Western Commercial Corporation Vs. State of West Bengal and ors. - Court Judgment

Excerpt:
1. by the instant application under section 8 of the west bengal taxation tribunal act, 1987 the applicant nos. 1 and 2, a registered partnership-firm and one of its partners respectively, have challenged the validity of a show cause notice served on them by the additional commissioner of commercial taxes. the applicant-firm is, inter alia, a re-seller of chemicals and is registered under the bengal finance (sales tax) act, 1941 (in short, "the 1941 act"). in assessing the applicant in respect of the four quarters ending on august 31, 1986 the commercial tax officer, central section (assessment wing) rejected the firm's books of accounts and by an order dated december 24, 1990 raised an additional demand of rs. 8,51,937 including a penalty of rs. 50,000, over and above the admitted tax as shown in the return. notices of demand in forms vii and viil were served on the firm on february 9, 1991. against such, assessment the firm preferred on april 8, 1991, before the assistant commissioner of commercial taxes, central section (assessment wing), two appeals--one against the assessment of tax and penalty and the other against the imposition of interest. but during the pendency of these appeals the assessing authority, in purported exercise of power under section 20(3) of the 1941 act suo motu revised on december 16, 1991 the assessment as well as the order as to interest and thereby raised the demand further. the assessing authority then issued modified notices of demand in forms nos. vii and viil in lieu of earlier demand notices. the firm again preferred two appeals on march 10, 1992 against such suo motu modification of assessment order and also the order relating to interest. in disposing of these two appeals, bearing nos. a-1113/aw/91-92 and a-1114/aw/91-92, the assistant commissioner of commercial taxes annulled the two suo motu revisions of the tax assessment and levy of interest, on grounds, inter alia, that while appeals against the original assessment of tax and interest were still pending before the superior authority, the commercial tax officer was not legally competent to exercise the suo motu revisional jurisdiction to disturb the self same assessment of tax and interest.but in the meantime, the additional commissioner of commercial taxes seeking to exercise the suo motu power under section 20(3) served a notice on the firm asking it to show cause why the appellate order of the assistant commissioner in appeal nos. a-1113/ aw/91-92 and a-1114/aw/91-92 should not be set aside. the firm has, therefore, filed the instant application before this tribunal questioning the legality of the said notice of the additional commissioner (respondent no. 3).according to the firm the order of the respondent no. 1 (the assessing authority) suo motu revising his own assessment was set aside by the assistant commissioner on the settled principle of law that during the pendency before a superior authority an appeal against an order of a subordinate authority, the latter (i.e., such subordinate authority) shall not make any change in the order appealed against, to render the appeal infructuous. the firm therefore contends that the additional commissioner cannot legally be competent to make attempt to revive a patently illegal suo motu order of the assessing authority which has already been set aside competently by the assistant commissioner on established legal principle. it is further added by the firm that the notice of the respondent no. 3 is intended to save the additional assessment from being barred by limitation and that since rule 80(5) of the bengal sales tax rules, 1941 (in short, "the 1941 rules") prohibits suo motu revision if appeal has already been filed, the order of the assessing officer in his suo motu revision was patently illegal and for that matter, the respondent no. 3 cannot legally revive such illegal order of the assessing officer. the applicant-firm prays for a direction on the respondents for cancelling the impugned notice and for forbearing from giving effect to such notice.2. the respondents in resisting the prayer of the applicants have contended in their affidavit-in-opposition that the respondent no. 3 is wholly competent to revise suo motu any order of his subordinate in terms of section 20(3) and that the order enhancing the tax was passed by the assessing officer by way of review of his own earlier order of assessment and that jurisdiction to pass such an order is not limited by the pendency of any appeal or by the provisions of rule 80(5) of the 1941 rules. it is their further case that mere service of a show cause notice communicating the gist of a proposed order cannot lead to an inference that despite any logical objection against such proposed order, the final order of the respondent no. 3 would be the same as proposed.3. the question that calls for decision here is whether the respondent no. 3 has acted illegally or he was within his jurisdiction in issuing the impugned notice dated november 19, 1997.4. mr. l.k. gupta, learned advocate for the applicant, at the first instance questions the validity of the notices issued by the additional commissioner on the ground that these notices do not disclose any reason for which the said authority considered it necessary to reopen the original assessment. but, if the additional commissioner gives the assessee an opportunity of being heard on all the grounds on which he (the additional commissioner) considered it necessary to reopen the assessment, there can be no denial of justice. the ratio of the decision of the supreme court in the case of sales tax officer, ganjam v. uttareswari rice mills [1972] 30 stc 567 provides the appropriate guideline in the matter.5. the assistant commissioner of commercial taxes, assessment wing, in his order in appeal case no. a-1113/aw/1991-92 has referred to some reported decisions while discussing the ambit of review jurisdiction, but in the last but three paragraphs of his order he has proceeded with the assumption that the commercial tax officer passed the impugned order modifying the earlier assessment in exercise of revisional jurisdiction. it may be seen that the revisional power as contemplated in section 20 of the 1941 act does not admit of revision of one's own order. both clauses (a) and (b) of sub-section (3) of section 20 empowers the commissioner to revise any assessment or any order passed by a person appointed under section 3 of the 1941 act to assist him.this clearly indicates that the section empowers the commissioner to revise the orders of his subordinates but not of his own. a delegated authority cannot stand on any better footing and can therefore revise only a subordinate officer's order. thus, the commercial tax officer concerned cannot have exercised his revisional power in modifying his own assessment order. be it mentioned that the applicant-firm has not, for reasons best known to it, filed any copy of the modifying order of the commercial tax officer. thus, we have been shut out of the information as to how the commercial tax officer has described his order, i.e., either as revision or as review. we are also not in a position to know if