# SUPDT. OF TAXES, DHUBRI & ORS v. ONKARMAL NATHMAL TRUST ETC. ETC

- **Citation:** [1975] Supp. 1 S.C.R. 365
- **Court:** Supreme Court of India
- **Decided:** 1975-05-01
- **Bench:** A. N. Rt\Y, H. R. Khanna. K. K. Mathew, M. H. Beg Andy. V. Chandrachud
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supdt-of-taxes-dhubri-ors-v-onkarmal-nathmal-trust-etc-etc-6526
- **Pages:** 29

## Headnote

Assam Taxation (on goods carried by Road or Inland Waterways) Act,
1961, sub-ss. (1) and (2) of s. 7, sub-s. (4) of s. 9 and s.
11-Notice on
assessee to be served within two years for filing return-Court ordering stay of
proceedings under tire Act-Notice of demand for return after expiry of two
years period-Notice under s. 7(2), if iflegal.
Consequent upon the declaration of the invalidity of the Assam Taxation
lon goods carried by Road or on Jnland Waterways) Act, 1954, by the Supreme Court in Atiabari Tea Co. Ltd. v. The State of Assam and Ors. [19611
1 S.C.R. 806, on the ground that prior sanction of the Presidend was not taken,
the ·Assam
Legislature
passed
on April
6,
1961, the
Assam
Taxation
(on goods
carried
by.
Road
or on Inland
Waterways)
Act,
1961.
This Act was to
remain in force with
retrospective effect from 24 April,
1954, upto 1 March, 1962.
The respondents challenged the validity of the
Ac~ before the High Court of Assam in writ petitions and they applied for
injunction restraining the appellants from taking any proceedings under the
Act.
Interim orders of injunction were passed on various dates.
The appellant~ opposed the interim orders of injunction.
A common order was passed
by
the
Court
on
18-9-1961
making
the
orders
absolute
and restraining
the
appel!ants
from
taking
any proceedings
under
the
Act.
The order
staying
proceedings
continued
till the
new
Act was held
ultra vires the
Constitution
by
the
High
Court. On
August l,
1963, he High Court held the new Act to be ultra vires. On the same day
the High Court granted certificate of fitness to appeal to this Court.
On
December 13, 1963, this Court in Khyeberi Tea Co. Ltd. & Anr v. The State
uf Assam, [1964] 5 S .. C.R. 975, held the Act of 1961 to be valid.
On the
strength of the certificate granted by the High Court, the State of Assrrm
filed an appeal in this Court on March 4, 1964.
On October 28, 1964, this
Court granted interim stay ofl the operation of the judgment of the High Court.
On January 29, 1965, the interim stay granted by this Court was made absolute.
On April 1, 1968, this Court accepted the appeals filed by the State.
the first sub-section of section 7 requires every producer and dealer to
fumish returns of manufactured tea carried in tea containers and jute CaJ:ried
B
c
D
E
F
in bales in such forms and to such authority as may be prescribed. The second
sub-section states that in case of any producer or dealer who, in .the opinion
G
of the Commissioner, is liable to pay tax for any return period· or a part
thereof, the Commissioner may serve within two years of the expiry of the
aforesaid period, a notice in the prescribed form requiring him to furnish a
return of goods carried and such producer or dealer shall thereupon furnish
the return within the date and to the authority mentioned in the notice. Subse;:;!ion (Z) of section 9 states that if the Commissioner is not satisfied that a
return furnished under section 7 is correct and complete, be shaH serve on the
producer or dealer a notice requiring him, on the date and hour and place
H
mentioned therein, either to attend in person or to produce or cause to be produced any evidence on which he may rely in support of his return. Sub-section
(4) states that if a producer or dealer fails to make a return as required by
section 7 or having made the return, fails to comply with the terms of the notice
issued under sub-section (2) of s. 9, the Commiss.ioner shall, by an order in writJOg', assess to the best of his judgment the producer or dealer and determine~
zax payable by him on the basis of such assessment. It is provided that before
making assessment the commissioner may allow the producer or dealer such
;}- .
r -
366
SUPREME COURT REPORTS
[1975] SUPP· S.C.~.
A further ti~e .as he thinks fit to make the return or to comply with the terms
of he nohce Issued under sub-section (2) of section 9.
B
c
It _is only after thei Sta!e obtained interim order from this CoUit that notices
were Issued by the

## Text

_Characters 0–39,791 of 91,391. This is a partial read: ask again with offset=39791 for what follows._

i
·· ~
365
SUPDT. OF TAXES, DHUBRI & ORS.
A
v.
ONKARMAL NATHMAL TRUST ETC. ETC.
May 1, 1975
[A. N. Rt\Y, C.J., H. R. KHANNA. K. K. MATHEW, M. H. BEG
ANDY. V. CHANDRACHUD, JJ.]
Assam Taxation (on goods carried by Road or Inland Waterways) Act,
1961, sub-ss. (1) and (2) of s. 7, sub-s. (4) of s. 9 and s.
11-Notice on
assessee to be served within two years for filing return-Court ordering stay of
proceedings under tire Act-Notice of demand for return after expiry of two
years period-Notice under s. 7(2), if iflegal.
