Chhajjoo Ram Mool Chand v. State of U. P. — 1959 DIGILAW 84 (ALL)

JUDGMENT N.U. Beg, J. - This is a reference under Sec. 11 of the U. P. Sales Tax Act. The applicants in the case are Chhajjuram Mool Chand, Lalkuan, Delhi, a firm carrying on business as forest contractors in Nepal. The head office of the firm is at Delhi. The firm carries on business in cutting timber in the Nepal forests and preparing Railway sleepers among other things from it. The sleepers are brought to Railway stations Tikonia and Chandan Chauki, which are situate in Uttar Pradesh. From these stations they are distributed to the various purchasers. The applicants were assessees under the Sales Tax Act for the year 1948-49. A notice under Sec. 31 of the Sales Tax Act was issued to them on the ground that a part of their income had escaped assessment. In response to this notice the applicants produced their account-books. These account books were rejected by the Sales Tax Officer who made the assessment on the basis of the best judgment. He also held that the sales of these sleepers were completed at Tikonia and Chandan Chauki and the property in the goods passed to the buyers at those stations. The turnover to the business was, therefore, held to be assessable to Sales Tax Act in Uttar Pradesh. 2. Aggrieved with the said order the firm filed an appeal before the learned Judge (appeals). The learned Judge set aside the assessment order and remanded the case for further enquiry in respect of three matters which in his view arose for consideration. 3. The Commissioner Sales Tax then filed an application in revision against the said order of remand. In that revision application the learned Judge (Revision) was of opinion that remand was not necessary and the case should have been decided by the learned Judge (appeals) on merits. The learned Judge (appeals) found that the sales at the Railway stations were only conditional and were to be treated as complete only on the acceptance of the goods by the purchasers at the station of destination. He further held that according to the general practice some Rly. sleepers were delivered unconditionally at the two Railway stations, Tikonia and Chandan Chauki. In respect of these sleepers the sales were treated to be as complete sales within Uttar Pradesh. He further held that according to the general practice some Rly. sleepers were delivered unconditionally at the two Railway stations, Tikonia and Chandan Chauki. In respect of these sleepers the sales were treated to be as complete sales within Uttar Pradesh. He, therefore, remanded the case for ascertaining as to what was the turnover of the sleepers unconditionally delivered at Tikonia and Chandan Chauki Railway stations. 4. The applicants went up in revision against that order of the appellate Court. This revision application was rejected mainly on the ground that the final assessment had not, been made till then and the application was, therefore, pre-nature. Thereafter the applicants made an application under Sec. 11 of the U. P. Sales Tax Act praying for a reference to the High Court. That application having been dismissed, the applicants moved the High Court for action under Sec. 11 of the U. P. Sales Tax Act. The High Court allowed the said application and held that a reference should have been made in the case. Two questions were framed by the High Court on which the authority concerned was directed to state the case. These two questions are as follows:- "1. Whether in view of the provisions of Sec. 7 (3) of the Act the Sales Tax Officer was right in law in assessing the liability of the firm to tax on the basis of its turnover for the assessment year ? "2. Whether an assessment under Sec. 21 of the Act must not be completed within three years from the end of the assessment year." 5. Thereupon the learned Judge (Revisions) , Sales Tax Uttar Pradesh, prepared a statement of the case in the above two questions and submitted it to the High Court. The reference under Sec. 11 of the U. P. Sales Tax Act has, accordingly, been fixed for hearing before us today. 6. At the very outset, it may be mentioned that the learned Counsel for the applicant has stated that he does not wish to press the point raised in question no. 2. That point may, therefore, be taken to be decided against the applicant. 7. So far as question no. 1 is concerned, we are of opinion that this reference must be allowed. 2. That point may, therefore, be taken to be decided against the applicant. 7. So far as question no. 1 is concerned, we are of opinion that this reference must be allowed. It may be mentioned that the U.P. Sales Tax Act was amended in the year 1954 and in this particular case we are concerned with the law as it stood prior to the amendment of the main Act by the Amending Act. Sec. 7 as it stood prior to the amendment in 1954 ran as follows:- "7 (1) Subject to the provisions of Sec. 18, every dealer whose turnover in the previous year is Rs. 12000/- or more in a year shall submit such return or returns of his turnover of the previous year within sixty days of the commencement of the assessment year in such form and verified in such manner as may be prescribed: Provided ................................................... Provided ................................................... (2) ............................................................. (3) If no return is submitted by the dealer under sub-sec. (1) within the period prescribed in that behalf or, if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such inquiry as he considers necessary, determine the turnover for the dealer for the previous year to the best of his judgment and assess the tax on the basis thereof : Provided that before taking action under this sub-sec. the dealer shall be given a reasonable opportunity of proving the correctness and completeness of any return submitted by him." 8. Sub-clause (3) of Sec. 7 cited above clearly lays down that in assessing the tax to the best of his judgment the Sales Tax Officer shall take into consideration the turnover of the dealer "for the previous year." In view of the clear provisions of this section it is difficult to entertain two opinions on the above point, and it must be held that the Sales Tax Officer was wrong in assessing the liability of the firm to tax on the basis of its turnover for the assessment year. It is obvious that for the purpose of making assessment to the best of his judgment the Sales Tax Officer should have taken into consideration the turnover for the previous year. 9. The same question arose in this Court in two Civil References, viz. It is obvious that for the purpose of making assessment to the best of his judgment the Sales Tax Officer should have taken into consideration the turnover for the previous year. 9. The same question arose in this Court in two Civil References, viz. Civil Reference No. 4 of 1955, Kishori Lal Kunj Behari Lal v. Commissioner of Sales Tax, D/d. 30.10.1958, and Civil Reference No. 14 of 1956, Amarnath Shambhoonath v. Commissioner, Sales Tax, Uttar Pradesh, D/d. 22.1.1959. In both the references the same answer was given. For the above reasons we allow this reference and direct the authority concerned to dispose of the matter in the light of the conclusions given by us above. The excess tax, if any, paid by the assessees shall be refunded to the assessees. The applicants are entitled to their costs which we assess at Rs. 100/-.