SALES TAX OFFICER, GANJAM & ANR. versus M/S. UTTARESWARI RICE MILLS

Citation: [1973] 2 S.C.R. 310 · Decided: 18-09-1972 · Supreme Court of India · Bench: P. JAGANMOHAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

310 
SALES TAX OFFICER, GANJAM & ANR. 
v. 
M/S. UTTARESWARI RICE MILLS 
September 18, 1972 
(With Connected Appeal) 
[P, JAGANMOHAN REDDY AND H. R. KHANNA, JJ.] 
Orissa Sales Tax Act, 1947, s. 12(8)-Notice for assessment of 
escaped 111rnover-lf should indicate reasons for reopening 
c.sselismtnl, 
A 
B 
On receipt of certain information, and, as a result of information 
disclosed in documents seized from the respondePt, the appellant issued 
a notice under s. 12 (8) of the Ot'issa Sales Tax Act, 1947, ~ the Form 
C 
prescribed under r. 23 made under the Act, for re-assessing the turnover 
of the respondent. The High Court, quashed the notice on the ground 
that the appellant had not indic~ted any rea·son for issu'1>g the notice. 
Allowing the appeal to this Court, 
HELD: (I) Although the opening words used in the section are 
"if for any reason" and :not "if the sales tax authority has reason to 
believe" the difference 
~1> phraseology does not make any 
difference. 
A reason cannot exist in vacuum, and in the context, it should be the 
sales-tax authority issuing the notice who should have reason to believe 
that the turnover of a dealer has escaped assessment or has been under 
assessed. The words used in the prescribed Form also are "whereas I have 
reason to believe' that your turnover has escaped assessment .... ,"' 
Any 
view which would make the opening words of the section 
unworkable 
should be avoided. [317 C·E) 
(2) 
The ingredients of s. 12 (8) of the Orissa Sales·tax Act. 1947, 
are: (i). there must exist reason for the belief that, (a) the turnover of 
a dealer for any period to which the Act applies has escaped assessment or 
has been under-assessed; or, (b) the tax has been 
compounded when 
composition is not permissible under the Act and the rules made there· 
under; (ii) in cases mentioned in cl. (i) the sales-tax authority may at 
any time within 36 months from the expiry of the year to which the above 
mentioned period relates call for a return under s. 11 ( 1) of the Act; 
(iii) after taking the steps mentioned in els. (i) and (ii) 1>bove. the sales 
tax authority may proceed to ass~ss the amou:rtt of the tax due from the 
dealer in the manner laid down in s. 12 (5) of the Act; (iv) the sales tax 
authority may also direct in cases where escapement or under-assessment 
or composition is due to the dealer having concealed particulars of his turn-
D 
E 
F 
over or having without sufficient cause 
furnished 
incorrect particulars 
thereof that the dealer shall pay penalty in addition to the ta'x assessed: 
G 
and ( v) such penalty shall not exceed one and a half times the amount . 
of the tax so assessed. [316 F-H; 317 A-Cl 
The proceedings for assessment or re-assessment under the sl!ction start 
with the issue of a notice and it is only after the service of the notice that 
the assessee whose turnover is sought to be assessed or re-assessed hecomes 
a party to the proceedings. 
Therefore, it is not ncccssarv to intimal~ to 
the assessee the nature of the alleged escapement in the notice issued to him 
H 
under the section. To held that the reasons which led to the issue of the 
said notice should be incorporated in the notice and that the failure to <.!<> 
so invalidated the notice would be tantamount to reading something into the 
statute which. in fact. is not there. However, if the sales-tax officer is in 
.. 
A 
S.T.0. V. UTTARESWARI RICE MILLS (Khanna, J.)· 
311 
possessio.• of material which he proposes to me against the dealer in pro-
ceedings for re-assessment the said officer must, before using that material, 
bring it to the notice of the dealer and give him an adequate opportunity to 
explain and answer the case on the basis of that material. [319 B; 320 C; 
321 F-HJ 
B. Patnaik Mines (P) Ltd. v. N. K. Molwnty Sales Tax Officer, 1.L.R. 
B 
[1967] Cuttack 446, overruled. 
c 
D 
Conunissioner of lnconie Tax, Bengal v. Messrs Malialiram Ramjidas 
[1940] 8,1.T.R. 442, (P.C.) applied. 
K. S. Rashid and Son v. Income Tax Officer, [1964] 52 l.T.R. 355 
(S.C.) an<l S. Na110.ivc.nappa and Ors. v. Conunissioner of Inco1ne 
Tax. 
Bangalore. [1967] 63 J.T.R. 219, (S.C.) followed. 
( 3) The fac,t that it is mentioned in the notice that penalty may also 
be imposed would \not make any difference to the validity of the notice. 
The question of imp-0sition of penalty will only arise at the time of making 
an order for re-assessment. At that stage, the sales-tax officer would go 
into the question \v

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