Bhatter and Co. Vs. Inspector of Commercial Taxes, - Court Judgment

Excerpt:
1. in this application under section 8 of the west bengal taxation tribunal act, 1987, the applicant has prayed for an order setting aside two notices both dated april 24, 1998 issued by the assistant commissioner, commercial taxes, posta bazar charge, for examination of the books of accounts and records of the applicant for the purpose of assessment for the period of four quarters ending march 31, 1995.2. the applicant's case is that it filed an application before this tribunal challenging a search and seizure made by the inspector, commercial taxes, bureau of investigation (respondent no. 1) at the office of the applicant as well as at the residence of the partner of the applicant. in that application the order passed by the additional commissioner, commercial taxes, west bengal, granting sanction for retention of the seized records till october 30, 1997 was also challenged. the said petition has already been heard by this tribunal but the judgment has not yet been delivered.3. the applicant, in the meantime, filed another application, being case no. rn-167 of 1997, before this tribunal challenging a notice dated may 15, 1997 issued by respondent no. 4 (assistant commissioner, commercial taxes, posta bazar charge) under section 20a of the bengal finance (sales tax) act, 1941 asking the applicant to show cause why a penalty to the extent of rs. 2 crore should not be imposed for furnishing incorrect statements of turnover in the returns for the periods four quarters ending march 31, 1995. the application no. rn-167 of 1997 was disposed of by this tribunal by its judgment dated april 22, 1998 where the notice dated may 15, 1997 issued by the respondent no. 4 was set aside.4. respondent no. 4 by two notices both dated april 24, 1998, directed the applicant to produce the books of accounts and other records for the purpose of assessment for the periods four quarters ending march 31, 1995. in one of such notices the applicant was directed to appear at the salt lake office of the respondent no. 4 on april 29, 1998 and by the other notice he was directed to appear before the office of shri a.r. mia, assistant commissioner, commercial taxes, bureau of investigation, at no. 10, madan street, on april 28, 1998.5. it is the case of the applicant that the respondent no. 4 has no right, authority or jurisdiction to direct the applicant to produce the books of accounts and records for the purpose of assessment under the bengal finance (sales tax) act, 1941 for the period four quarters ending march 31, 1995, on april 28, 1998 or april 29, 1998. according to the applicant, the assessment of the four quarters ending march 31, 1995 is already barred by limitation. the interim order passed by the tribunal in case no. rn-167 of 1997, restraining the respondents from proceeding with the assessment for the period four quarters ending march 31, 1995, according to the applicant, was automatically vacated in view of the proviso to sub-section (7) of section 8 of the west bengal taxation tribunal act, 1987 on december 16, 1997. after december 16, 1997 there was, according to the applicant, no interim order by which the respondents were restrained from proceeding with the assessment. hence december 31, 1997 was the last date for making the assessment for the period four quarters ending march 31, 1995.therefore, according to the applicant, the two notices issued on april 24, 1998 are barred by limitation.6. the applicant has also submitted that the respondent no. 4 should not be allowed to proceed in the facts and circumstances of the case because the validity of the seizure and the retention of the books of accounts have been argued at length before this tribunal and the judgment is awaited. if the tribunal takes the view that the seizures made by the respondent no. 1 were bad in law and liable to be quashed the said view of the tribunal would be of great importance in the matter of assessment of the applicant. it is also submitted that it is not possible for the applicant to participate in the assessment proceedings and explain the books of accounts and records to the respondent no. 4 without return of such books of accounts and records which are in the custody of the bureau of investigation. it is not possible for a dealer to explain the books of accounts and records which are in possession of some other person, it is further submitted that the respondent no. 4 has no right, authority or jurisdiction to direct the applicant to appear before the office of the bureau of investigation for the purpose of examination of the books of accounts and records for assessment. the respondent no. 4, if necessary, can bring the said seized books of accounts and records from the office of the bureau of investigation into his office for examination of the same for the purpose of assessment for the period four quarters ending march 31, 1995. on these grounds the applicant urges that the two notices dated april 24, 1998 issued by