1966 PLP 287 (PTD)

Javed Hashmi for Respondent. Dates of hearing: 30th November and 1st December 1965. MUHAMMAD YAQUB ALI, J.‑The question which falls for determination in this reference under section 17(1) of the Sales Tax Act is "whether on the facts and circumstances of the case the Tribunal was correct in holding that the assessment made by the Sales‑tax Officer on the 26th March 1956, without service of notice under section 28 was illegal". The relevant facts gathered from the statement of the case are that the Sales‑tax Officer, 1st Additional A‑Ward, Lyallpur, received information that Sheikh Inayat Ullah, son of Muhammad Abdullah of Lyallpur assessee, who had during the year 1951‑52 got ginned from a cotton factory in Shor Kot Road 588 bales of coati, and neither filed a, return nor paid the tax. The Sales‑tax Officer, thereupon, issued on the 11th of February 1953, a notice to the assessee under section 10(4 j for appearance and production of account books. The notice was served upon one Hidayat Ali of M/s. Hidayat Ali Muhammad Ismail, Montgomery Bazar, Lyallpur, who were carrying on business in the premises formerly occupies by the assessee, Abdul Latif, a partner of the firm, appeared or, the 4th of March 1953 and stated that they were carrying on business since January 1953 and that before that the business was done premises by Inayat Ullah and Hidayat Ali, sons of Muhammad Abdullah. Hidayat Ali himself attended on the 30th of March 1953 and gave information that Inayat Ullah was carrying on business in Montgomery and gave his address as `care of Haji Khushi Muhammad, Galla Mandi, Montgomery'. A fresh notice was, thereupon, issued on the 31st of March 1953 and sent to the Sales‑tax Officer, Montgomery who sent it back with the report that Haji Khushi Muhammad was in jail and the assessee was not available at the aforesaid address. Another notice was issued on the same address on the 5th of February 1955 and received back with the report that the assessee was, in fact, doing business in Lyallpur. Thereupon, on the 4th of June 1955 a fresh notice was issued at the Lyallpur address of the assessee and like the earlier notices remained unnerved. It was reported that Muhammad Abdullah, the father of the assessee, who was carrying on cloth business in Gol Bazar, Lyallpur,' was contacted but he expressed ignorance about the whereabouts of the assessee. It further came to light that the assessee owned a house in Model Town, Lyallpur, where his wife and children were staying. In these circumstances, notice for attendance on the 7th of March 1956, was issued to the assessee and service thereof effected by affixation on the outer door of his ordinary abode. 1n those circumstances, the assessment was completed ex parte on the 26th of March 1956, raising a demand of Rs. 9,225 on a total turnover of Rs. 2,95,

200. The assessee now suddenly came out of obscurity and filed an appeal before the Appellate Assistant Commissioner contending inter alia that as no notice under section 28 of the Sales Tax Act was issued to him, the assessment was illegal and liable to be annulled on that ground. On examining the form of the notice served on the assessee by affixation and taking into consideration the provisions of sections 10 and 28 of the Sales Tax Act the Appellate Assistant Commissioner concluded that omission to issue notice under section 28 had rendered the assessment illegal and cancelled it as without any jurisdiction or sanction of law'. The Department preferred an appeal to the Tribunal challenging the correctness of the decision of the Appellate Assistant Commissioner on the ground that the notice in Form S. S. T. 24 required under section 10 (4) having been duly served on the assessee, there was no necessity for issuing a notice under section 28 of the Act. The plea did not find favour with the learned Members of the Tribunal who were of the view that section 10(4) of the Sales Tax Act being general in nature, must yield to the special provisions of section 28 which was in 1, pari materia with section 34 of the Income‑tax Act and as no ‑notice under section 28 was issued or served, the assessment made 1 by the Sales‑tax Officer could not stand and was rightly cancelled by the Appellate Assistant Commissioner. The correctness of this view is the subject‑matter of the question reproduced in the opening part of this order.