the modification of the assessment order involved mere corrective mathematical calculations on the existing materials of the already concluded assessment or involved new materials. be that as it may, since the law permits review of one's own order under section 20(4), we, in the absence of the copy of the order, can take it to be an order of the assessing authority by way of such review.6. now the question is if such review by the commercial tax officer of his own assessment order is permissible during the pendency of appeal against such order. in our opinion, the principle, as applicable to a situation where an order is revised suo motu by an authority during the pendency of an appeal against such order, will apply in case of review also. mr. gupta has quite appropriately drawn our attention to rule 80(5) of the 1941 rules. this rule lays down, inter alia, that the authority competent to exercise power of revision shall not, on his own motion revise any assessment or an order passed under the 1941 act, if the period within which an appeal may be made has not expired. we fully cater to the view of mr. gupta that the legislative intent in framing this rule is not only to prohibit such suo motu revision during the period but has also greater implication. he adds that it would be wrong to say that after expiry of the period the commissioner or his delegated authority would be competent to exercise the power despite the pendency of an appeal against the order which is intended to be suo motu revised. we fully agree with mr. gupta that this rule has been framed to ensure that an appeal filed against an order is not interfered with by any suo motu revision during the pendency of the appeal. this rule not only prohibits exercise of revisional power during the period available for. filing of appeal but also by necessary implication prohibits exercise of the revisional power, even after the period of limitation, during the course of pendency of the appeal.unless this be the position the clause (i) to the main sub-rule (5) of rule 80 of the 1941 rules will be a meaningless clog on the power of such authority during the period of limitation. if suo motu revision of an order during the pendency of the appeal against such order is allowed it will directly interfere with the appellate authority's jurisdiction and will at times render the appeal infructuous due to change of nature and character of the order by way of such revision.such outcome will not only lead to confusion but will also create anarchy in the justice dispensation process envisaged in the 1941 act.the same principle applies with greater force in the matter of review of his own order by a subordinate authority when an appeal against the same order is already pending before a superior authority. therefore, such review is not permissible. in this context, the decision of the supreme court reported in [1981] 48 stc 248 (tel utpadak kendra v.deputy commissioner of sales tax) 7. the question will obviously arise as to what should be the remedy if an assessing authority during the pendency of appeal against his own assessment order detects gross instances of concealment of sales or evasion of tax relevant to the assessed period. will the assessing officer be a helpless on-looker without any remedy no doubt, the 1941 act does not contain any specific provision to meet such situation. in our opinion, in such situation the best course would be to lay, by way of a memorandum, before the authority before whom the appeal is pending the full particulars of concealment of sales or evasion of tax, for adjudication of the matter along with the appeal. the appellate authority has competent jurisdiction to examine if there was any evasion of tax.8. in the instant case, the appeal against the original assessment is still pending. it is open to the assessing authority to make a memorandum of the materials which prompted him to review his order, and shall file the same before the appellate authority for a combined hearing of the appeal and the memorandum. the appellate authority can dispose of the whole matter as would be before him, after of course giving the dealer-assessee an opportunity of being heard. this seems to be the appropriate way of dealing with the matter without unnecessary complicating the appeal proceeding by suo motu review of the assessment during the pendency of the appeal.9. it has been argued by shri k.k. saha, learned advocate for the respondents, that the additional commissioner has the unrestricted jurisdiction to revise under section 20 of the 1941 act any order of his subordinate, and that the order of the assistant commissioner setting aside the order of the commercial tax officer (modifying his own assessment) being also an order within the meaning of section 20, there can be no legal prohibition for him (the additional commissioner) to revise the said order of the commercial tax officer. in support of his contention he refers to the decision of the supreme court reported in [1997] 107 stc 579 (commissioner of sales tax, orissa v. halari store). the said decision is in the context of section 23(4)(a) of the orissa sales tax act, 1947. in the said case the supreme court has held that under the said section the commissioner has power to revise any order, including an appellate order made under the act or the rules by a person other than the tribunal or the additional tribunal. he further adds that when the additional commissioner has the competence to exercise power under clauses (a) and (b) of section 20(3) to revise any such order, the notice issued by the additional commissioner initiating the revision proceeding cannot be ipso facto bad and that after hearing the assessee the additional commissioner may, being satisfied, uphold the assessee's contention, and therefore, it is premature for the assessee to question the authority of the said officer in initiating a suo motu revision under the said section. but this argument could have been valid only if the additional commissioner could have any choice in making his "decision", in the true sense of the term. where it is impermissible for a subordinate authority to review his own order against which appeal has already been filed and pending before the superior authority, there can be no choice for the additional commissioner, in the proposed suo motu revision, except for declaring the c.t.o.'s action of review as impermissible and such declaration will have the effect of justifying the order of the assistant commissioner setting aside the review order of the assessing authority.so, it will be a meaningless formality to initiate a suo motu revision and to drag the assessee into it when the revisional authority's only conceivable decision stands predetermined.10. in the above circumstances, it will he useless to pursue with the impugned notices of the additional commissioner. hence, the application of the applicant is allowed and the said impugned notices issued by the additional commissioner shall not be pursued further. the commercial tax officer is, however, at liberty to submit his memorandum, as discussed above, before the appellate authority before whom appeals against the original assessments are still pending. we make no order as to costs.

