form VI was issued on 23.9.98, the S.T.O. passed order for issuance of such notice under Section 12(8) of O.S.T. Act only on 24.9.98. In other words the impugned notice was issued even prior to the necessary directions being issued for such purpose by the S.T.O.
(iii) the notice of assessment was issued under the dictates of the Audit party and there has been no independent application of mind by the S.T.O. nor any reason has been recorded to show any application of mind.
(iv) it was also urged that since the petitioner became entitled to refund of a sum of Rs. 66,775/- as a result of the assessment order for the year 1 994-95 and since the petitioner made an application for refund, the S.T.O. set in motion a proceeding for re-opening the assessment.
4. In paragraph 11 of the writ petition the following averments have been made :
11. A careful scrutiny of the Order Sheet and the 12(8) notice brings out some interesting facts. Opp. party No. 2 on 24.10.1998, noted in the Order Sheet for issuance of notice Under Section 12(8) of the O.S.T. Act, whereas, one would find in that notice Under Section 12(8) of the OST Act in fact was issued much earlier i.e. on 23.09.1998. On 23.09.1998, no reasons are given for such an action and why.
While dealing with those averments the revenue replied as under in Paragraph 9 of its counter :
9. That as regard to paragraph-11 of the writ petition, it is humbly submitted that notice was first issued on 24.10.98 at Banharpali address later on 23.12.98 it was issued to Petitioner at its permanent address. The reason for issue of notice is basing on objection raised by Audit in the matter of deduction of value of materials issued by the contractee.
It is therefore clear that the Revenue never disputed that the notice was signed on 23.9.98 and was dated 23.9.98. What is sought to be urged is that the said notice was sent to the petitioner at Banharpali address on 24.10.98 and thereafter it was sent on 23.12.98 to the permanent address of the writ petitioner.
5. About the steps taken for issuing the notice under Section 12(8) of O.S.T. Act, the following averments have been made by the Revenue in Paragraph-5 of its counter. Those averments are as follows:-
5. xx xx xx xxAssessment proceeding was considered for re-opening on receipt of the objection memo issued by Audit. On the basis of the Audit Report, the file was put up before the Opposite Party No. 2 and Opposite Party No. 2 on perusal of the marginal note as well as the Audit report directed issue of notice under Section 12(8) of the O.S.T. Act. Further, elaboration of Audit's observation would have amounted to duplication of work. Therefore, order for issuing/notice under Section 12(8) of the Orissa Sales Tax Act was passed after perusal of the marginal note as well as Audit report referred to in the margin of the order sheet.
In paragraph 7 of the counter, it has been specifically admitted by the Revenue that 're-opening was initiated basing on the observation and suggestion of Audit'.
6. These are the pleadings of the parties and on those pleadings the following questions fall for determination by the Court :-
(i) Whether assessment can be re-opened mechanically by the authorities and without showing any application of mind by not recording any reason?
(ii) Whether in issuing re-assessment notice, the statutory authorities can surrender or abdicate its statutory discretionary power in favour of a non-statutory authority and completely act under the dictate of such an authority ?
(iii) Whether the issuance of the statutory notice of the reopening of assessment can precede the recording of any thing in the order sheet in the concerned file. In other words whether notice can be issued first and then the formation of opinion or satisfaction of the authorities can be recorded later in the file ?
(iv) Whether the expression 'for any reason' in Section 12(8) of O.S.T. Act gives wider powers to the authorities to-reopen assessment than the words 'reasons to believe' and whether the exercise of power under Section 12(8) of O.S.T. Act has to be consistent with the statutory rules and in accordance with the statutory forms framed under the said Act?
7. Question No.(iv) raises some points of statutory interpretation and is taken up first for consideration. For a proper appreciation of the points involved, the provision of Section 12(8) of O.S.T. Act is set out below :-
12. Assessment of Tax :-
xx xx xx xx(8) If for any reason the turnover of a dealer for any period to which this Act applies has escaped assessment or has been under assessed or where tax has been compounded when composition is not permissible under this Act and the Rules made thereunder the Commissioner may at any time within five years from the expiry of the year to which that period relates call for return under Sub-section (1) of Section 11 and may proceed to assess the amount of tax due from the dealer in the manner laid down in Sub-section (5) of this Section and may also direct, in cases where such escapement or under assessment or composition is due to the dealer having concealed particulars of his turnover or having without sufficient cause has furnished incorrect particulars thereof, that the dealer shall pay, by way of penalty, in addition to the tax assessed under this Sub-section, a sum equal to one and a half times of the said tax so assessed.