the respondent no. 4 be quashed.7. mr. chakraborty, learned advocate for the applicants, has argued that the seizures made by respondent no, 1 have been challenged in rn-179 of 1997 and the judgment in that case was not yet delivered when the impugned notices dated april 24, 1998 had been issued. according to mr. chakraborty, if the tribunal takes the view that the seizures made by the respondent no. 1 were bad in law and liable to be quashed, the said view of the tribunal would be of great importance in the matter of assessment of the applicant. this is a contention which we are unable to accept. even if the tribunal ultimately were to hold that the seizures were illegal, it would not follow that the evidence obtained by such illegal seizure could not be used by the respondents for the purpose of assessment. in this case reference may be made to the decision of the supreme court in the case of pooran mal v. director of inspection (investigation), income-tax (vide [1974] 93 itr 505). in that case the supreme court held that "courts in india and even in england have consistently refused to exclude relevant evidence merely on the ground that it is obtained by illegal search or seizure". it is, therefore, settled law that evidence collected during illegal search or seizure need not be excluded on that ground alone. hence, although the judgment of the tribunal was pending at the time of issue of the notices on april 24, 1998 that does not in any way affect the assessment proceedings.8. mr. chakraborty has also argued that it is not possible for the applicant to participate in the assessment proceedings and explain the books of accounts and records to respondent no. 4 because such books of accounts and records are in the custody of the bureau of investigation.however, from the order sheet of rn-179 of 1997, annexed with the application, it is seen that mr. chakraborty, who was representing the applicant in that case also, had urged that the books of accounts were very much necessary for the day to day business of the applicant and therefore, he had prayed for immediate return of the same. however, he submitted that his purposes would be served if he were permitted to take photo copies of the seized books of accounts and documents. on such submission of mr. chakraborty, the respondents were directed to allow the applicant to take photo copies of seized books of accounts and documents at its own cost. it would, therefore, be seen that the applicant was permitted to obtain photo copies of the seized books of accounts and documents as prayed for by his advocate and hence he cannot now take the plea that it is not possible for him to explain the books of accounts and records which were in the possession of some other person. mr. chakraborty has further argued that the respondent no. 4 has no right to direct the applicant to appear before the office of the bureau of investigation for the purpose of examination of the books of accounts and records for assessment. we are not able to appreciate his argument. the assessing officer is required to give the dealer a reasonable opportunity of being heard while making the assessment. it is admitted that some books of accounts and records are lying in the custody of the bureau of investigation. we do not find any impropriety in the assessing officer directing the dealer to appear at the office of the bureau of investigation where such seized books of accounts and other records are lying. the assessing officer has in his letter not directed the dealer to appear before the assistant commissioner, commercial taxes, bureau of investigation. what he has done is to direct the dealer to appear at the office of the assistant commissioner, commercial taxes, bureau of investigation, for examination of his books of accounts and other records by him. it is clear that the assessing officer was directing the dealer to remain present at the office of the assistant commissioner, commercial taxes, bureau of investigation, for the purpose of examination of the books of accounts and other records for the purpose of assessment for four quarters ending march 31, 1995 and such an action and examination by the assistant commissioner, commercial taxes, posta bazar charge, being the assessing officer of the dealer, cannot be considered to be beyond jurisdiction or in excess of jurisdiction. the applicant's submission that the assistant commissioner, commercial taxes, posta bazar charge, if necessary, can bring the seized books of accounts and records from the office of the bureau of investigation into his office for examination of the same at his office is not acceptable and not a claim which is legally valid.9. mr. chakraborty has submitted that the assessment is barred by limitation and therefore, the notices dated april 28, 1998 cannot be issued by the assessing officer. according to mr. chakraborty, the proviso to sub-section (7) of section 8 of the west bengal taxation tribunal act, 1987, clearly implies that the interim order passed by the tribunal in case