Judgment:
1. By the instant application under Section 8 of the West Bengal Taxation Tribunal Act, 1987 the applicant Nos. 1 and 2, a registered partnership-firm and one of its partners respectively, have challenged the validity of a show cause notice served on them by the Additional Commissioner of Commercial Taxes. The applicant-firm is, inter alia, a re-seller of chemicals and is registered under the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act"). In assessing the applicant in respect of the four quarters ending on August 31, 1986 the Commercial Tax Officer, Central Section (Assessment Wing) rejected the firm's books of accounts and by an order dated December 24, 1990 raised an additional demand of Rs. 8,51,937 including a penalty of Rs. 50,000, over and above the admitted tax as shown in the return. Notices of demand in forms VII and VIIL were served on the firm on February 9, 1991. Against such, assessment the firm preferred on April 8, 1991, before the Assistant Commissioner of Commercial Taxes, Central Section (Assessment Wing), two appeals--one against the assessment of tax and penalty and the other against the imposition of interest. But during the pendency of these appeals the assessing authority, in purported exercise of power under Section 20(3) of the 1941 Act suo motu revised on December 16, 1991 the assessment as well as the order as to interest and thereby raised the demand further. The assessing authority then issued modified notices of demand in forms Nos. VII and VIIL in lieu of earlier demand notices. The firm again preferred two appeals on March 10, 1992 against such suo motu modification of assessment order and also the order relating to interest. In disposing of these two appeals, bearing Nos. A-1113/AW/91-92 and A-1114/AW/91-92, the Assistant Commissioner of Commercial Taxes annulled the two suo motu revisions of the tax assessment and levy of interest, on grounds, inter alia, that while appeals against the original assessment of tax and interest were still pending before the superior authority, the Commercial Tax Officer was not legally competent to exercise the suo motu revisional jurisdiction to disturb the self same assessment of tax and interest.

But in the meantime, the Additional Commissioner of Commercial Taxes seeking to exercise the suo motu power under Section 20(3) served a notice on the firm asking it to show cause why the appellate order of the Assistant Commissioner in appeal Nos. A-1113/ AW/91-92 and A-1114/AW/91-92 should not be set aside. The firm has, therefore, filed the instant application before this Tribunal questioning the legality of the said notice of the Additional Commissioner (respondent No. 3).