Consequent upon the declaration of the invalidity of the Assam Taxation
lon goods carried by Road or on Jnland Waterways) Act, 1954, by the Supreme Court in Atiabari Tea Co. Ltd. v. The State of Assam and Ors. [19611
1 S.C.R. 806, on the ground that prior sanction of the Presidend was not taken,
the ·Assam
Legislature
passed
on April
6,
1961, the
Assam
Taxation
(on goods
carried
by.
Road
or on Inland
Waterways)
Act,
1961.
This Act was to
remain in force with
retrospective effect from 24 April,
1954, upto 1 March, 1962.
The respondents challenged the validity of the
Ac~ before the High Court of Assam in writ petitions and they applied for
injunction restraining the appellants from taking any proceedings under the
Act.
Interim orders of injunction were passed on various dates.
The appellant~ opposed the interim orders of injunction.
A common order was passed
by
the
Court
on
18-9-1961
making
the
orders
absolute
and restraining
the
appel!ants
from
taking
any proceedings
under
the
Act.
The order
staying
proceedings
continued
till the
new
Act was held
ultra vires the
Constitution
by
the
High
Court. On
August l,
1963, he High Court held the new Act to be ultra vires. On the same day
the High Court granted certificate of fitness to appeal to this Court.
On
December 13, 1963, this Court in Khyeberi Tea Co. Ltd. & Anr v. The State
uf Assam, [1964] 5 S .. C.R. 975, held the Act of 1961 to be valid.
On the
strength of the certificate granted by the High Court, the State of Assrrm
filed an appeal in this Court on March 4, 1964.
On October 28, 1964, this
Court granted interim stay ofl the operation of the judgment of the High Court.
On January 29, 1965, the interim stay granted by this Court was made absolute.
On April 1, 1968, this Court accepted the appeals filed by the State.
the first sub-section of section 7 requires every producer and dealer to
fumish returns of manufactured tea carried in tea containers and jute CaJ:ried
B
c
D
E
F
in bales in such forms and to such authority as may be prescribed. The second
sub-section states that in case of any producer or dealer who, in .the opinion
G
of the Commissioner, is liable to pay tax for any return period· or a part
thereof, the Commissioner may serve within two years of the expiry of the
aforesaid period, a notice in the prescribed form requiring him to furnish a
return of goods carried and such producer or dealer shall thereupon furnish
the return within the date and to the authority mentioned in the notice. Subse;:;!ion (Z) of section 9 states that if the Commissioner is not satisfied that a
return furnished under section 7 is correct and complete, be shaH serve on the
producer or dealer a notice requiring him, on the date and hour and place
H
mentioned therein, either to attend in person or to produce or cause to be produced any evidence on which he may rely in support of his return. Sub-section
(4) states that if a producer or dealer fails to make a return as required by
section 7 or having made the return, fails to comply with the terms of the notice
issued under sub-section (2) of s. 9, the Commiss.ioner shall, by an order in writJOg', assess to the best of his judgment the producer or dealer and determine~
zax payable by him on the basis of such assessment. It is provided that before
making assessment the commissioner may allow the producer or dealer such
;}- .
r -
366
SUPREME COURT REPORTS
[1975] SUPP· S.C.~.
A further ti~e .as he thinks fit to make the return or to comply with the terms
of he nohce Issued under sub-section (2) of section 9.
B
c
It _is only after thei Sta!e obtained interim order from this CoUit that notices
were Issued by the Supenntendent o~ Taxes to the respondents for ffii.nc the
returns for the quarters mentioned in the writ petitions.
The respondents-ttl>"·
sessees ~hallenged _these demand notices in the High Court on the ground that
the notices were illegal and beyond the jurisdiction of the State.
The broad
contention of the assessees was that tl'te State could issue. notice~ within two
Years from the expiry of the return period and none of the notices was within
the time mentioned in the New Act, and therefore, the State had no jurisdiction to issue the notices.
The State, on the other hand, contended that from
10 August, 1961 to 1 August, 1963 there was an order of tht) High Court
~laying all proceedings, and, therefore, it was not possible to issue any notice:
unti~ the State was permitted by orders of this Court to commence proceedings.
The High Court accepted the contention of the assessees. The High Col!rt
held that the notices were barred by limitation in terms of the provisio11~
contained in s. 7(2) of the New Act.
Each of the challenegd notices was
much beyond the date of expiry of two years from the date when return should
h:.tve been filed.
These appeals have been filed after obtaining special ll)ll.ve
from this Court.
D
Dismissing the appeals,
E
F
G
H
HELD : Per A. N. Ray, C. J. andY. V. Cbandrachud, J.
(i) The State cannot contend that it was impossible to issue any notice
within the period mentioned in s. 7(2) of the New Act.
The State did not
endeavour to obtain appropriate orders to surmount the difficulties by r.euon
of the injunction against taking steps within the time contemplated in s. 7{2J
of the New Act. The State is guilty of default.
The State had remedie& open
to take steps by asking for modification of the order. The State had to aliiert
the right that the State was entitled to demand taxes and the respondent was
liable to pay the same. The State followed the policy of inactivity. llilactivity
is not impossibility. The order of injunction is not to be equated with 1m :a.:t
of God! or an action of the enemy of the State or a general strike. [374 R·D]
(ii) If a return under s. 7(1) is not made, the service of a notice uud~r
s. 7(2) of the Act is the only method for initiation of valid assessment proceedings under the Act. The period of two years under s. 7(2) of the. New
Acl is a fetter on the power of the authority and is not just a bar of time.