no. rn-167 of 1997 restraining the respondents from proceeding with the assessment for the period four quarters ending march 31, 1995 was automatically vacated on december 16, 1997.therefore, after december 16, 1997 there was no interim order by which the respondents could be restrained from proceeding with the assessment, and hence, december 31, 1997 was the last date for making the assessment for the period four quarters ending march 31, 1995 and accordingly, mr. chakraborty argued, the assessment proceeding became time barred and the two notices dated april 24, 1998 were barred by limitation.10. this contention of mr. chakraborty is not correct. to appreciate the meaning of the proviso to sub-section (7) of section 8 of the west bengal taxation tribunal act, 1987 it is necessary to reproduce the said sub-section which is quoted below : "(7) notwithstanding anything contained in any other provision of this act or in any other law for the time being in force, no interim order (whether by way of injunction or stay or in any other manner) shall be made on, or in any proceeding relating to an application made under sub-section (1) unless-- (a) copies of such application and of all documents in support of the plea for such interim order are duly furnished seven days in advance to the party against whom such application is made or proposed to be made ; (b) such amount of tax, if any involved in the matter or such amount of security as may be deemed adequate by the tribunal to safeguard the interest of state revenue, is paid or furnished by the applicant ; and (c) opportunity of being heard is given to the party against whom such application is made : provided that the tribunal may dispense with the requirement of clause (b) and pass an interim order as an exceptional measure if it is satisfied for reasons to be recorded in writing that it is necessary so to do for preventing any loss being caused to the applicant which may dislocate, disrupt or lead to closure of his business, or which cannot be adequately compensated in money, but if the application referred to in sub-section (1) is not disposed of within a period of six months from the date when the order was made, the interim order shall, if it is not vacated earlier, stand vacated." 11. it would be clear from the proviso that while no interim order should be made unless the requirements of clause (b) are met, the tribunal may dispense with such requirement and pass an interim order as an exceptional measure if it is satisfied for reasons to be recorded in writing that it is necessary so to do for preventing any loss being caused to the applicant which may dislocate, disrupt or lead to closure of his business, or which cannot be adequately compensated in money.the proviso implies that such an interim order passed as an exceptional measure shall stand vacated within a period of six months from the date when the order was made unless it has been vacated earlier. it is only in these exceptional circumstances that the interim order will stand vacated within a period of six months from the date of such order.interim orders passed by the tribunal on considerations other than those mentioned in the proviso in relation to clause (b) of sub-section (7) of section 8 of the west bengal taxation tribunal act, 1987, will not be subject to this proviso as this proviso only deals with cases where the tribunal may dispense with the requirements of clause (b). in the instant case it would be clear from the order dated june 16, 1997 in rn-167 of 1997 that the interim order was passed not on the ground that it was necessary so to do for preventing any loss being caused to the applicant which may dislocate, disrupt or lead to closure of his business, or which cannot be adequately compensated in money. there was no formal prayer for interim order from the respondents also. the tribunal noted the submission of the learned state representative that if the assessment proceeding is completed it will not be possible to proceed with the imposition of penalty thereafter if called for. it was in such circumstances that the tribunal passed the interim order directing the respondents not to proceed with the assessment for the period of four quarters ending march 31. 1995 till final disposal of the main application. it would be abundantly clear that this interim order is not an interim order referred to in the proviso to sub-section (7) of section 8 of the west bengal taxation tribunal act, 1987, and hence the argument of mr. chakraborty that the interim order stood vacated on december 16, 1997 cannot be accepted as legally valid.moreover, this tribunal had directed that the said interim order would remain in force till disposal of the main application.after the judgment has been delivered, mr. sumit kr. chakraborty, learned advocate for the applicant, prays for stay of operation of the judgment and order. the prayer is opposed by mr. k.k. saha, learned advocate for the respondents. after considering the submissions the prayer for stay is rejected.

