Commissioner of Income-tax Vs. Panduranga Engineering Co. - Court Judgment

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direct taxation - cancellation of registration - sections 28, 142 (1), 143 (2), 144, 144 (1) and 185 (5) of income tax act, 1961 - assessee was issued notices under sections 142 (1) and 143 (2) - assessee did not comply with requirements of notices - assessing authority issued notice under sections 186 (2) and 185 (5) seeking to cancel registration of firm - whether registration granted to assessee-firm not to be refused under section 185 (5) - in every case where best judgment assessment was faced by assessee it is not necessary that order to be passed for refusing to continue registration of firm - cancellation of registration of firm should be after complying with principles of natural justice which implies that assessing officer is satisfied with explanations offered by assessee - it cannot be predicated that assessing officer must pass order automatically cancelling registration where assessee had not responded to 14 days notice issued under section 186 (2) - held, assessee entitled to registration. head note: income tax assessment--best - maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter. scientifically or common sense point of view, even though ghee is not directly obtained from milk (which is certainly a product of cow/buffalo), it is certainly a product of a product of livestock i.e., cow or buffalo. it would be rather illogical or irrational to say that ghee is not a milk/dairy product or to say that it is not a product of livestock. section 2(x) and 2(iv) of the act used the plural products of livestock. the legislative intention is very clear that not only a product of livestock like milk (when notified by government), butter etc., are products of livestock but even derivative items (derived from a product of livestock) are intended to be product of livestock for the purpose of the act. thus the term ghee is to be interpreted on the basis of expression products of livestock as defined in section 2(xv) of the act. whatever products are declared as such by the government by notification, they become products of livestock for purpose of the act. consequently it was held that ghee is the product of livestock and by reason of power conferred under section 3(1) read with section 3(3) of the act on them it is competent for the government to declare ghee as product of livestock for the purpose of regulating its purchase and sale, in any notified market area. [per p.s. narayana, j,(dissenting)]if livestock or agricultural produce and the categories thereof had been specified in the statute itself by appending in the schedule or otherwise, that would stand on a different footing from the present provisions of the act which contemplate the issuance of notifications in accordance with the procedure ordained by the provisions specified supra. in view of the clear definition of the livestock and products of livestock, the ghee being derivative of butter or cream, if the language employed in definition to be taken as they stand, the only conclusion would be is that the ghee would not fall within ambit of the definitions aforesaid. sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] declaration of notified area held, it is only under section 3 that government are required to publish draft notification inviting objections and section 3(3) mandates to consider objections and suggestions before issuing declaration order. it is very conspicuous that section 4 does not contemplate any draft notification inviting objections and suggestions before either constituting market committee, establishing notified market area or declaring notified market area for the purpose of levy of market fees. thus, except ordaining government to issue preliminary/draft notification inviting objections at the time of issuing declaration order under section 3(3) of the act nowhere much less under section 4 contemplates issuing a notification inviting objections. when the legislature has chosen to exclude principles of natural justice, the court cannot introduce rule of audi alteram partem and render statutory provisions unworkable. in such a case, maxim, expressum facit cessare tacitum (when there is express mention of certain things, then anything not mentioned is excluded) would apply. section 7: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] levy of market fee element of quid pro quo - held, levying fees and tax are two forms of exercise of sttaes taxing power. there is no quid pro quo between tax payer and public authority as tax is a part of common burden. it is also well settled that fee is charge for special service or a benefit given to a class of individual fee payers and fee collected need not have correlation with actual service in exactitude but if it is shown that substantial portion of the fee is expended or the purpose for which it is levied, it would be justified. expressum facit cessare tacitum sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] meaning when there is express mention of certain things, then anything not mentioned is excluded. - there is no rule that in every case where a best judgment assessment was suffered by the assessee, the assessing officer must invariably pass an order refusing to continue the registration of the firm. there is no inference that in every case where a best judgment assessment was suffered by the assessee, the assessing officer must invariably pass an order refusing to continue the registration of the firm for the assessment year in question. cancellation of the registration should only be after complying with the principles of natural justice, which necessarily implies that if the assessing officer is satisfied with the explanation offered by the assessee, he may drop the proposal to cancel the registration. assessment--whether assessment under section 144 should necessarily be followed by cancellation of registration of firm.ratio:there is no rule that in every case where a best judgment assessment was suffered by the assessee, the assessing officer must invariably pass an order refusing to continue the registration of the firm.held:there is no inference that in every case where a best judgment assessment was suffered by the assessee, the assessing officer must invariably pass an order refusing to continue the registration of the firm for the assessment year in question. cancellation of the registration should only be after complying with the principles of natural justice, which necessarily implies that if the assessing officer is satisfied with the explanation offered by the assessee, he may drop the proposal to cancel the registration. withdrawal of the benefit of registration in respect of an assessment year results in serious consequences. it is penal in nature in that the consequences are very serious to the assessee and that is why discretion is conferred on the assessing officer by requiring him to give a second opportunity. a penal provision must always be interpreted strictly and if two views are possible, the benefit should go to the assessee.case law analysis:cit v. krishnamma and co. (1955) 28 itr 273 (ap) and sheth (j. m.) v. cit (1965) 56 itr 293 (mad) followed. c. k. abdul khader and co. v. ito (1983) 141 itr 159 (ker) and phoolchand ramsahai v. cit (1979) 117 itr 631 (mp) relied.application:not to current assessment years.a. y.:1982-83 income tax act 1961 s.144income tax act 1961 s.185income tax act 1961 s.186