According to the firm the order of the respondent No. 1 (the assessing authority) suo motu revising his own assessment was set aside by the Assistant Commissioner on the settled principle of law that during the pendency before a superior authority an appeal against an order of a subordinate authority, the latter (i.e., such subordinate authority) shall not make any change in the order appealed against, to render the appeal infructuous. The firm therefore contends that the Additional Commissioner cannot legally be competent to make attempt to revive a patently illegal suo motu order of the assessing authority which has already been set aside competently by the Assistant Commissioner on established legal principle. It is further added by the firm that the notice of the respondent No. 3 is intended to save the additional assessment from being barred by limitation and that since Rule 80(5) of the Bengal Sales Tax Rules, 1941 (in short, "the 1941 Rules") prohibits suo motu revision if appeal has already been filed, the order of the assessing officer in his suo motu revision was patently illegal and for that matter, the respondent No. 3 cannot legally revive such illegal order of the assessing officer. The applicant-firm prays for a direction on the respondents for cancelling the impugned notice and for forbearing from giving effect to such notice.

2. The respondents in resisting the prayer of the applicants have contended in their affidavit-in-opposition that the respondent No. 3 is wholly competent to revise suo motu any order of his subordinate in terms of Section 20(3) and that the order enhancing the tax was passed by the assessing officer by way of review of his own earlier order of assessment and that jurisdiction to pass such an order is not limited by the pendency of any appeal or by the provisions of Rule 80(5) of the 1941 Rules. It is their further case that mere service of a show cause notice communicating the gist of a proposed order cannot lead to an inference that despite any logical objection against such proposed order, the final order of the respondent No. 3 would be the same as proposed.

3. The question that calls for decision here is whether the respondent No. 3 has acted illegally or he was within his jurisdiction in issuing the impugned notice dated November 19, 1997.

4. Mr. L.K. Gupta, learned Advocate for the applicant, at the first instance questions the validity of the notices issued by the Additional Commissioner on the ground that these notices do not disclose any reason for which the said authority considered it necessary to reopen the original assessment. But, if the Additional Commissioner gives the assessee an opportunity of being heard on all the grounds on which he (the Additional Commissioner) considered it necessary to reopen the assessment, there can be no denial of justice. The ratio of the decision of the Supreme Court in the case of Sales Tax Officer, Ganjam v. Uttareswari Rice Mills [1972] 30 STC 567 provides the appropriate guideline in the matter.

5. The Assistant Commissioner of Commercial Taxes, Assessment Wing, in his order in appeal case No. A-1113/AW/1991-92 has referred to some reported decisions while discussing the ambit of review jurisdiction, but in the last but three paragraphs of his order he has proceeded with the assumption that the Commercial Tax Officer passed the impugned order modifying the earlier assessment in exercise of revisional jurisdiction. It may be seen that the revisional power as contemplated in Section 20 of the 1941 Act does not admit of revision of one's own order. Both Clauses (a) and (b) of Sub-section (3) of Section 20 empowers the Commissioner to revise any assessment or any order passed by a person appointed under Section 3 of the 1941 Act to assist him.

This clearly indicates that the section empowers the Commissioner to revise the orders of his subordinates but not of his own. A delegated authority cannot stand on any better footing and can therefore revise only a subordinate officer's order. Thus, the Commercial Tax Officer concerned cannot have exercised his revisional power in modifying his own assessment order. Be it mentioned that the applicant-firm has not, for reasons best known to it, filed any copy of the modifying order of the Commercial Tax Officer. Thus, we have been shut out of the information as to how the Commercial Tax Officer has described his order, i.e., either as revision or as review. We are also not in a position to know if the modification of the assessment order involved mere corrective mathematical calculations on the existing materials of the already concluded assessment or involved new materials. Be that as it may, since the law permits review of one's own order under Section 20(4), we, in the absence of the copy of the order, can take it to be an order of the assessing authority by way of such review.

6. Now the question is if such review by the Commercial Tax Officer of his own assessment order is permissible during the pendency of appeal against such order. In our opinion, the principle, as applicable to a situation where an order is revised suo motu by an authority during the pendency of an appeal against such order, will apply in case of review also. Mr. Gupta has quite appropriately drawn our attention to Rule 80(5) of the 1941 Rules. This rule lays down, inter alia, that the authority competent to exercise power of revision shall not, on his own motion revise any assessment or an order passed under the 1941 Act, if the period within which an appeal may be made has not expired. We fully cater to the view of Mr. Gupta that the legislative intent in framing this rule is not only to prohibit such suo motu revision during the period but has also greater implication. He adds that it would be wrong to say that after expiry of the period the Commissioner or his delegated authority would be competent to exercise the power despite the pendency of an appeal against the order which is intended to be suo motu revised. We fully agree with Mr. Gupta that this rule has been framed to ensure that an appeal filed against an order is not interfered with by any suo motu revision during the pendency of the appeal. This rule not only prohibits exercise of revisional power during the period available for. filing of appeal but also by necessary implication prohibits exercise of the revisional power, even after the period of limitation, during the course of pendency of the appeal.