Judgment:
1. In this application under Section 8 of the West Bengal Taxation Tribunal Act, 1987, the applicant has prayed for an order setting aside two notices both dated April 24, 1998 issued by the Assistant Commissioner, Commercial Taxes, Posta Bazar Charge, for examination of the books of accounts and records of the applicant for the purpose of assessment for the period of four quarters ending March 31, 1995.

2. The applicant's case is that it filed an application before this Tribunal challenging a search and seizure made by the Inspector, Commercial Taxes, Bureau of Investigation (respondent No. 1) at the office of the applicant as well as at the residence of the partner of the applicant. In that application the order passed by the Additional Commissioner, Commercial Taxes, West Bengal, granting sanction for retention of the seized records till October 30, 1997 was also challenged. The said petition has already been heard by this Tribunal but the judgment has not yet been delivered.

3. The applicant, in the meantime, filed another application, being Case No. RN-167 of 1997, before this Tribunal challenging a notice dated May 15, 1997 issued by respondent No. 4 (Assistant Commissioner, Commercial Taxes, Posta Bazar Charge) under Section 20A of the Bengal Finance (Sales Tax) Act, 1941 asking the applicant to show cause why a penalty to the extent of Rs. 2 crore should not be imposed for furnishing incorrect statements of turnover in the returns for the periods four quarters ending March 31, 1995. The application No. RN-167 of 1997 was disposed of by this Tribunal by its judgment dated April 22, 1998 where the notice dated May 15, 1997 issued by the respondent No. 4 was set aside.

4. Respondent No. 4 by two notices both dated April 24, 1998, directed the applicant to produce the books of accounts and other records for the purpose of assessment for the periods four quarters ending March 31, 1995. In one of such notices the applicant was directed to appear at the Salt Lake Office of the respondent No. 4 on April 29, 1998 and by the other notice he was directed to appear before the office of Shri A.R. Mia, Assistant Commissioner, Commercial Taxes, Bureau of Investigation, at No. 10, Madan Street, on April 28, 1998.

5. It is the case of the applicant that the respondent No. 4 has no right, authority or jurisdiction to direct the applicant to produce the books of accounts and records for the purpose of assessment under the Bengal Finance (Sales Tax) Act, 1941 for the period four quarters ending March 31, 1995, on April 28, 1998 or April 29, 1998. According to the applicant, the assessment of the four quarters ending March 31, 1995 is already barred by limitation. The interim order passed by the Tribunal in Case No. RN-167 of 1997, restraining the respondents from proceeding with the assessment for the period four quarters ending March 31, 1995, according to the applicant, was automatically vacated in view of the proviso to Sub-section (7) of Section 8 of the West Bengal Taxation Tribunal Act, 1987 on December 16, 1997. After December 16, 1997 there was, according to the applicant, no interim order by which the respondents were restrained from proceeding with the assessment. Hence December 31, 1997 was the last date for making the assessment for the period four quarters ending March 31, 1995.

Therefore, according to the applicant, the two notices issued on April 24, 1998 are barred by limitation.

6. The applicant has also submitted that the respondent No. 4 should not be allowed to proceed in the facts and circumstances of the case because the validity of the seizure and the retention of the books of accounts have been argued at length before this Tribunal and the judgment is awaited. If the Tribunal takes the view that the seizures made by the respondent No. 1 were bad in law and liable to be quashed the said view of the Tribunal would be of great importance in the matter of assessment of the applicant. It is also submitted that it is not possible for the applicant to participate in the assessment proceedings and explain the books of accounts and records to the respondent No. 4 without return of such books of accounts and records which are in the custody of the Bureau of Investigation. It is not possible for a dealer to explain the books of accounts and records which are in possession of some other person, It is further submitted that the respondent No. 4 has no right, authority or jurisdiction to direct the applicant to appear before the office of the Bureau of Investigation for the purpose of examination of the books of accounts and records for assessment. The respondent No. 4, if necessary, can bring the said seized books of accounts and records from the office of the Bureau of Investigation into his office for examination of the same for the purpose of assessment for the period four quarters ending March 31, 1995. On these grounds the applicant urges that the two notices dated April 24, 1998 issued by the respondent No. 4 be quashed.