Rule 23 of Orissa Sales Tax Rules, 1947 (hereinafter referred to as the 'O.S.T. Rules') which is relevant in this case is set out below :- '
23. Calling for return when turnover has escaped assessments or has been under assessed-(1) If for any reason the turnover of sales or the turnover of purchases of a dealer has escaped assessment or has been under assessed or has not been assessed due to the tax having been compounded when composition is not permissible under the Act and these rules and it is proposed to assess it, the Commissioner shall serve on the dealer a notice in Form VI calling upon him to furnish a return in Form IV within one calendar month from the date of receipt of such notice.
(2) Such notice may also require the dealer to attend in person or by his agent at the office of the authority issuing the notice on the date specified therein and to produce or cause to be produced the accounts and documents specified in the notice.
In this case notice of re-assessment was issued in Statutory Form VI. Third paragraph of Form VI is as follows :-
Whereas I have reason to believe that your turnover of sales and/or purchases for the quarter/year ending 94-95 on which Tax payable under the Orissa Sales Tax Act, 1947 has escaped assessment/has been under assessee/has not been assessed due to the tax having been compound when composition is not permissible.
It is important to note the said rules being framed under Section 29 of the said Act are to be laid before the State Legislature in view of the provisions of Section 29-A of the said Act. So the rules are part of the Act.
That is the clear statutory dispensation.
8. While the Court is scrutinizing the exercise of power by the authorities under Section 12(8) of O.S.T. Act, the entire gamut of statutory provisions contained in the rules and the forms are to be kept in its mind. It cannot be said and in fact it has not been said by the Revenue that any part of statutory rules and forms is redundant or that the power under Section 12(8) of O.S.T. Act can be exercised ignoring the rules and the statutory forms. In fact it was not so exercised and the impugned notice was issued under the statutory form, the relevant part of which has been set out previously.
Certain decisions have been cited at the bar.
Reliance was placed on the judgment of the Supreme Court in the case of Sales Tax Officer, Ganjam, and Anr. v. Uttareswari Rice Mills, reported in (1972) 30 S.T.C. 567. The point of controversy in that case was whether in a notice under Section 12(8) of O.S.T. Act reasons for re-opening are to be indicated on the notice. The Court ultimately held that there is nothing in the language of Section 12(8) of O.S.T. Act which 'postulates the recording of reasons in the notice which is issued to the dealer under the above provision of law.'
While reaching the aforesaid conclusion, the Apex Court held:-
(a) The difference in phraseology between 'If for any reason' and 'If the Sales tax authority has reason to believe' does not 'make material difference.
(b) In coming to this conclusion, the Apex Court took into consideration Rule 23 of the said rules and Form VI, referred to in Rule 23 and also the relevant recitals in Form VI, which have been set out above 'Whereas I have reasons to believe.
(c) The Sales Tax authority issuing the notice... 'should have reason to believe that the turnover of a dealer has escaped assessment or has been under assessed'. Reasons 'cannot exist is vacuum'.
(d) The approach of the Court should be 'practical and not pedantic.
9. In view of the aforesaid ratio of the Apex Court in Uttareswari (Supra), the judgment of the Division Bench of Orissa High Court in Bindlish Chemical and Pharmaceutical Works v. Commissioner of Sales Tax, Orissa and Anr. reported in (1993) 89 S.T.C. 102 cannot lay down a different proposition. In fact the Court in Bindlish Chemical referred to the decision of the Apex Court in the case of Kameshwar Singh v. State of Bihar, reported in : [1959]37ITR388(SC) . In Kameshawar Singh, the Apex Court found that the words 'any reason' in Section 26 of Bihar Agricultural Income Tax Act are of wide import and dispense with the conditions under Section 34 of Income Tax Act, prior to its amendment in 1948. However, this Court finds that though there are similarities between the opening words in Section 26 of Bihar Agricultural Income Tax Act and Section 12(8) of O.S.T. Act, but if the two Sections are carefully read it will be clear that they are not in pari materia. Apart from that the provisions of the Statutory Rules and Forms, if any, under the Bihar Act were not considered in Kameshwar Singh (Supra).
