LALTA PRASAD KHINNI LAL vs. ASSTT. COMMR, (JUDL.) SALES TAX, KANPUR & ANR.

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CIVIL APPEAL No. 2571/1969Supreme Court[1972] 1 S.C.R. 101006 October 1971Bench: 2 JudgesAuthor: K.S. HEGDE, A.N. GROVER6 pages
AI SummaryRemanded

What did the Supreme Court hold?

The Supreme Court held that the Assistant Commissioner was wrong in disposing of the appeal on the ground that it had no jurisdiction to extend the period of limitation. The Court clarified that an appeal filed without proof of payment of tax is considered preferred only when such proof is furnished. If this proof is furnished after the expiry of the limitation period, Section 9(6) of the U.P. Sales Tax Act, which makes Section 5 of the Limitation Act applicable, comes into play. This allows the appellant to apply for condonation of delay if there is sufficient cause. The Court reasoned that the correct approach is to treat the appeal as having been preferred on the date proof of payment was furnished and then consider the delay for condonation. The High Court's reliance on the word 'entertain' and the decision in Lakshmiratan Engineering Works Ltd. was found to be misplaced in this context. The appeal was allowed, and the case was remitted to the High Court for appropriate directions to the appellate authority for reconsideration and rehearing of the appeal.

What were the facts?

The appellant, Lalta Prasad Khinni Lal, a Hindu undivided family, was assessed for sales tax for the assessment year 1963-64. The Sales Tax Officer enhanced the turnover, increasing the tax liability. The appellant filed an appeal on October 21, 1965, three days before the limitation period expired. However, the full payment of the admitted tax amount, which was to be made via cheque, was delayed due to encashment difficulties, with the treasury challan produced only on May 27, 1966. The Assistant Commissioner (Judicial) Sales Tax rejected the appeal as defective, holding that the admitted tax was not deposited within the limitation period and the delay could not be condoned under Section 5 of the Limitation Act. The appellant's writ petition challenging this order was dismissed by the High Court.

What were the issues?

1. Whether an appeal filed under Section 9 of the U.P. Sales Tax Act, 1948, can be entertained if the admitted tax due is deposited after the expiry of the period of limitation for filing the appeal, and if so, whether the delay in such deposit can be condoned under Section 5 of the Limitation Act, as made applicable by Section 9(6) of the U.P. Sales Tax Act, 1948. Assessee's arguments: The assessee contended that the appeal was filed within the prescribed time. While there was a delay in depositing the admitted tax, this delay should be condonable under Section 5 of the Limitation Act, which is applicable to appeals under Section 9(6) of the U.P. Sales Tax Act. The Assistant Commissioner erred in rejecting the appeal on the ground of lack of jurisdiction to condone the delay in deposit. Revenue's arguments: The revenue, through the Assistant Commissioner's order and the High Court's dismissal of the writ petition, argued that the proviso to Section 9(1) mandates satisfactory proof of payment of the admitted tax to accompany the appeal. Since this proof was not provided within the limitation period for filing the appeal, the delay in deposit could not be condoned, rendering the appeal defective and non-entertainable.

Which sections of the Income-tax Act were involved?

