STATE OF BIHAR v. S. S. MUKHERJEE — 1954 DIGILAW 52 (PAT)

JUDGMENT RAMASWAMI AND SINHA, JJ. In this case the Sales Tax Officer of Dhanbad assessed the petitioner to sales tax to the extent of Rs. 3,988-10-0 under Section 13(5) of the Bihar Sales Tax Act of 1947. A penalty of Rs. 5,011-6-0 was also imposed under Section 13(5) as the petitioner did not register himself as a dealer. The order of assessment is dated the 30th of May, 1949. The case of the petitioner was that contracts were entered into before the Amending Act (Act VI of 1949) came into force and that he was not liable to register himself as a dealer or to pay the sales tax which has been assessed upon him. Section 4(1) of Bihar Act, XIX of 1947, as it was originally enacted reads as follows :- "Subject to the provisions of Section 5, 6, 7 and 8 and with effect from such date as the Provincial Government may, by notification in the Official Gazette, appoint, being not earlier than thirty days after the date of the said notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Act, on sales which have taken place both in and outside Bihar, exceeded Rs. 10,000 shall be liable to pay tax under this Act on sales which have taken place in Bihar after the date so notified : Provided that the tax shall not be payable on sales involved in the execution of a contract which is shown to the satisfaction of the Commissioner to have been entered into by the dealer concerned on or before the date so notified." The contention of the petitioner was that the sales were involved in execution of the contracts which were entered into before the notification of the Provincial Government under Section 4(1) of the Act. This contention was rejected by the Sales Tax Authorities on the ground that Section 4(1) was amend with retrospective effect by Act VI of 1949. This contention was rejected by the Sales Tax Authorities on the ground that Section 4(1) was amend with retrospective effect by Act VI of 1949. The Amending Act substituted the following proviso for the original proviso of Section 4(1) : "Provided that the tax shall not be payable on sales involved in the execution of a contract which is shown to the satisfaction of the Commissioner to have been entered into by the dealer concerned on or before the 1st day of October, 1944." This Amending Act was extended to Chotanagpore by a notification of the Governor of Bihar under Section 92(1) of the Government of India Act. The notification is dated the 22nd of March, 1949. Under Section 25(1) of the Act the petitioner applied to the Board of Revenue to state a case on the following two questions of law : "(1) Can the Governor exercising powers under Section 92(1) extending the operation of Act VI of 1949 give retrospective effect to a piece of legislation affecting tax payers ? and (2) If no retrospective effect can be given does the notification in existence on the date of order of assessment but passed subsequent to the initiations of proceedings empower the Sales Tax Officer to impose tax on contracts which when executed did not invoke the provision of the sales tax ?" This application was allowed and the Board of Revenue has stated a case for the opinion of the High Court on the following question of law : "Whether the Amending Act (Bihar Sales Tax Amendment Act VI of 1949) which was extended to Chotangpore on the 22nd of March, 1949, would govern the present proceedings, which were commenced on the 15th October, 1948 ?" On behalf of the assessee Mr. P. R. Das made the submission that the Governor of Bihar could not by notification under Section 92(1) of the Government of India Act give retrospective effect to any piece of legislation. In support of his argument counsel referred to a passage of the judgment of Patanjali Sastri, J., in Jatindra Nath Gupta's case ([1949] F.C.R. 595 at p. 614). But we are unable to accept the argument of Mr. P. R. Das as valid. In support of his argument counsel referred to a passage of the judgment of Patanjali Sastri, J., in Jatindra Nath Gupta's case ([1949] F.C.R. 595 at p. 614). But we are unable to accept the argument of Mr. P. R. Das as valid. The notification of the Governor in the present case is not retrospective and the question whether the Governor could make notification under Section 92(1) with retrospective effect does not arise in this in this case and the decision of the Federal Court in Jatindra Nath Gupta's case ([1949] F.C.R. 595 at p. 614) has no application. It is clear in the present case that the Amending Act itself was retrospective and by the notification under Section 92(1) the Governor of Bihar only extended the operation of the Act to Chotanagpore. Mr. P. R. Das next put forward the contention that after the notification of the Governor under Section 92(1) a fresh proceeding should have been initiated against the assessee for the realisation of the sales tax and of the penalty under Section 13(5). It appears that the proceeding was stated on the 15th of October, 1948, and final order was passed on 30th of May, 1949. At the time the Amending Act was extended to Chotanagpore by the Governor's notification the proceeding started against the assessee was pending. But it is a mistake to suppose that the jurisdiction of a Sales Tax Officer to make assessment depends upon the issue of a notice. The issue or receipt of a notice is not the foundation of the jurisdiction of the