KUNDAN LAL SRIKISHAN MATHURA (U.P.) vs. COMMISSIONER OF SALES TAX, U.P. AND ANOTHER

CIVIL APPEAL No. 625/1986Supreme Court[1987] 2 S.C.R. 14003 February 1987Bench: 2 JudgesAuthor: E.S. VENKATARAMIAH, M.M. DUTT11 pages
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What were the facts?

The appellant-firm was assessed for the assessment year 1975-76 on February 7, 1979. Subsequently, the Sales Tax Officer issued a notice under Section 21 of the Uttar Pradesh Sales Tax Act, 1948, proposing reassessment due to escaped assessment of mandi cess and arhat. An order was passed on January 18, 1980, holding the appellant not liable for further tax. In 1982, the appellant filed applications under Section 22 for rectification of assessment orders for 1975-76 to 1978-79, alleging wrong assessment of turnover on purchases for Ex-U.P. principals. The Appellate Authority allowed appeals for 1976-77 to 1978-79 but dismissed the appeal for 1975-76 on limitation grounds, stating the rectification application was filed beyond three years from the original assessment order. The Tribunal restored the appellant's appeal for 1975-76, holding the rectification application within limitation. The High Court, however, allowed the Revenue's revision for 1975-76, holding the application time-barred.

What did the Supreme Court hold?

The Supreme Court allowed the appeal, setting aside the High Court's judgment and restoring the Tribunal's decision. The Court held that when a notice is issued under Section 21 for reassessment, the original assessment proceedings are reopened, and the initial order ceases to be operative. The effect of reopening is to vacate the initial order and substitute it with the reassessment order. Therefore, the order passed on January 18, 1980, under Section 21, even if it did not result in additional tax, was to be construed as a fresh order of assessment. Consequently, the period of limitation for filing a rectification application under Section 22 would commence from the date of this Section 21 order (January 18, 1980), not the original assessment order (February 7, 1979). The Court cited several precedents, including Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu, to support its reasoning. The Court found no merit in the Revenue's submission that the order under Section 21 was merely a discharge of the notice.

What were the issues?

1. Whether the period of limitation for filing an application for rectification under Section 22 of the Uttar Pradesh Sales Tax Act, 1948, commences from the date of the original assessment order or from the date of the order passed under Section 21 of the Act, when a notice for reassessment has been issued. Assessee's contention: The assessee argued that upon the issuance of a notice under Section 21, the original assessment order ceased to be in force, and the only operative order for purposes of rectification was the one passed under Section 21 on January 18, 1980. They relied on the principle that reassessment proceedings reopen the entire assessment. Revenue's contention: The Revenue contended that since no formal reassessment order was passed on January 18, 1980, but only an order discharging the notice under Section 21, the original assessment order dated February 7, 1979, continued to remain in force. They argued that the order under Section 21 had no effect on the limitation period for rectification.

Which sections of the Income-tax Act were involved?

Section 21,Section 22

AI-generated summary — verify with the full judgment below

A KUNDAN LAL SRIKISHAN MATHURA (U.P.). v. COMMISSIONER OF SALES TAX, U.P. AND ANOTHER. \'"" FEBRUARY 3, 1987 B [E.S. VENKATARAMIAH AND M.M. DUTT, JJ.] c Uttar Pradesh Sales Tax Act, 19~s. 21 and 22-0rder passed under s.21-Assessee held not liable to pay any more tax-Application for rectification of the original assessment order moved-Period of limitation-Whether to commence from the date of the original assess- ment order or from the date of order passed under s .

21.

An assessment order was passed in respect of the turnover of the appellant-firm for the year 1975-76 by the Sales Tax Officer on 7.2.1979. Thereafter, the Sales Tax Officer issued a notice under s.21 of the Uttar Pradesh Sales Tax Act, 1948, proposing to make a reassess- D ment on the ground that the mandi cess and arhat (commission) had escaped assessment and direded the appellant to appear along with its account books on 18. 1. 1980. The Sales Tax Officer passed the order under s.21 on the same date holding that the appellant was not liable to pay any more tax. E In the year 1982 the ap11ellant med four applications under s.22 for }- F rectification of the mistakes in the assessment orders fo

The order continues below.

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