7. Mr. Chakraborty, learned advocate for the applicants, has argued that the seizures made by respondent No, 1 have been challenged in RN-179 of 1997 and the judgment in that case was not yet delivered when the impugned notices dated April 24, 1998 had been issued. According to Mr. Chakraborty, if the Tribunal takes the view that the seizures made by the respondent No. 1 were bad in law and liable to be quashed, the said view of the Tribunal would be of great importance in the matter of assessment of the applicant. This is a contention which we are unable to accept. Even if the Tribunal ultimately were to hold that the seizures were illegal, it would not follow that the evidence obtained by such illegal seizure could not be used by the respondents for the purpose of assessment. In this case reference may be made to the decision of the Supreme Court in the case of Pooran Mal v. Director of Inspection (Investigation), Income-tax (vide [1974] 93 ITR 505). In that case the Supreme Court held that "courts in India and even in England have consistently refused to exclude relevant evidence merely on the ground that it is obtained by illegal search or seizure". It is, therefore, settled law that evidence collected during illegal search or seizure need not be excluded on that ground alone. Hence, although the judgment of the Tribunal was pending at the time of issue of the notices on April 24, 1998 that does not in any way affect the assessment proceedings.

8. Mr. Chakraborty has also argued that it is not possible for the applicant to participate in the assessment proceedings and explain the books of accounts and records to respondent No. 4 because such books of accounts and records are in the custody of the Bureau of Investigation.

However, from the order sheet of RN-179 of 1997, annexed with the application, it is seen that Mr. Chakraborty, who was representing the applicant in that case also, had urged that the books of accounts were very much necessary for the day to day business of the applicant and therefore, he had prayed for immediate return of the same. However, he submitted that his purposes would be served if he were permitted to take photo copies of the seized books of accounts and documents. On such submission of Mr. Chakraborty, the respondents were directed to allow the applicant to take photo copies of seized books of accounts and documents at its own cost. It would, therefore, be seen that the applicant was permitted to obtain photo copies of the seized books of accounts and documents as prayed for by his advocate and hence he cannot now take the plea that it is not possible for him to explain the books of accounts and records which were in the possession of some other person. Mr. Chakraborty has further argued that the respondent No. 4 has no right to direct the applicant to appear before the office of the Bureau of Investigation for the purpose of examination of the books of accounts and records for assessment. We are not able to appreciate his argument. The assessing officer is required to give the dealer a reasonable opportunity of being heard while making the assessment. It is admitted that some books of accounts and records are lying in the custody of the Bureau of Investigation. We do not find any impropriety in the assessing officer directing the dealer to appear at the office of the Bureau of Investigation where such seized books of accounts and other records are lying. The assessing officer has in his letter not directed the dealer to appear before the Assistant Commissioner, Commercial Taxes, Bureau of Investigation. What he has done is to direct the dealer to appear at the office of the Assistant Commissioner, Commercial Taxes, Bureau of Investigation, for examination of his books of accounts and other records by him. It is clear that the assessing officer was directing the dealer to remain present at the office of the Assistant Commissioner, Commercial Taxes, Bureau of Investigation, for the purpose of examination of the books of accounts and other records for the purpose of assessment for four quarters ending March 31, 1995 and such an action and examination by the Assistant Commissioner, Commercial Taxes, Posta Bazar Charge, being the assessing officer of the dealer, cannot be considered to be beyond jurisdiction or in excess of jurisdiction. The applicant's submission that the Assistant Commissioner, Commercial Taxes, Posta Bazar Charge, if necessary, can bring the seized books of accounts and records from the office of the Bureau of Investigation into his office for examination of the same at his office is not acceptable and not a claim which is legally valid.

9. Mr. Chakraborty has submitted that the assessment is barred by limitation and therefore, the notices dated April 28, 1998 cannot be issued by the assessing officer. According to Mr. Chakraborty, the proviso to Sub-section (7) of Section 8 of the West Bengal Taxation Tribunal Act, 1987, clearly implies that the interim order passed by the Tribunal in Case No. RN-167 of 1997 restraining the respondents from proceeding with the assessment for the period four quarters ending March 31, 1995 was automatically vacated on December 16, 1997.