No assessment can be legally made under s. 9(4) of the New Act without
service of a notice under s. 7(2) of the New Act within two years in case
where the assessee has not Stlbmitted any return under s. 7(1) of the New
Act. [375-AB]
The words "if a producer or dealer fails to make a return as required by
s. 7" occurring in s. 9 of the New Act make it clear that s. 9 can come
into operation only when there is a failure to comply with the requirements
of s. 7 and not the requirements only under sub-s. ( J).
Reference can o~
made to s. 11 of the New Act .. Section 11 deals With escaped asset~>ment.
There is a time limit for initiating an escaped assessment under s. 11 of the
New Act. The time limit is two years from the end of the return period.. It is
the scheme of the Act that the service of notice within two years of the
return p~riod is an imperative requirement for initiation of assessment proceeding as also re-assessment proceeding under the Act. [375-CD]
State of Assam & Anr. v. D. C. Choudhuri & Ors., [1970] 1 S.C.R. 780,
discussed.
·(iii) In the present case, the respondent cannot be s~.id to have waived
tht; provisions of t~e. statut<;.
There cannot. b_e .any wawer of a statutory
requirement or provision wh1ch goes to the JUnsdJctlon of
a~ssment. The
t
, __
·-
SUPDT. TAXES V. ONKARMAL TRUST (Ray, C.J.)
367
-(lri,iin of the assessment is either an assessee filing a return as contemplated
A
in the Act or an assessee being called upon to file a return as contemplated
in the Act. The respondents challenged the Act. The
order of injunction
-doei not amount ~o a waiver of the stautory provisions. The issue of a notice
under the provisions of the Act relates to ·the exercise of jurisdiction
under
the Act in all cases. [378 D-F]
The re~ponden!~ wen entitled to impeach the statute under which they
were made liable. The; respondents have done no wrong. The respondents are
B
not taking any advantage of any act of theirs.
The State was entitled t.o
.resist the respondents. The State did so by contending that the Act was valid,
but the State took no steps -during the pendency of the litigation to take
directions from the Court to serve notices of demand upon the respondents
to keep alive the right of the appellants. [379 B-C]
Dawson's Bank Limited v. Nippon Menkwa Kabushiki Kai.sha, 62 I.A.
C
100; Vellayan Chettiar v. Province of Madras 74-I.A. 223; Kammins Ballrooms
Co. Ltd. v. Zenith bzvestment.s (Torquary) Ltd./1971/A.C. 850; William
Shcpa~d, v. O.E.D. Barron, 194 U.S. 553-48 L. Ed. 1115 and Re : Hall~tt's
'Bscate Knatchbu/1 v. Hallett 13 Ch. D. 696 at page 727, referred to.
PerM. H. Beg J, (Conc11rring)
The waiver, even where both sides have agreed to waive the operation of
.a statutory provision, cannot extend to a case in which the effect may b:!
either to oust the jurisdiction conferred by statute or to confer a jurisdiction,
which according to the statute is not the['e.
In other words, if a notice under
s. 7(2) of the Act is a condition precedent to the exercise of jurisdiction to
make the ·best judgment assessment, it cannot be said that the doctrine of
waiver will confer jurisdiction so as to enable parties to avoid the effect of
violating a mandatory provision on a jurisdictional matter even by agreement.
On tho language of s. 11 of the Act, it is evident that in every case where
1ea or jute chargeable to tax escaped assessment for any period or has been
up.der-aSiieSSed the Commissioner must take action within two years of the
eXpirT of the return period. It is this part of the Act which will operate
•s a bar to the jurisdiction of the Commissioner to tax any escaped assessment
beyond two years of the return period. Therefore quite apart from: the question
whether on the mere language of s. 7(2) and s. 9(4), a failure td issue a notice
under s. 7 {2) of· the Act within the period constitutes a bar to proceeding~
under 10. 9(4) of the Act, it cannot be said that a failure to i>sue such notice
would not become a bar due to the clear provisions of s. 11 of the Act. This
bar, at any rate, is against the exercise of jurisdiction to assess beyond the
prescribed period. [389 E-F, 392 E·G]
Cape Brandy Syndicate v. l.R.C. [1921] 1 K.B. 66, 71 and State of Assam
& Anr. v. D. C. Clwudfmri & Ors. [1970] 1 S.C.R. 780, referred to.
D
E
(Per K. K. Mathew and H. R. Khana, JJ. dissenting.) (i) The respondents
G
obtained the orders of injunction from the Court which the Court would not
have issued, had the Court known at the time that tm Act was intra vires
the powers of the legislature as it ultimately turned Ollt to be by the decision
of this Court. The Court issued orders of injunction on the basis of its view
that the respondents has a prima facie case; but when ultimately this Court
declared that the Act was valid, justice requires that the respondents shoulli
not be allowed to set up the contention that they were entitled W get the noticeA
within the period during which the judgment of the
High Court
declaring
the
Act ultra vires remained
in operation. In other
words,
the resH
pondents, after
having
successfully
prevented
the
Commissioner
from
i&suing notices by virtue of the orders of injunction obtained by them from
the High Court, should not be heard to say that they were entitled to notices
as they themselves made it impossible for the Commissioner to i~ue the
notices within the period by obtaining the orders of injunction. [382 G-H]
(ii) Even assuming that the provision for issue of notice within the period
specmed in s. 7 (2) was mandatory and was a condition precedent for the
r368
SUPREME COURT REPORTS
[1975] SUPP· S.C.R.