But in Uttareswari Rice Mills, the Apex Court specifically considered the provisions of Section 12(8) of O.S.T. Act, Rule 23 of the said Rule and Form VI which are the relevant statutory provisions here and held that the difference of the phraseology between 'for any reason' and 'if the Sales Tax authority has reasons to believe' does not make much of a difference. But unfortunately the attention of the Division Bench which rendered the judgment in Bindlish Chemical was not drawn to the decision in Uttareswari (Supra).
10. In Bindlish Chemical the second question which was posed namely 'Whether re-assessment could have been started under Section 12(8) of the Act on the basis of observation made in audit report' was not specifically answered. So the said decision does not have much relevance to the questions involved in the present case.
11. The subsequent Division Bench judgment of Orissa High Court in State of Orissa v. Ugratara Bhojanalaya, reported in (1993) 91 S.T.C. 76, in my judgment, explains the requirement of Section 12(8) of O.S.T. Act, in consonance with the views of the Apex Court in Uttareswari (supra) since the judgment in Uttareswari was cited before the Division Bench. Accordingly the Division Bench held that the legislative intent in Section 12(8) of O.S.T. Act 'is apparent from the words used in Form VI', in which the words 'Whereas I have reasons to believe' find place. Therefore the Division Bench held following the dicta of the Apex Court in Uttareswari, that the difference in phraseology between 'For any reason' and 'If the Sales Tax authority has reasons to believe' does make any material difference.
The Division Bench in Ugratara Bhojanalaya scrutinized the notice in Form VI and came to the conclusion that the notice is vague, having been issued under Sections 11(1), 12(5) and 12(8) of O.S.T. Act. The Court held that a proposed action by the Revenue cannot be both under Sections 12(5) and 12(8) of O.S.T. Act. Here also the impugned notice was issued similarly under Sections 11(1), 12(5) and 12(8) of O.S.T. Act. Here also the impugned notice did not disclose any basis on which action under Section 12(8) was proposed to be taken. The impugned notice is a mere printed form without disclosing any basis on which the same was allegedly issued. In Ugratara Bhojanalaya, the Court held that the 'assessing authority is required to record the basis on which action under Section 12(8) of the Act is proposed to be taken'. Here the basis has not been disclosed in the impugned notice. So, the notice in this case does not satisfy the requirement of Section 12(8) of O.S.T. Act.
12. In view of the clear opinion expressed by the Apex Court in Uttareswari (supra) and which was followed by the Division Bench of this Court in Ugratara Bhojanalaya (supra), it is difficult for this Court to interpret the words 'if for any reason' in Section 12(8) of O.S.T. Act on the basis of judgment of other High Courts which were pronounced while construing different legislature provisions. On this score, the Revenue relied on four judgments which were rendered in the following cases :-
(a) Full Bench decision in the case of The State of Madras v. Louis Dreyfus and Company Ltd. Reported in (1955) 6 STC 318.
(b) Dinod Cashew Corporation v. Deputy Commercial Tax Officer and Anr., reported in (1986) 61 S.T.C.1.
(c) Bio-Visual Products v. The State of Andhra Pradesh reported in (1986) 63 S.T.C. 476.
(d) Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. T.P. Elias, reported in (1993) 90 S.T.C. 25.
13. The main point of controversy in the Madras Full Bench decision in the case of Louis Dreyfus was 'Whether Rule 14 of the Madras General Sales Tax Rules is valid and if so, whether the powers of revision thereunder can be exercised in cases to which Rule 17 relating to escaped assessment is applicable.' This question is not even remotely connected with the issues in this case.
The Full Bench held that Rule 14(2) is valid, but the revisional power under Rule 14(2) cannot be exercised in cases to which Rule 17 applies and the Court held that Rule 17 only applies to cases of escaped turnover. In that context the Court explained the natural meaning of the expression 'turnover' which has escaped assessment in Rule 17(1). There can be no dispute with the way the Full Bench explained the meaning of the expression 'turnover' but the same is of very little relevance in the context of the issues raised in this case.