Unless this be the position the Clause (i) to the main Sub-Rule (5) of Rule 80 of the 1941 Rules will be a meaningless clog on the power of such authority during the period of limitation. If suo motu revision of an order during the pendency of the appeal against such order is allowed it will directly interfere with the appellate authority's jurisdiction and will at times render the appeal infructuous due to change of nature and character of the order by way of such revision.

Such outcome will not only lead to confusion but will also create anarchy in the justice dispensation process envisaged in the 1941 Act.

The same principle applies with greater force in the matter of review of his own order by a subordinate authority when an appeal against the same order is already pending before a superior authority. Therefore, such review is not permissible. In this context, the decision of the Supreme Court reported in [1981] 48 STC 248 (Tel Utpadak Kendra v.Deputy Commissioner of Sales Tax) 7. The question will obviously arise as to what should be the remedy if an assessing authority during the pendency of appeal against his own assessment order detects gross instances of concealment of sales or evasion of tax relevant to the assessed period. Will the assessing officer be a helpless on-looker without any remedy No doubt, the 1941 Act does not contain any specific provision to meet such situation. In our opinion, in such situation the best course would be to lay, by way of a memorandum, before the authority before whom the appeal is pending the full particulars of concealment of sales or evasion of tax, for adjudication of the matter along with the appeal. The appellate authority has competent jurisdiction to examine if there was any evasion of tax.

8. In the instant case, the appeal against the original assessment is still pending. It is open to the assessing authority to make a memorandum of the materials which prompted him to review his order, and shall file the same before the appellate authority for a combined hearing of the appeal and the memorandum. The appellate authority can dispose of the whole matter as would be before him, after of course giving the dealer-assessee an opportunity of being heard. This seems to be the appropriate way of dealing with the matter without unnecessary complicating the appeal proceeding by suo motu review of the assessment during the pendency of the appeal.

9. It has been argued by Shri K.K. Saha, learned Advocate for the respondents, that the Additional Commissioner has the unrestricted jurisdiction to revise under Section 20 of the 1941 Act any order of his subordinate, and that the order of the Assistant Commissioner setting aside the order of the Commercial Tax Officer (modifying his own assessment) being also an order within the meaning of Section 20, there can be no legal prohibition for him (the Additional Commissioner) to revise the said order of the Commercial Tax Officer. In support of his contention he refers to the decision of the Supreme Court reported in [1997] 107 STC 579 (Commissioner of Sales Tax, Orissa v. Halari Store). The said decision is in the context of Section 23(4)(a) of the Orissa Sales Tax Act, 1947. In the said case the Supreme Court has held that under the said section the Commissioner has power to revise any order, including an appellate order made under the Act or the Rules by a person other than the Tribunal or the Additional Tribunal. He further adds that when the Additional Commissioner has the competence to exercise power Under Clauses (a) and (b) of Section 20(3) to revise any such order, the notice issued by the Additional Commissioner initiating the revision proceeding cannot be ipso facto bad and that after hearing the assessee the Additional Commissioner may, being satisfied, uphold the assessee's contention, and therefore, it is premature for the assessee to question the authority of the said officer in initiating a suo motu revision under the said section. But this argument could have been valid only if the Additional Commissioner could have any choice in making his "decision", in the true sense of the term. Where it is impermissible for a subordinate authority to review his own order against which appeal has already been filed and pending before the superior authority, there can be no choice for the Additional Commissioner, in the proposed suo motu revision, except for declaring the C.T.O.'s action of review as impermissible and such declaration will have the effect of justifying the order of the Assistant Commissioner setting aside the review order of the assessing authority.

So, it will be a meaningless formality to initiate a suo motu revision and to drag the assessee into it when the revisional authority's only conceivable decision stands predetermined.

10. In the above circumstances, it will he useless to pursue with the impugned notices of the Additional Commissioner. Hence, the application of the applicant is allowed and the said impugned notices issued by the Additional Commissioner shall not be pursued further. The Commercial Tax Officer is, however, at liberty to submit his memorandum, as discussed above, before the appellate authority before whom appeals against the original assessments are still pending. We make no order as to costs.