Section 9(6),Section 5,Section 9(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1010 LALTA PRASAD KHINNI LAL v .. ASSTT. COMMR, (JUDL.) SALES TAX, KANPUR & ANR. October 6, 1971 (K. S. HEGDE AND A. N. GROVER, JJ.] U.P. Sa/es Tax Act, 1948, s. 9(6) and Limitation Act, 1908 s. 5-Sa/es Tax Appeal filed within period of limitation-Amount admitted to be due deposited in full after expiry of limitc.tion-Resulting dewy in filing appeal whet.her nia,v be condoned. The appellant Jas a Hindu undivided fan1ily carrying on the business of manufacturing oils. For the assessment year 1963-64 the appellant filed its quarterly returns undo'r the U.P. Sales Tox Act, 1948. The Sales Tax Officer made an assessment enhancing the turnover which resulted in increase of the amount of tax. The appellant filed an appeal on October 21, 1965 which was three days' before the period of limitation prescribed for filing the appeal was to expire. There was some difficulty about the encashment of a cheque which had been deposited along with the rest of the cash amount towards payment of the ljffiOunt of tax the lia- bility for which stood admitted. The total payment was not made if the entire amount until May 27, 1966 when the treasury challan was pro- duced. The assessee filed an application praying for condonation of delay, if any, in filing the appeal under s. 5 of the Indian Limitation Act I Y08 which was applicable by virtue of s. 9( 6) of the U.P, Sales Tax Act, 1948. The Assistant Commissioner (Judi.) Sales Tax rejected the memorandum of appeal as defective on the ground that the deposit of tne amount of tax admitted to be due had not been made within the period of limitation and that the delay in doing so could not be condoned under s. 5 of the Limitation Act. The appellant's petition under Art. 226 challenging the Assistant Commissioner's order was dismissed. In appeal by certificat10, HELD : It is true that an appeal filed under s. 9 of the Act cannot be entertained by the appellate authority unless satisfactory proof is adduced of the payment of tax admitted by thi> appellant to be due but in a case where the amount of admitted tax is deposited after the period of limitation has expired all that will happen is that the appeal will oo- come entertainable only on the day on which satisfactory proof of pay- ment of that amount is oroduced. In other words the appeal will be deemed to hav1~ been prOperly filed on the date on which the amount of admitted tax is paid. If that is beyond the period of 30 days the appeal will be barred by time. Section 9(6) \Viii immediately become applicable to that apoeal and it will bio open to the appellant to apply for condonation of delay under that provision. It was not possible to accept the argument that the deposit of the amount of admitted tax must be made within 30 days even thou.eh the delay in filing the appeal can be condoned under sub-s. ( 6). The correct approach is to treat the appeal as having been prefermd on the date on which proof of payment of the tax was furnished and then to see whether under sub-s. ( 6) of s. 9 there was sufficient cause for excusing the delay in preferring the appeal. [1013 E-1014 BJ Gangadharan Pillai v. Sales Tax Officer (Reserve) Ernakulam, 16 S.T.C. 578 and Raja of Venkatagiri v. Commissioner of Income-tax, Madra~. 28 J.T.R. 188, approved. A B c D E F G H LALTA PRASAD v. COMMR, S.T. (Grover, J.) 101-1 A Janta Cycle & Motpr Mart v. Asstt. Commissioner (!.) 111, Sales Tax Kanpur Range & Ahr. 22 S.T.C. 94, disapproved. Lakshmiratan Enginee.ring Works Ltd. v .. Asstt. Commissioner (/), I Sales Tax, Kanpur, 21 S.T.C. 154, distinguished. In the present case when the assessee produced the necessary docu- ments which showied that the deposit of the full amount had been made B by May 27, 1966 the appeal became entertainable. It only suffered from the ddect that it was barred by time on that date. The assessee could, therefore, apply under s., 9.(6) for extending the period of Jin1itation in accordance with s. 5 of the Limitation Act. The appellate authority was wrong in disposing of the appeal on the short grOl\Od thaf it had no jurisdiction to extend the period of limitation. [1015 B-D] c D E F G H [Appeal allmved and case remitted to High Court for making appro- priate directions for reconsideration and rellloaring of the appeal by the appellate authority under the Act.] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2571 of 1969. Appeal from the judgment and order dated March 25, 1968 of the Allahabad High Court in Civil Misc. Writ No. 2200 of 1966. S. Markandeya, for the appellant. L. M. Singhvi and 0. P. Rana, for the responde.nts. The Judgment of the Court was delivered by Grover, J. This is an appeal by certificate from a judg· ment of the Allahabad High Court in which the main point in- volved relates to the provisions of s. 9 of the U.P. Sales Tax Act, 1948, hereinafter called the 'Act'. The facts lie in a narrow compass. Lalla Prasad Khinni Lal a Hindu undivided family which is the assessee carried on business of manufacturing oils. For the assessment year 1963- 64 it was assessed to sales tax under the Act by an order dated July 28, 1965. The assessee had been filing its quarterly returns and had deposited a sum of Rs. 3,153.01 which was the admitted amount of its tax liability. The Sales tax Officer, however, made an assessment enhancing the turnover which resulted in increase of the amount of tax. The assessee filed an apyeal on October 21, 1965 which was three days before the per10d of limitation prescribed for filing the appeal was to expire. There was some difficulty about encashment of a cheque which had been deposited along with the rest of the cash amount towards payment of the amount of tax the liability for which stood admitted. The total payment was not made of the entire amount until May 27, 1966, when the treasury challan was produced. The assessee filed an application under s. 5 of the Indian Limitation Act praying for l 012 SUPREME COURT REPORTS [1972] l S.C.R. condonation of delay, if any, in filing the appeal. The Assistant Commissioner (Judicial) Sales Tax rejected the memorandum of appeal as defective on the ground that the deposit of the amount of tax admitted to be due had not been made within the period of limitation and that the delay in doing so could not be con- doned under s. 5 of the Limitation Act. The assessee filed a petition under Art. 226 of the Constitu- tion in the High Court challenging the order of the Assistant Commissioner (Judicial) Sales Tax. That petition was dismis- sed on the ground that although the appeal was file4 within time there was delay in making the necessary deposit of the admitted tax and that delay could not be condoned under s.5 of the Limi- tation Act. Section 9 of the Act deals with an appeal against an order of assessment. It provides that any dealer objecting to an order under the various sections mentioned in sub-s. ( 1) may within 30 days appeal to such authority as may be prescribed. The proviso to sub-s. (1) is material and is set out below : "Provided that no appeal against an assessment shall be entertained unless. it is accompanied by satis- factory proof of the payment of the amount of tax ad- mitted by the appellant to be due or of such instal- ments thereof as may have become payable: Provided, secondly, that the appellate authority shall not exercise any powers or perform any other function except those conferred on or entrusted to him as such authority." Sub-s.(6) of s.9 provides that s.5 of the Indian Limitation Act 1908 shall apply to appeals under the Act. The relevant Rules may next be reproduced: Rule· 66(2) "The memorandum of appeal shall be accompanied by adequate proof of payment of the fee