(a) The next decision of the Division Bench of Madras High Court in the case of Dinod Cashew Corporation (supra) relied on the Full Bench judgment in Louis Dreyfus and was concerned with the question whether Cashewnut and Cashew Kernels are the same goods for the purpose of Section 5(3) of the Central Sales Tax Act. In deciding the question incidentally the Division Bench referred to Section 16(1)(a) of Tamil Nadu General Sales Tax Act 1959. In Section 16(1)(a) of the Act, the words 'for any reason' find place. The Court held that power under Section 16 is a wide power and the words are of wide import. The Court .also found that in Bihar Agricultural Income Tax, similar words have been used.
There can be no dispute with the aforesaid principles. But the impact of the relevant statutory rules and statutory forms regulating the exercise of such wide power does not appear to have been considered by the learned Judges. So the interpretation given in the Madras High Court judgment cannot override the Apex Court's interpretation of Section 12(8) of O.S.T. and which was given after considering the statutory rules and forms, in Uttareswari [supra) and which was followed by the Division Bench in Ugratara Bhojanalaya.
(b) In so far as the judgment of Andhra Pradesh High Court in Bio-Visual Products is concerned, this Court finds that the Andhra Pradesh High Court considered Rule 14-A(9) of Central Sales Tax (Andhra Pradesh) Rules. Rule 14-A(9) also considered the expression 'If, for any reason'. The said expression was construed by the Andhra Pradesh High Court to mean that the power of the taxing authority is available under all circumstances. It also held that the said rule is a part of the machinery provision in the tax law. Such provisions are therefore to be liberally interpreted to effectuate the intention of the law-makers. This ratio does not help this Court to answer the question raised in this case.
(c) The last judgment in this series cited by the learned counsel for the Revenue was a Division Bench judgment of Kerala High Court in the case of T.P. Elias (supra). Here also in Section 19 of Kerala General Sales Tax Act, the expression 'For any reason' occurred. The Court held that an assessment made under the Act can be reopened under Section 19 of the Act on a mere change of opinion. We are not concerned with that question here.
14. So, after considering all the decisions cited on this point, this Court feels bound by the interpretation given to Section 12(8) of O.S.T. Act by the Apex Court in Uttareswari Rice Mills (supra) and which was subsequently followed in Ugratara Bhojanalaya (supra). Following the aforesaid ratio this Court reiterates that the difference in phraseology between 'For any reason' and 'Where the Sales Tax Officer has reasons to believe' does not make any material difference in view of the provisions in Rule 23 of the said rules which mandate that notice for re-opening has to be in Form VI and Form VI uses the expression 'Where the Sales Tax Officer has reasons to believe'. So the question No. (IV) is answered by holding that the words 'for any reason' in Section 12(8) of OST do not give-wider powers to the authorities to re-open assessment compared to words 'reasons to believe' since the words 'reasons to believe' are incorporated in the statutory form in which notice of assessment is to be issued. The Court also holds that while exercising power under Section 12(8) of OST, the authority has to act consistently with the statutory norms prescribed under the statutory rules and the forms.
In Uttareswari, construing Section 12(8) of O.S.T. Act, the Apex Court held that the Sales Tax Officer issuing the notice 'should have reason to believe that the turnover of a dealer has escaped assessment or has been under-assessed.' The Apex Court further held that the approach has to be practical.
15. Following that judgment of the Apex Court, the Division Bench of Orissa High Court held in Ugratara that some basis for reopening has to be disclosed in the notice.
(a) Here no basis has been disclosed either in the notice or in the records. Rather the records show that the issuance of the notice preceded any recording of an order in the file. So it is clear that the notice has been issued mechanically and at a point of time when there could not be even any formation of opinion. So the notice was mechanically issued first and then it was sought to be covered up by recording an opinion in the file.
(b) From a perusal of the file, it appears that there was an audit objection. From the affidavit of the Revenue also it appears that notice was issued as suggested by audit objection.