A
liability to file the returns, the respondents could have waived the benefit of it
auJ, in fact, they did waive it by their conduct.
That apart, the principle of
restitution requires that the party prejudiced by a wrong order of the Court
+-
B
c
D
E
F
G
should be put in the position which he or it would have occupied had the
wrong order not been passed. l383-HJ
(iii) It was the orders of injunction and the order declaring the Act as
ultra l'ires which made it impossible for the Commissioner to issue the notices
within the period specified in s. 7 ( 2) . The respondents were bound to file the
returns even though the notices were not issued to them within the period
specified in ~- 7 (2). The liability to file the return was created by s. 7 (I) and
as the requirement of notice within the period specified in s. 7 (2) could not
have been insisted upon by the respondents, the authority empowered to make
the assessment under s. 9( 4) was competent to do so. [386 GH, 387 H, 388 A]
~'allaya11 Chetuar v. Province oj Madras, A.LR. 1947 P.C. 197; Graham. v.
In,:!leby [1948] 1 Exch 651, 655-56:
Kammins Co. v. Zenith
Investments
(H.L. (E) [1971] A.C. 850; Craine v. Colonial Mutual Fire Insurance Co. Ltd.
[1920] 28 C.L.R. 305 at p. 327 and Corporation
of
Toronto
v, Russell
[1908] A.C. 493, referred to.
CIVIL APPELLATE JURTSDICTION : Civil Appeals Nos. 140-143 of'
1973.
Appeals by special leave from the judgment and order dated the
25th September, 1972 of the Gauhati High Court in Civil Rule No. 441.
442. 443 and 444 of ~968AND
Civil Appeals Nos. 262-275 of 1973
Appeals by special leave from the judgment and order dated the
28th September, 1972 of the Gauhati High Court in Civil Rule Nos.
80, 82, 646 & 652 of 1969ANJJ
Civil Appeal No. 687 of 1975
Appeal by special leave from the judgment and order dated the
25th May, 1972 of the Gauhati High Court in Civil Rule No. 49 of
1969.
AND
CiFil Appeals Nos. 1161-1762 of 1973
Appeals by special leave from the judgment and order dated the
22nd March, 1973 of the Gauhati High Court in Civil Rules Nos. 403
& 404 of 1969.
L. N. Sinha, Sollcitor General of India (In C. As. Nos. 140H 143, 687 & 1761-62'73), Moinul Haque Chaudhry (In C. As. Nos.
262-275/73) and S. N. Chaudhry, for the appellants. (In all the
appeals).
A. K. Sen, B. Sen, Leila Seth, U. K. Khatan and !. P. Bhalt:lchariee, for respondents.
..
...
i-
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, :
~,. ..... ...
SUPDT. TAXES V. ONKARMAL TRUST (Ray, C.J.)
369
Sachin Chaudhary, Prashanta K. Gmwami, S. R. Agarwala, B. M.
A
Parekh, S. Bhandare and Manju Jaitley, for respondents (In C. As.
Nos. 1761-62/73) and Interveners (In C. As. Nos. 140-143/1973).
The Judgment of A. N. Ray, C. J. andY. V. Chandrachud, J. was
delivered by Ray, C. J., K. K Mathew, J. gave a dissenting opinion
on behalf of H. R. Khanna, J. and himself. M. H. Beg, J. als-o gave
B
a separate opinion.
RAY. C. J.-These appeals by special leave raise the question of
the validity of notices of demand under the Assam Taxation (on Goods
.carried by Road or on Inland Waterways) Act, 1961 hereinafter referred to as the New Act.
The Assam Taxation (on goods carried by road or Inland Water·
ways) Act, 1954 hereinafter referred to as the Old Act was passed
by the Assam Legislature in 1954.
On 26 SeptembeJ;~ 1960 this
Court declared the Old Act to be ultra vires the Constitution on the
ground that prior sanction of the President was not taken. On 6 April,
1961 the New Act was passed by the Assam Legislature. The New
Act was published in the Gazetteon 15 April, 1961. The New Act
was to remain in force with retrospective effect from 24 April, 1954
up to 1 March, 1962.
c
D
On 28 July, 1961 the New Act was challenged by about 485
nssessees in the Assam High Court. The High Court passed an order
E
staying all proceedings.
The order staying proceedings continued till
the New Act was held ultra vires the Constitution by the High Court.
On 1 August, 1963, the High Court held the New Act to be ultra
vires. On 1 August, 1963 the High Court granted certificate of fitness
to appeal to this Court.
On 13 December, 1963 on a writ application filed by M/s. Khyerbari Tea Co. Ltd. this Court held the New Act to be valid.
