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M/S Ashok Kumar Praduman Kumar v. Trade Tax Officer - WRIT TAX No. 847 of 2000  RD-AH 2618 (9 September 2005)
CIVIL MISC. WRIT PETITION NO. 847 OF 2000.
M/S Ashok Kumar Praduman Kumar, Muzaffarnagar. Petitioner.
Trade Tax Officer, Muzaffarnagar. Respondents.
Hon'ble R. K. Agrawal, J.
Hon'ble Rajes Kumar, J.
(Delivered by Hon'ble Rajes Kumar, J)
By means of the present writ petition, the petitioner has claimed the following reliefs.
(a) issue a writ, order or direction in the nature of certiorari quashing the penalty notices dated 11.7.2000 and 10.8.2000 (Annexure No. 8 and 10) issued under section 15-A (1) (l) of the U.P. Trade Tax Act by the Trade Tax Officer, Sector-2,Muzaffarnagar-respondent proposing to impose penalty against the petitioner for the assessment year 1973-74.
(b) issue a writ, order or direction in the nature of mandamus commanding the respondent not to proceed with the penalty notice dated10.8.2000 against the petitioner.
(c) issue any other writ, order or direction which this Hon'ble Court may deem fit and proper in the circumstances of the case.
(d) award cost to the petitioner.
The brief facts of the case-giving rise to the present petition are as follows:
The petitioner is a proprietorship concern of Ashok Kumar, was registered under the Trade Tax Act (hereinafter referred to as "the Act"), and was carrying on the business of gur on commission agency basis. In the assessment year 1973-74 the gur was liable to tax under section 3-D (1) of the Act at the point of first purchase and under section 3-D (2) of the Act at the point of sale to unregistered dealer. For the assessment year 1973-74 vide order dated 13.8.1974, the Sales Tax Officer, Muzaffarnagar passed an ex parte order fixing the net turnover at Rs.31,10, 000/- and liability of tax at Rs.1,70,800/-. The petitioner did not file any appeal against the said order and the said order has become final. Subsequently, the Sales Tax Officer initiated proceedings under section 21 of the Act and by passing an ex parte order dated 29.4.1978 estimated the escaped taxable turnover at Rs.11,51,000/- and the liability of tax at Rs.63,290/-. Against the assessment order, first appeal under section 9 of the Act was filed which was dismissed vide order dated 10.8.1979. The petitioner filed revision under section 10 of the Act before the Additional Judge (Revision), Saharanpur. Subsequently, the said revision was converted into Second Appeal and in place of Additional Judge (Revision), Tribunal was constituted. The Tribunal vide order dated 7.11.1989 dismissed the second appeal. The petitioner filed revision no.70 of 1990 under section 11 of the Act, before this Court which was allowed vide order-dated 20.11.1997 and matter was remanded back to the first appellate authority. The first appellate authority vide order dated 31st May, 1999 remanded back the matter to the assessing authority. The petitioner challenged the order of the Deputy Commissioner (Appeal) dated 31st May, 1999 before the Tribunal. The Tribunal vide order dated 29th March, 2000 allowed the appeal and quashed the proceeding under section 21 of the Act on the ground that no notice under section 21 was served on the proprietor and the entire reassessment proceeding was held without jurisdiction. Thereafter the respondent issued the impugned penalty notice dated 11.7.2000 under section 15-A (1) (l) of the Act, which is under challenge.
Counter and rejoinder affidavits have been exchanged and therefore with the consent of the parties, the present writ petition is being finally disposed of in accordance to rule of the Court.
Heard Sri R.R.Agarwal, learned counsel for the petitioner and Sri M.R. Jaiswal, learned Standing Counsel for the respondent.
Learned counsel for the petitioner submitted that the assessment year involved is 1973-74 for which the original assessment order was passed on 13.8.1974 and the order under section 21 of the Act was passed on 29.4.1978. The notice issued under section 15-A (1) (l) of the Act on 10.8.2000 is barred on the ground that it was issued after an unreasonable period. He submitted that the notice has been issued on the ground that the petitioner had made purchases of gur for Rs. 42,09,814.91 paise and in respect thereof issued Form 3-C 1 on which there was a liability of tax which has not been deposited. It has been alleged that if Form would not be issued, the department would have realised the tax from the selling dealers. Thus, Form 3-C (1) have been issued to misguide the department, hence punishable under section 15-A (1) (l) of the Act. He submitted that notice under section 21 of the Act was issued in the year 1978 on the basis of the information received about the said purchases of gur of Rs. 42,09,814.91 paise in respect of which Form 3-C (1) was issued and therefore, the fact about the issue of Form 3-C (1) came in the knowledge of the assessing authority in the year 1978 itself. Thus, the notice ought to have been issued within the reasonable period thereafter, but it has been issued after the lapse of 22 years, which is barred and liable to be quashed. In support of his contention, he relied upon the decisions in the case of Mohd. Atiq Versus ITO 46 ITR 452, Manik Chand Burman Versus Income Tax Officer reported in 229 ITR 90, Allahabad Paper House, Allahabad Versus State of U.P. and another reported in 2004 UPTC 1260, Narendra Kumar and another Versus Collector, Bulandshahar and others reported in (2004) 2 UPLBEC 2037 and Commissioner of Trade Tax, U.P. Versus M/S Kanhai Ram Thekedar reported in 2005 NTN (Vol.27) 236.