Therefore, after December 16, 1997 there was no interim order by which the respondents could be restrained from proceeding with the assessment, and hence, December 31, 1997 was the last date for making the assessment for the period four quarters ending March 31, 1995 and accordingly, Mr. Chakraborty argued, the assessment proceeding became time barred and the two notices dated April 24, 1998 were barred by limitation.

10. This contention of Mr. Chakraborty is not correct. To appreciate the meaning of the proviso to Sub-section (7) of Section 8 of the West Bengal Taxation Tribunal Act, 1987 it is necessary to reproduce the said sub-section which is quoted below : "(7) Notwithstanding anything contained in any other provision of this Act or in any other law for the time being in force, no interim order (whether by way of injunction or stay or in any other manner) shall be made on, or in any proceeding relating to an application made under Sub-section (1) unless-- (a) copies of such application and of all documents in support of the plea for such interim order are duly furnished seven days in advance to the party against whom such application is made or proposed to be made ; (b) such amount of tax, if any involved in the matter or such amount of security as may be deemed adequate by the Tribunal to safeguard the interest of State revenue, is paid or furnished by the applicant ; and (c) opportunity of being heard is given to the party against whom such application is made : Provided that the Tribunal may dispense with the requirement of Clause (b) and pass an interim order as an exceptional measure if it is satisfied for reasons to be recorded in writing that it is necessary so to do for preventing any loss being caused to the applicant which may dislocate, disrupt or lead to closure of his business, or which cannot be adequately compensated in money, but if the application referred to in Sub-section (1) is not disposed of within a period of six months from the date when the order was made, the interim order shall, if it is not vacated earlier, stand vacated." 11. It would be clear from the proviso that while no interim order should be made unless the requirements of Clause (b) are met, the Tribunal may dispense with such requirement and pass an interim order as an exceptional measure if it is satisfied for reasons to be recorded in writing that it is necessary so to do for preventing any loss being caused to the applicant which may dislocate, disrupt or lead to closure of his business, or which cannot be adequately compensated in money.

The proviso implies that such an interim order passed as an exceptional measure shall stand vacated within a period of six months from the date when the order was made unless it has been vacated earlier. It is only in these exceptional circumstances that the interim order will stand vacated within a period of six months from the date of such order.

Interim orders passed by the Tribunal on considerations other than those mentioned in the proviso in relation to Clause (b) of Sub-section (7) of Section 8 of the West Bengal Taxation Tribunal Act, 1987, will not be subject to this proviso as this proviso only deals with cases where the Tribunal may dispense with the requirements of Clause (b). In the instant case it would be clear from the order dated June 16, 1997 in RN-167 of 1997 that the interim order was passed not on the ground that it was necessary so to do for preventing any loss being caused to the applicant which may dislocate, disrupt or lead to closure of his business, or which cannot be adequately compensated in money. There was no formal prayer for interim order from the respondents also. The Tribunal noted the submission of the learned State Representative that if the assessment proceeding is completed it will not be possible to proceed with the imposition of penalty thereafter if called for. It was in such circumstances that the Tribunal passed the interim order directing the respondents not to proceed with the assessment for the period of four quarters ending March 31. 1995 till final disposal of the main application. It would be abundantly clear that this interim order is not an interim order referred to in the proviso to Sub-section (7) of Section 8 of the West Bengal Taxation Tribunal Act, 1987, and hence the argument of Mr. Chakraborty that the interim order stood vacated on December 16, 1997 cannot be accepted as legally valid.

Moreover, this Tribunal had directed that the said interim order would remain in force till disposal of the main application.

After the judgment has been delivered, Mr. Sumit Kr. Chakraborty, learned advocate for the applicant, prays for stay of operation of the judgment and order. The prayer is opposed by Mr. K.K. Saha, learned advocate for the respondents. After considering the submissions the prayer for stay is rejected.