The
decision of this Court is reported in (1964) 5 S.C.R. 975 Khyerbari
·Tea Co. Ltd. & Anr. v. The State of Assam •
On 4 March, 1964 the State of Assam bn the strength of the
certificate granted by the High Court filed an appeal in this Court
against the judgment of the High Court dated 1 August, 1963.
On
28 October, 1964 this Court granted interim stay of the operaticm of
the judgment of the High Court dated 1 August, 1963. On 29 January, 1965 the interim stay granted by this Court was made absolute
snbject to the condition that the assessment proceedings in respect
of 485 respondents would continue but no levy would be made, and
the respondents could initiate assessment proceedings in respect of
those assessees.
On 1 April, 1968 this Court accepted the appeals
filed by the State Government.
It is only after the State obtained mterim order from this Court
on 29 January. 1965 that notices under section _7~2) of the New.Act
werf) issued.
The~e ·appeals challenged the vahd1ty of those notices'.
F
G
H
.,
370
SUPREME COURT REPORTS
[1975] SUPP• S.C.It.
A ln CivH Appeals No. 140-143 of 1973 notice under section 7(2)
of the New Act was issued on 4 March, 1965 for the return of the
quarter 1 January, to 31 March, 1962. In Crvil Appeal No. 687 of
1973 notice under section 7(2) of the New Act was issued on 4 March,
1965 for the return of the quarter 1 January to 31 March, 1962. In
Civil Appeals No. 262-275 of 1973 notice under section 7(2) of
B
the New Act was issued on 2 August, 1965 for the return of tl:te
qliarter 1 October, 1961 to 31 December, 1961. In Civil Appeals
~o. 1761-1762 of 1973 notice under section 7(2) of the New Act
was issued on 30 February, 1965 for the return of the quarte~ 1 Octo·
ber, 1961 to 31 December, 1961. The respondent-assessees challenged
these demand notices in the High Court on the ground that the notices
were illegal and beyond the jurisdiction of the State.
The broad
C
contention of the assessees was that the State could issue notices withi!"!
two years from the expiry of tbe return period and none of the notices
wa~ within the time mentioned in the New Act, and, therefore, tl":c
State had no jurisdiction to issue the notices. Thet State, on the other
hand, contended that from 10 August, 1961 to 1 August, 1963 there
was an order of the High Court staying all proceedings, and, therefore.
D
it was not possible to issue any notice until the State was permitted
by orders of this Coutt to commence proceedings.
The High Court accepted the contention of the assessees.
The
High Court held that the notices were barred by limitation in terms
of the provisions contained in section 7 ( 2) of the New Act.
Each
E
of the challenged notices was much beyond the date of expiry of two
years from the date when return should have been filed.
The High
Court held that the provisions contained in the Limitation Act do not
apply to legislation of the type of the New Act.
F
Section 3 of the New Act is the <;ha~ging section.
Under that
section tax is levied on (a) manufactured tea and (b) jute in bales
carried by means mentioned therein. The period and the rate for taxes
are specified in the Schedule.
The tax levied on manufactured tea
shall be realised from the producer. The tax levied on jute shall be
realised from the dealer.
Section 7 of the New Act speaks of return. There are four subG
sections of section 7.
The first sub-section requires every producer
and dealer to furnish returns of manufactured tea carried in tea containers and jute carried in bales in such form and to such authority
as may be prescribed.
The second sub-section states that in case
of any producer or dealer who, in the opinion of the Commissioner,
is liable to pay tax for any return period or a part thereof, the Com·
missioner may serve within two years of the expiry of the aforesaid
l:l period, a notice in the prescribed form requiring him to furnish a
return of goods carried and such producer or dealer shall thereupon
furnish the return within the date and to the authority mentione:d in
the notice.
The notices in the present appeals are issued under this
sub-section (2) of section 7 of the New Act. The third sub-section
states that the returns, during the first year of operation of the New
Act, shall be furnished for such period and within such time as mrty
•
.c-
' {
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SUPDT. TAXES V. ONKARMAL TRUST (Ray, C.J.)
be notified by the Commissioner and thereafter quarterly and within
thirty days of completion of the quarter in respect of which the
returns are to be filed.
The fourth sub-section states that if any
producer or dealer discovers any omission or other error in any return
furnished by l1im he may furnish a revised return at any time before
assessment is made on the original return.
Section 9 of the New Act speaks of assessment.
There are four
sub-sections of section 9. Sub-section ( 1) states that if the Commissioner is satisfied that a return furnished by a dealer or a producer
· under section 7 in respect of any period is correct and complete, he
shall, by an order in writing, assess the producer or dealer and determine the tax payable by him on the basis of such return. Sub-section
(2) states that if the Commissioner is not satisfied that a return fur-
. nished under section 7 is correct and complete, he shall serve on the
producer or dealer a notice requiring him, on the date and hour and
place mentioned therein, either to attend in person or to produce or
cause to be produced any evidence on which he may rely in support of
his return.
Sub-section (3) states that on the day mentioned in the
notice under sub-section (2) or as soon afterwards as may be, the
Commissioner, after hearing such evidence as the producer or dealer
may produce and such other evidence as the Commissioner may require, shall, by an order in writing, assess the producer or dealer and
determine the tax payable by him on the basis of such assessment.