2. The scheme of levying tax on sale of goods under the Sales Tax Act brings out clearly that the instant case falls under section, 28 as a case of escaped assessment and not under section 10(4) as an original assessment. Assessments under section 10 are made in the following manner: - (1) Every manufacturer or producer and every licensed wholesaler and every exporter shall, within thirty days of the end of the quarter, send to the Sales Tax Officer a return in the prescribed form and in the prescribed manner relating to the sales made in each quarter. (2) If the Sales Tax Officer is satisfied that the return sent under subsection (1) is correct and complete, he shall make an assessment on the basis thereof and determine the amount of tax payable after giving credit for the tax paid in pursuance of the provisions of subsection (1) of section 12. (3) If the Sales Tax Officer is not so satisfied, he may, after obtaining such further particulars and such books of account and documents as he may require, determine the tax payable. (4) If no return has been sent, the Sales Tax. Officer shall make an assessment to the best of his judgment after giving the assessee an opportunity of being heard. (5) Nothing contained in this section shall prevent a Sales Tax Officer from determining in a single assessment the tax payable in respect of the sales made in two or more quarters of the same year." Unlike the provisions of the Income‑tax Act, which apply to income, profits and gains of the previous year, tax under the Sales Tax Act is levied under section 3 on gross turnover. The procedure for assessing and collecting tax is; thus, on a different basis. Tax is paid under section 12(1) monthly and returns submitted after each quarter whereupon the tax payable is determined. Ordinarily, therefore, there are to be four assessments in an accounting period extending over a year, though the Sales- tax Officer may in a given case determine in a single assessment the tax payable in respect of sales made in two or more quarters. The provisions of section 10(4), thus, apply to cases where a known assessee has omitted to submit a return whereas the case of an assessee who has suppressed from the knowledge of the assessing authority the factum of the sales made by him will fall under section 28.

3. In this view, the Tribunal was right in holding that the assessment in the instant ease could be made under section 28 of the Sales Tax Act only. It will follow that if no notice as contemplated in the section was given to the assessee the assess ment was illegal but more pertinent question arises whether an assessee who has deliberately refused to acquaint himself with the terms of the notice issued under section 10 (4) or section 28 of the Sales Tax Act can object to the assessment which follows they notice on the ground of a defect in its form. A distinction between the provisions of section 34 of Income‑tax Act and section 28 of the Sales Tax Act must be kept in view in this respect. Under section 34, "if for any reason income, profits or t gains chargeable to income‑tax have escaped assessment in any year, or have been the subject of excessive relief under this Act,) the Income‑tax Officer may, in any case in which he had reason to believe that the assessee or another person on his behalf has not filed any return or concealed the particulars of his income or deliberately furnished inaccurate particulars thereof or omitted or failed to disclose all material facts necessary for the assessment for that year, may proceed to assess or reassess such income, profits or gains". Exercise of jurisdiction under this section, therefore, depends upon a tentative conclusion by the Assessing Authority that one or more of the events enumerated in the section have occurred. The notice under this section must, accordingly, indicate the grounds on which assessment or re assessment is proposed to be made and the period of limitation for completing assessment or reassessment, as the case may be, will also depend on the application of the first part of the section or the second part. The form of the notice and the particulars set out in it are, therefore, necessary conditions for proceeding to assess or reassess income, profits or gains under section 34 of the Income‑tax Act. The provisions of section 28 of the Sales Tax Act are, however, materially different in this context. The section provides: "if for any reason any tax payable under the Act has escaped assessment or has not been paid is any year the Sales‑tax Officer may, at any time, within four years of the end of that year, assess the tax payable after issuing a notice to the assesses and making such inquiry as he considers necessary." No particular form is provided for notice in the section and, unlike section 34 of the Income‑tax Act, no reason need be mentioned in it. It is intended that the assessee should have an opportunity of being heard before the assessment is completed, which is provided for both in section 10 (4) and section 28 of the Sales Tax Act. Form of the notice under both the sections is provided for in the Rules framed under section 39 which, when published in the official Gazette, have effect as enacted under the Act. The forms will, therefore, be taken as, statutory forms, but on the above analysis of sections 10 and 28 they are of directory nature and not mandatory in the sense that a departure from the prescribed form will render an assessment illegal. The notice issued to the assessee in the instant case required his presence in person or by an authorised agent or by pleader duly instructed and able to answer all questions relating to the assessment and to produce documents relating to the assessment in question. Notwithstanding the particular form prescribed for a notice under section 28,t (SST‑15) the notice issued to the assessee prima facie conformed to the requirements of that section which, as seen above, simply provides that the Sales‑tax Officer may after issuing a notice to the assessee and making such inquiries as he considers necessary assess the tax payable under the Act. We were, thus, inclined to adopt the view that the defect in the form of the notice issued to the assessee had no fatal effect on the assessment, but inasmuch as the statement of the case will not support this answer we will remit the case to the Appellate Tribunal for making such additions and alterations to the statement of the case as will be necessary to refer the question of law which, as indicated above, suitably arises on the facts of the case. S. Q. Order accordingly.