payable and a certified copy of the order appealed against and the challan showing deposit in the treasury of the tax admitted by the appellant to be due, or of such instalments thereof as might have become pay- able". Rule 67 (3) "If the memorandum of appeal is not in order it may be rejected or be returned, after the necessary endorsement on its back about its presenta- tion and return, to the applicant for correctfon and re- presentation within the time to be fixed by the Assistant Commissioner (Judicial) or be amended then and there". I A B c D E F G H

A B c D E F G • H LALTA PRASAD v. COMMR. S.T. (Grover, J.) 1013 A full bench of the Allahabad High Court considered the ques- tion of the applicability of s.5 of the Limitation Act to a case where the admitted amount of tax is not deposited by the appel- lant within the time prescribed for filing the appeal in Janta Cycle and Motor Mart v. The Assn. Commissioner (!.) III, Sales Tax Kanpur Range & Anr.('). The full bench relied on an observation of this Couvt in Lakshmiratan Engineering Works Ltd. v. Asstt. Commissioner (!.) I, Sales Tax, Kanpur & Aiwther(') with regard to the meaning of the word "entertain''. According to that decision "entertain" meant the first occasion on which the court took up the matter for decision. It might be at the admission stage or if by the rules of the appellate Tribunal the appeals were automatically admitted it would be the time of the hearing of the appeal. The High Court considered that according to the aforesaid decision of this Court when the first proviso is read with the main provision of s.9 (l) of the Act the deposit also had to be made within limitation. The High Court came to the conclusion that s.9(6) of the Act could not be applied and s .5 of the Limitation Act was not attracted when the question arose whether the delay in depositing the admitted tax should be condoned. We are wholly unable to comprehend and appreciate the above reasoning or the conclusion of the High Court on the point under consideration. It is true that an appeal filed under s.9 of the Act cannot be entertained by the appellate authority unless satisfactory proof is adduced of the payment of tax admitted by the appellant to be due but in a case where the amount of ad- mitted tax is deposited after the period of limitation has expired all that will happen is that the appeal will become entertainable only on the day on which satisfactory proof of payment of that amount is produced. In other words the appeal will be deemed to have been properly filed on the date on which the amount of admitted tax is paid. lf that is beyond the period of 30 days