. Sulrsection ( 4) states that if a producer or gealer fails to make a
return as required by section 7 or having made the return, fails to
comply with the terms of the notice issued under sub-section (2) of
Sf:ction 9, the Commissioner shall, by an order in writing, assess ~o
the best of his judgment the producer or dealer and determine the
tax payable by him on the basis of such assessment. It is provided
that before making assessment the Commissioner rna~ allow the producer or dealer such further time as he thinks fit to make the retum
or to comply with the terms of the notice issued under sub-section (2)
ot section 9 .
The Rules under the New Act are framed under section 32 of the
New Act.
Rule No. 6 states that every dealer or producer shall
furnish returns of the total gross weight of jute or tea carried to the
Superintendent in Form I. Rule No. 8 states that the notice referred
to -in sub-section (2) of section 7 may be issued to dealer or producer
who have
failed to
submit returns
within the
period mentioned
sulrsection (3) of section 7.
The notices shall be in Form II.
Rule No. 9 states that every dealer or
producer shall submit
to the Superintendent every quarter a return so as to reach that officer
on or before the dates therein.
30 April, 30 July, 30 October and
30 J anuarv are the dates on or before which the producer or dealer
~ha11 submit return for the quarters preceding these dates, viz., quarters
ending 31 March, 30 June, 30 September and 31 December respectively.
Form No. I under Rule No. 6 mentions the name of the dealer,
the return period and the details of net weight carried and amount
~
of tax. Form No. II under section 7(2) and Rule No. 8 states that
371
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SUPREME COURT REPORTS
(1975] SUPP· S.C.R.
A whereas the person notified carried manufactured tea or jute as the
case may be, during the period ending on the date mentioned therein
and whereas the carrier is liable to pay tax he is required to furnish
a return.
The New Act received the assent of the ?resident on 6 Aprll,
B
1%1. It was notified in the Gazette on 12 April, 1961.
The New
Act was deemed to have had effect as from 24 April, 1964 and remained in force till 31 March, 1962.
Section 3 of the New Act
refers to the Schedule which specifies the periotl and rate of tax.
Th~ rates vary from year to year. In view of the fact that the New
Act became retrospective with effect from 1954 section 7(3) of the
C New Act provided that returns during the first year of operation crf
the New Act "shall be furnished for such period and within such time
as may be notified by the Commissioner and thereafter quarterly and
within thirty days of completion of the quarter in respect of whici1
n
·the returns are to be filed". It therefore follows that the return for
ti1e years during which the New Act became retrospective in operation
was to furnish in accordance with the notification to be issued by the
Commissioner under section 7 ( 3) of the New Act.
The
present
appeals do not concern that aspect of the New Act.
After the New
Act came into existence returns were to be furnished by the producers
and dealers on 30 April, 30 July, 30 October and 30 January for
the preceding quarters.
The provisions contained in section 7 ( 1) •Jf
the New Act enjoined dealers and producers to furnish returns on
E
the date mentioned in the Rules for the appropriate quarters.
The
provisioqs of section 7 (2) of the New Act contemplate cases wher;!
the Commissioner may serve within two years of the expiry of the
return period a notice upon producer or dealer who, in the opinion
of the Commissioner, is liable to tax for any return period or a part
thereof.
F
On behalf of the State the Solicitor General raised three contentions.
First, that for the period 1 October, 1961 to 31 December, 1961
or for the period 1 January, 1962 to 31 March, 1962 the State could
not issue any notice by reason of stay of proceedings granted by
the High Court on 10 August, 1961. It was said that when this
Court on 28 October, 1964 granted interim stay of operation of the
·G High Court judgment dated 1 August, 1963 it was possible for the
State to issue notice. The State issued notice within two years from
28 October, 1964. It was also said that if the period of two years
be counted from 13 December, 1963 when this Court pronounced
the New Act to be valid in the case of Khyerbari Tea
Co.
Ltd.
(supra) the notices would be within the period of two years from
13 December, 1963.
It was emphasised by the Solicitor General
H
that an act of Court granting stay of the proceedings should not be
permitted to . act adversely to the interest of the Sate against whom
the injunction was granted.
' "
The second contention of the Solicitor General was that section
9 ( 4) of the New Act confers power on the Commissioner to assess
.to the best of his .judgment if a producer or dealer fails to furnish
~
-
. t
SUI'DT. TAXES V. ONKARMAL TRUST (Ray, C.J.)
a return as required by section 7 or having made the return fails to
comply with the terms of the notice issued under section (2) of .the
New Act.
The notice under section 9 (2) of the New Act refers to
cases where if the Commissioner is not satisfied with the return furnished under section 7 he seryes a notice on the assessee to produce
evidence in support of the return. The Solicitor General leaned heavily
on the words "if a producer or dealer fails to make a return as
required by section 7" and contended that section 7 ( 1) of the New
Act required the producer or dealer to make a return and that section 7 (2) of the New Act did not itself require the producer or
dealer to make a return but only clothed the Commissioner in certain
circumstances to call for a return.
Therefore, the Solicitor General
submitted that the condition precedent to the exercise of power- under
section 9 ( 4) of the New Act is a d~fault with reference to section 7 (1)
of the New Act and not the issue of a notice under section 7 (2) of the
New Act.