(c) Of course audit objection can be a valid factor which can be taken into consideration by the concerned officer for initiating a proceeding for re-opening of assessment. But the concerned Sales Tax Officer must independently apply his mind and form an opinion that on the basis of audit objection, an order for re-opening of assessment can be passed. That would be a valid basis for re-opening. But the Sales Tax Officer's formation of opinion cannot be dictated by audit objection.
(d) In the instant case in the audit report it was objected that the tax has been under assessed. The concluding part of the audit objection states 'The desirability of the opening of the case under Section 12(8) of O.S.T. Act for re-assessment may be kindly re-examined under intimation to Audit'. The said audit objection is dated 10.9.98. The impugned noticed of re-opening was issued on 23.9.98. But the Sales Tax Officer recorded an order for issuing the notice under Section 12(8) of O.S.T. Act only on 24.10.98. So the notice was issued mechanically even before the order for issuing the notice was actually passed. This is not permissible in law.
16. Reference in this connection may be made to the decision of the Supreme Court in the case of Mahadayal Premchandra v. Commercial Tax Officer, Calcutta and Ors. reported in : (1958)ILLJ260SC .
In that case the Commercial Tax Officer assessed the dealer under Bengal Finance (Sales Tax) Act on the instruction of the Assistant Commissioner. The Court did not approve of such procedure as it found that in the orders which were passed by the Commercial Tax Officer he was 'merely voicing the opinion of the Assistant Commissioner without any conviction of his own' (Page 670, Para 18 of the report).
Here also by purportedly issuing notice under Section 12(8) of O.S.T. Act, the Sales Tax Officer was merely 'voicing' the audit objection without recording any formation of opinion of his own. So the ratio in the case of Mahadayal squarely applies to the facts of the present case.
17. Similar views have been expressed by the Apex Court in the case of Orient Paper Mills Ltd. v. Union of India, reported in : 1973ECR1(SC) . The Court held that the directions issued by the Central Board of Revenue cannot control the exercise of power of the Collector. In paragraph 8, page 51 of the report, Justice Hegde, speaking for the Apex Court, held that 'no authority however high can control the decision of a quasi-judicial body' and the learned Judges found this principle as important as being of 'the essence of our judicial system'.
18. The importance of this doctrine lies in the fact that if a statutory functionary is vested with a power to act, it is that statutory authority alone who will form the necessary objective opinion for exercising its power. In doing so, it may take into consideration whatever is relevant. As in the instant case audit objection may be a relevant consideration. Taking that objection into consideration, the Sales Tax Officer has to form his objective opinion. But the Sales Tax Officer cannot totally abdicate or surrender his discretion to the objection of the audit party by mechanically re-opening assessment under Section 12(8) as has been done in this case. This was frowned upon again by Justice Hegde again while delivering the judgment of the Apex Court in The Purtabpur Company Ltd. v. Cane Commissioner of Bihar and Ors., reported in : [1969]2SCR807 . The Supreme Court quashed the order of the Cane Commissioner as it found that the Cane Commissioner virtually worked as the mouth piece of the Chief Minister.
19. In State of U.P. and Ors. v. Maharaja Dhasmander Prasad Singh, reported in : [1989]1SCR176 , Justice M.N. Venkatachaliah (as his Lordship then was) reiterated the same principles in Paragraph 24, Page 1009 of the report. His Lordship was pleased to rely on De Smith's Administrative Law in support of the principle that 'statutory authority cannot permit its decision to be influenced by the direction of others as that would amount to abdication and surrender of its discretion.' The Court laid down if an authority hands over its discretion to another and acts under the dictate of the other authority it acts ultra vires.
20. Similar view has been expressed by Professor Wade in Administrative Law, Eighth Edition, 326. The learned author succinctly summed up the principles as follows :-
Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by Parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void.
21. In view of the above discussions, the Court answers in the negative the questions (I), (II) and (III) framed in the earlier part of the judgment.
22. Following these principles this Court holds that the manner in which re-assessment proceeding was blindly initiated on audit objection by the Sales Tax Officer without any independent application of mind, the exercise of power under Section 12(8) of O.S.T. Act has been vitiated and as such the impugned notice of re-assessment is liable to be quashed and is accordingly quashed. Annexure-1 is quashed.
The writ petition is thus allowed. There will be no order as to costs.
I. Mahanty, J.
23. I agree.