the appeal will be barred by time. Section 9(6) will immediately become applicable to that appeal and it will be open to the appel- lant to apply for condonation of delay under that provision. We are wholly unable to follow the argument that the deposit of the amount of admitted tax must be made within 30 days even though the delay in filing the appeal can be condoned under sub- s.( 6). A proper and correct reading of s.9 cannot justify such an approach. If a petition of appeal has been filed without proof of payment of tax accompanying it that appeal can be said to have been preferred only when proof of payment of tax is furnished. Such furnishing of the proof may take place within the period prescribed for preferring the appeal or after the lapse (1) 22 S.T.C. 94. (2) 21S.T.C.154. 1014 SUPREME COURT REPORTS [ 1972] l S.C.R. of that period. If the proof of payment of admitted tax is fur- A nished within the period prescribed the appeal must be enter-. tained. If the furnishing of that proof is done after the expiry of the period of limitation the question will arise whether the appeal should be entertained or not. In such cases s.9(6) will come into operation and the question will arise whether there has been sufficient cause for not preferring the appeal within the statutory B period. The correct approach is to treat the appeal as having been preferred on the date on which proof of payment of the tax was furnished and then to see whether under sub-s. ( 6) of s.9 there was sufficient cause for excusing the delay iri preferring the appeal. The decision of the Kerala High Court in Ganga- dharan Pillai v. Sales Tax Officer (Reserve) Ernakulam(1) is c to this . effect and we entirely agree with the reasoning and the conclusion therein. In Raja of Vankatagiri v. Commissioner of Tncome tax, Madras( 2 ) a division bench of the A,ndhra Pradesh High Court consisting of Sub ha Rao C. J. as he then was and Bhimasankaram J. had to consider the provisions of the Indian Income tax Act 1922 similar to s.9 of the Act. According to D the proviso to s.30(1) of that Act no appeal lay against an order under sub-s.(1) of s.46 unless the tax had been paid. Sub:s.(2) of that section provided that the appeal was to be ordinarily presented within 30 days but the Appellate Assistant Commis- sioner could admit the same after the expiration of the period if he was satisfied that the appellant had sufficient cause for not presenting it within that period. It was held that the payment of E the tax was condition precedent to the maintainability of the appeal. If an appeal was filed, though after the prescribed period of time10 the Assistant Commissioner had the juri iction to hear ·the appeal after the tax due was paid. The only possible objec- tion that could have been raised was that the appeal was barred as having b~n filed beyond the period prescribed by s.30(2). F But the appellate authority had the juri iction to excuse the delay. The ratio of this decision is that even though the payment of tax was a condition precedent to the maintainability of the appeal the delay could be condoned under s.30(2) thus treat- ing the appeal as having been filed when the amount of tax was paid. G The Allahabad High Court appears to have been greatly in- fluenced by the decision of this Court in Lakshmiratan Engineer- ing Works Ltd. v. Asstt. Commissioner (!.) I Sales Tax, Kanpur ( 3 ) amd by the meaning of the word "entertain" as explain- ed there. We have found considerable difficulty in discovering how that decision could afford any assistance to the respondents in H the present case. Indeed according to that decision the words (1) 16 S.T.C. 578. l (2) 28 I.T.R. 188. (3) 21 S.T.C.154. i

I A B c D E LALTA PRASAD v. COMMR, S.T. (Grover, h) 1015 "no appeal shall be entertained" in the proviso to s.9 do not denote the filing of the memorandum of appeal but refer to the point of time when the appeal is being considered. Therefore, though the memorandum of appeal filed within time is not ac- companied by the treasury challan showing payment of tax if before the appeal is being considered satisfactory proof of pay- ment of tax is given then the proviso to s.9 is satisfied. In the present case when the assessee produced the necessary documents which showed that the deposit of the full amount had been made by May 27, 1966 the appeal became entertainable. It only suffered from the defect that it was barred by time on that date. The assessee could, therefore, apply under s.9(6) for extending the period of limitation in accordance with s.5 of the Limitation Act.. It is entirely a different matter whether on the facts of the present case the appellate authority would have condoned the delay or not but to say that the appellate authority had no juris- diction to extend the time simply because the amount of admitt.ed tax had been deposited beyond the period of 30 days would be wholly erroneous and would not represent a true and correct view of the provisions of s.

9.

It may be pointed out that· the case of Lakshmiratan Engineering Works(1) on which the High Court largely relied did nOi involve the question of the extension of the period of limitation under s. 9 ( 6). Indeed in our judg- ment the word "entertain" in s.9(1) has hardly any material bearing on the point under consideration. As the appellate authority disposed of the-appeal Qn the short ground that it was barred by time and that it had no juri iction to extend the period of limitation this matter will have to go back for reconsideration and redecision of that authority. In the result the appeal is allowed and the judgment of the High F Court is set aside. The case is remitted to the High Court for making appropriate directio.ns for reconsideration and rehearing , of the appeal by the appellate authority under the Act. The assessee will be entitled to costs in this Court. G.C. Appeal allowed. (I) 21 s.r.c. 154. {

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