The Solicitor General submitted that at the best section
7(1) of the New Act regulates the exercise of the power created by
section 9 ( 4) of the New Act but is not the source and condition of
the power.
The third contention of the Solicitor General was_ that by obtaining
and enjoying . the benefit of an injunction for the relevant period expiring within the period of two years prescribed by section 7(2) of
the New Act the respondent must pe deemed to_ have waived. the
benefit of section 7(2) of the New Act. This was amplified' to mean
that the interim injunctions in the present cases were founded on the
postulate that the action restrained during the pendency of the proceedings would be and could be taken if the ground of attack ultimately
failed on the conclusion of the proceedings.
The Solicitor General
further submitted that a party who obtained such an injunction could
not set up a plea arising solely from the injunction issued and ultimately dissolved. It was said that by reason of such injunction if a
preliminary step like a notice within a particular period became impossible, it must be deemed to have been waived just as any provision
intended for the protection of the property owner may be waived by
him by a course of conduct where it would be unjust to permit it to
be set up.
The first contention on behalf of the State that it became impossible
for the State to issue notice under section 7 (2) of the New Act within
two years of the expiry of the period of return is unsound on principle
and facts.
The maxim lex non cogit ad impossibilia means that the
373
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law does not compel a man to do that _which he cannot possibly
perform. In the present appeals, the applications were moved in the ·
High Court for stay of proceedings. The respondents challenged the
H
validity of the Act, and, therefore, asked for an injunction restraining
the State from taking proceedings under the Act.
At no stage, did
the State ask for variation or modification of. the order of injunction.
It is well known that if it is brought to the notice of a court that
proceedings are likely to be barred by time by reason of any order
of injunction or stay the court passes such suitable or appropriate
orders as will protect the interest of the parties and will not prejudice
374
SUPREME COURT REPORTS
[1975] SUPP· S.C.R.
A ctther party. Even when certificate to appeal to this Court was granted
on 1 August, 1963, the State did not ask for any order for stay of
operation of the judgment.
That is quite often done.
For the first
time, on 10 August, 1964 the State filed an application for stay of
operation of the judgment of the High Court. The State did not take
steps at the appropriate time. This Court on 28 October, 1964 granted
B
an interim order staying the operation of the High Court judgment.
The interim order was made absolute on 28 January, 1965 with certain
conditions.
The State cannot take advantage of its own wrong and
lac( of diligence.
The State cannot contend that it was impossible
to issue any notice within the period mentioned in section 7(2) of
the New Act.
The State did not endeavour to obtain appropriate
C
orders to surmount the difficulties by reason of the injunction against
taking steps withirt the time contemplated in section 7 (2) of the New
Act. The State is guilty of default.
The State had remedie8 open'
to take steps by asking for modification of the order. The
State had to assert the right that the State was
entitled to demand
D
taxes and the respondent was liable to pay the same. The State followed
the policy of inactivity.
Inactivity is not impossibility.
The order
o 1 injunction is not to be equated with an act of God or an aetion
of the enemy of the State or a general strike.
The second contention of the State that the State has power under
section 9( 4) of the New Act to pass an order of best assessment is
E
unmeritorious. The provisions contained in section 7 of the New Act
indicate these steps. A producer or dealer is to furnish a return for
the preceding quarter on 30 April, 30 July, 30 October and 30 Januj
ary.
Where a producer or dealer is liable to pay tax for any return
period and he does not furnish a return, the Commissioner may, within
two years of the expiry of the period, serve a notice requiring him to
F
furnish a return.
The provisions contained in section 9 ( 4) of the
New Act with regard to best judgment assessment apply where a
producer or dealer fails to make a return or having made the return
fails to comply with the terms of the notice under section 9 ( 2) of
the New Act.
A notice under section 9(2) of the New Act is
served where the Commissioner is not satisfied with the return furnished
G under section 7 of the New Act. The words ''if a producer or dealer
fails to make a return as required by section 7" occurring in section 9
of the New Act apply to failure to make a return as contemplated by
both sub--sections (1) and (2) of section 7
1 of the New Act. To accede
to the contention of the Solicitor General that the words "if a producer
or dealer fails to make a return as required by section 7" occurring
in section 7 of the New Act apply only to a return under sulrsection
( 1) of section 7 of the New Act is. to read new words into the
H
legislation.
In order to have the best judgment assessment under\
section 9 ( 4) of the New Act, there must be first a failure to furnish
a return under section 7 ( 1) of the New Act or a failure. to furnish a
return after notice under section 7(2) of the New Act. Further, the
contention of the Solicitor General means that there will never be
;my que.«tion of limitation of time with regard to service of notice
by the Commissioner to file a return.
Section 7(2) of the New Act
is a section conferring power and jurisdiction on the authoritie's to tax
..
... -
SUPDT, TAXES v. ONKARMAL TRUST (R
CJ
.
ay,
.)
375
by calling upon .the ·producer or dealer to file a return wit .
.