Sales Tax Officer to make assessment or of the liability of the assessee to pay the sales tax. The liability to pay the tax is founded upon Section 4 of the Sales Tax Act which is the charging section. Section 13 of the Act only provides a machinery for the determination of the amount of the tax and any irregularity in the issue of the notice would not affect the legal validity of the assessment. That was the view taken by the Federal Court in Chatturram v. Commissioner of Income-tax ([1947] F.C.R. 116; 15 I.T.R. 302), where the material facts were almost parallel to those of the present case. In that case notices under Sections 22(1) and 22(2) of the Income-tax Act were issued on or about the 20th of April, 1940. That was the view taken by the Federal Court in Chatturram v. Commissioner of Income-tax ([1947] F.C.R. 116; 15 I.T.R. 302), where the material facts were almost parallel to those of the present case. In that case notices under Sections 22(1) and 22(2) of the Income-tax Act were issued on or about the 20th of April, 1940. At that time the Indian Income-tax Act of 1939 and the Finance Act of 1940 were not in force in the Chotanagpore Division of the State of Bihar. On the 26th of May, 1940, the Governor of Bihar acting under Section 92(2) of the Government of India Act issued a notification applying the Indian Finance Act of 1940 and the Indian Income-tax Act of 1939 to Chotanagpore Division with retrospective effect. It was argued before the Federal Court that the notices issued under Sections 22(1) and 22(2) of the Act were the foundation of the jurisdiction of the Income-tax Officer and at that time the Indian Finance Act of 1940 and the Indian Income-Tax Act of 1939 were not operating in the area in question. It was argued that the Governor cannot by a notification give jurisdiction to the Income-tax Officer in respect of this ultra vires notices. This argument was rejected by the Federal Court and it was held that the assessment order made by the Income-tax Officer was valid. At page 125 Kania, J., states :- "This contention is founded on a misunderstanding of the jurisdiction of the Income-tax Officer and the operation of the Income-tax Act. The income-tax assessment proceedings commence with the issue of a notice. The issue or receipt of a notice is not, however, the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessee to pay the tax. It may be urged that the issue and service of a notice under Section 22(1) or (2) may affect the liability under the penal clauses which provide for failure to act as required by the notice. The jurisdiction to assess and the liability to pay the tax, however, are not conditional on the validity of the notice. It may be urged that the issue and service of a notice under Section 22(1) or (2) may affect the liability under the penal clauses which provide for failure to act as required by the notice. The jurisdiction to assess and the liability to pay the tax, however, are not conditional on the validity of the notice. Suppose a person, even before a notice is published in the papers under Section 22(1), or before he receives a notice under Section 22(2) of the Income-tax Act, gets a form of return from the Income-tax Officer and submits his return, it will be futile to contend that the Income-tax Officer is not entitled to assess the party is not liable to pay any tax because a notice had not been issued to him. The liability to pay any a tax because a notice had not been issued to him. The liability to pay the tax is founded on Sections 3 and 4 of the Income-tax Act which are the charging sections, Section 22 etc. are the machinery sections to determine the amount of tax." For these reasons we hold that the Amending Act (Act VI of 1949) which was extended to Chotanagpore on the 22nd of March, 1949, would govern the proceedings against the assessee though they were commenced on the 15th October, 1948. In other words, the question referred by the Board of Revenue for the opinion of the High Court must be answered against the assessee and in favour of the State of Bihar. Mr. P. R. Das raised the point that at least as regards the penalty the action of the Sales Tax Authorities was illegal and without jurisdiction. It was pointed out by the learned counsel that the assessee got himself registered as a dealer on 30th of November, 1948, long before the Amending Act came into force in Chotanagpore. There is much force in the argument of Mr. P. R. Das but the difficulty is that this is not the question referred by the Board of Revenue for the opinion of the High Court under Section 25(1) of the Act. It should also be pointed out that in the application under Section 25(1) to the Board of Revenue the petitioner did not raise the question as to the legality of the penalty imposed upon him. It should also be pointed out that in the application under Section 25(1) to the Board of Revenue the petitioner did not raise the question as to the legality of the penalty imposed upon him. We cannot in these circumstances permit the counsel on behalf of the assessee to raise the new question for the first time at the hearing of this reference. For the reasons we have already express we answer the question referred to the High Court against the assessee and in favour of the State of Bihar. The assessee must pay the cost of the reference : hearing fee Rs. 250. Reference answered accordingly.