A
mentioned therem. H a return under section 7{1) .
hin the time
sc.rvice of a notice u.nder section 7(2) of the Act is
1~ notnlmadc, the
for initiation of valid assessment proceedings under th 0 ;{ method
~riod of two years under section 7 (2) of the New· A et . ct. The
on the power of the authority and is not just a bar ~f f a fewr
asseSsment ~an be leg~y made unde_r section 9(4) of the~=~ Ae~
\\ithout serVICe of a not1ce under· section 7(2) of the New Act witliin
B
two years m case where the assessee has not submitted any return
under section 7 ( 1) of the New Act.
-:fbe words :·if a ,produce~ or. deale~ fails to make a return as
rcqwred by secu~:m 7
occurnng _m sectiOn 9 of the New Act make
it dear that secuon ~ can come !nto operation only when there is a
C
failure to comply w1th the reqwrements of section 7 and not the
rcquirc_ments only under any sub-sec~on ( 1). Reference may be made
to scctJon 11 ?f the_ Ne": ~ct.
Sc~t.1~n .11 deals with escaped assessmcHt. There IS a time lurut for . mitlaimg an escaped · assessment
under section 11 of the New Act. The time limit is two years from
the end of the return period. It is the scheme of the Act that the
D
service of notice within two years of the return period is an imperative
requirement for initiation of assessment proceeding as also re-assess-
~ent proceeding under the Act.
This Court in State of Assam & ATir. v. D. C. Choudlwri & Ors.
(1970) 1 S.C.R. 780 considered the provisions ·of Assam Act IX of
E
1939. Sections 19 and 20 of the Assam Act of 1939 are pari nwuria
with sections 7 and 9 of the New Act. Section 19 ( 1) of the Assam
Act of 1939 required persons whose agricultural income.exceeded the
lJirut of taxable income prescribed to furnish within thirty days as
specified in the notice a return.
Section 19(2) of the Assam Act
ot 1939 stated that in the case of any person whose total agricultural
F
income is, in the opinion of the Agricultural Income Ta:t O~cer, of
such amount as to.' render such person liabl~ to payment o[ agricultural
income tax for any financial year, the Agricul~a: Inc'?me Tax ~flic:r
may serve in that fioandal Y,ear a notice rcqumng him ~o furrush .11
return. Section 20 ( 4) of the Assam Act of _1939 provided tha~ ~
persons failed to make a return under sub-secuon ( 1) ?r sub-secuo
(2) of section 19 or failed to comply with terms of a nouce ~JDdcr s~bG
&Cction (2) of section 20 or to prOduce any evidence requtred un e~
aub-section (3) of section 20 the Agricultural Income T~:t Ojgc~f
shall make the assessment in the best or his judgment.. Section icu!t~-
thc Assam Act of 1939 provided tlmt if for any reason the A~ . ul
raJ income has escaped assessment for any financial year the
gnf ethel a1
•
· h"n three years o
ur
Income Tax Ol\iccr may Dt any time Wit l r ble to vay ta.~ 0
H
en~ of that financial year serve on the person ·
1~ t assess or renohce as fuUy mentioned therein and may proccc
0
asses, as stated in the section.
I
es received a notice in
1
n the Assam case · (supra) the assess~9
_50 to 1953-54.. The
961 to fu.rnish returns for the years 1Tb
9 t:reafter they rece1ved a
Rssessees dtd not submit any return.
I('Scns-25
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376
SUPRBM~ COVIll' JlEPORTS
(1975) SUpp. S.C.R,
·
tice of demand for payment of tax on the ·basis of beat judgment
A ~~sessment under sc:etion 20 ( ~) of the As~ am Act. The MSe:!secs
were not served with any not.Jce under section 19 (2) of the Ass~m
Act which provided for a notice to be serv~d on the assessee dunng
the respective financial year, nor under section 30 of the Assam Act
which dealt with escaped assessment. The purchasers of .the tea estat~
B were similarly served with assessment orders under sect.!on 20(4) of
the Assam Act. The purchasers were also not serv~d w1th any notice
under section 19(2) or section 30 of the Act T~ Court held thilt
if no return was made pursuant to the general_ notice under section
19(1) of the Act assessment could be m:ule aaamst an assessee under
section 19(2) of the Act serving an individual notice during that financial year. Once that finan;ial yearwM ?ver and no return was made
C in response to general notice under secti?n 19(1) of the Act and no
.individual notice was served under section 19(2) of the Act there
~uld arise a case of escaped assessment. The only way to bring escaped assessment income to tax was to initiate proceedings whe'r¢
notice in accordance with section 30 was served within three years of
the end of that financial year. No such proceedings were initiated in
D that Assam ca.1e (supra), and therefore, the assessment order
were quashed. The Assam case is an a4thority for the proposition
that if no notice is served in accordance with the provisions of the
Act there cannot be any initiation of assessment proceedings and there
would be no jurisdiction to assess.
E
In the present case the notices of demand vfere illegal. The best
judgment assessment which was made under section 91( 4) of the New
Act would be attracted only if there was a failure to furnish a return
a~ contemplated in sub-sections (1) and (2) or section 7 Ol failure
to comply with the terms of the notice under section 9(2) of the New
Act.
F
. The thlr_d contention of the Solicitor General is than the respondem~
wat.ved servtce of a notice within two years of the expiry of the return
pcn?rl by reason' of the order of injunct~on obtained by them. Waiver
ts eJtlH~r a form of estoppel or an election.