Learned Standing Counsel submitted that under the statute no limitation is provided for initiating the penalty proceeding. He further submitted that the proceeding relating to the assessment year was pending in appeal and when the Tribunal has decided the appeal vide order dated31st March, 2000 and quashed the proceeding under section 21of the Act, immediately thereafter penalty notice has been issued on18.10.2000 which cannot be said to be after an unreasonable delay. In support of his contention, he relied upon the two decisions of this Court in the case of M/S Asha Pal Munnu Lal, Mirzapur Versus Commissioner of Sales Tax reported in 2001 UPTC 46 and M/S Ocean Time Agencies, Agra Versus Commissioner of Trade Tax reported in 1997 UPTC 1167 (paragraph 5).
We have given our anxious consideration to the submissions of the learned counsel for the parties. It is true that no limitation has been provided under the Act for the initiation of penalty proceeding but the authority cannot be permitted to sleep over the matter for an indefinite period and to initiate the penalty proceedings after unreasonable delay. The law expects everyone to be vigilant. If one sleeps over his right, the remedy due after lapse of time may become barred. The Apex Court in the case of Sharda Devi Versus State of Bihar reported in (2003) 3 SCC 128, while considering the Section 30 of the Land Acquision Act, 1894 which does not provide any limitation for making reference held as under:
" No period of limitation for exercise of any statutory power is prescribed, the power can nevertheless be exercised only within the reasonable period; what is a reasonable period in a given case shall depend on the facts and circumstances of each case".
In the case of Mohd. Atiq Versus ITO reported in 46 ITR 452, this court held that even though there is no period of limitation prescribed for initiating penalty proceeding for levy of penalty but it must be taken within a reasonable time and where the proceedings for levy of penalty for non-compliance with notice issued under sub-sections (2) and (4) of Section 22 of the Indian Income Tax Act, 1922 were taken after the expiry of 14 years, it was held that there was unreasonable delay in commencing the proceedings and the proceedings were quashed.
Similarly, in the case of I.T.O. Versus Bisheshwar Lal reported in 26 ITR 653, same view has been taken.
In the case of M/S Allahabad Paper House, Allahabad Versus State of U.P. (supra), the assessment for the assessment year 1983-84 was made on 8th November, 1988. Appeal was decided on 12th November, 1990. Penalty proceeding initiated under section 15-A (1) (c) of the Act on 31st March, 1993 has been held initiated beyond reasonable time and accordingly, notice under section 15-A (1) (c) of the Act was quashed.
In a recent decision in the case of Commissioner of Trade Tax Versus M/S Kanhai Ram Thekedar reported in 2005 NTN (Vol.127) 236, the Apex Court though held that interest accrues automatic by operation of law but the demand of interest has been held unjustified which has been demanded after four years. The Apex Court held as follows:
"Thus the demand was after nearly four years. There was no demand of interest in the assessment order, which, in our opinion, form part of the assessment order. As the assessment order did not include a claim for interest, the demand for interest had to be made within a reasonable period thereafter. To be noted that for rectification of the assessment order, a limitation period of three years is laid down. Since the demand of interest was made after almost four years, we hold that the demand is not within a reasonable period and the assessee is not liable to pay the interest as demanded".
In the case of The State of Andhra Pradesh Versus Sri Ganesh Bhavan Hotel reported in 53 STC, 169, the Division Bench of Andhra Pradesh has held that the limitation to levy the penalty is to be the limitation provided for levy of tax.. Rule 73 of the U.P. Trade Tax Rules provides the dealer or any other person to maintain his books of account and other documents for the period of eight years from the end of the assessment year or till the proceedings are completed, whichever is later. Thus the assessing authority cannot be allowed to initiate the proceeding whenever he desires inasmuch as the dealer is under the obligation to keep the books of account only for eight years.
Learned Standing Counsel placed reliance on the two decision of this Court in the case of M/S Asha Pal Munnu Lal, Mirzapur Versus Commissioner of Sales Tax (supra), in which for the assessment year 1978-79 the assessment was completed on 20th January, 1982 and the assessment for the year 1980-81 was completed on 22nd March, 1985. It was found that the penalty proceeding was initiated immediately after passing of the assessment order which was held to be without any undue delay.
In the case of M/S Ocean Time Agencies, Agra Versus Commissioner of Trade Tax (supra) no question of initiation of penalty proceeding after unreasonable delay has been raised and decided. In the said case following the decision of this Court in the case of G.V. Industries Versus State of U.P. reported in 1985 UPTC 171 it has been held that the period of limitation does not apply to the penalty proceedings.
In the present case, the assessment year involved is 1973-74. The assessing authority received information about the purchases made by the petitioner to the extent of Rs. 41,76,221.83 paise for which Form 3-C (1) was issued, in the year 1978 and on the basis of the said information the notice under section 21 of the Act was issued and the re-assessment order was passed on 29.4.1978. Thus the assessing authority had full knowledge about the said purchases and issuance of Form 3-C 1 in respect thereof in the year 1978 itself, still the assessing authority slept over the matter and has not initiated any penalty proceeding under section 15-A (1) (l) of the Act on the ground that the Form 3-C (1) was issued in respect of such purchases to defraud the Revenue. In the appeal before the Tribunal the only issue involved was the validity of initiation of proceeding under section 21 of the Act for the want of proper service of notice under section 21 of the Act. Thus, the subsequent order passed by the Tribunal dated 31st March, 2000 had no relevance and had no bearing on the penalty proceeding to be initiated. In the circumstances, we find that it is a clear case of gross negligence and latches on the part of the assessing authority in initiating penalty proceeding and for the said lapse, the assessing authority cannot be permitted to proceed. We are of the view that the penalty notice issued on 11.02.2000 under section 15-A (1) (l) of the Act for the assessment year 1973-74 being issued beyond reasonable period is barred and liable to be quashed.
In the result, the writ petition is allowed. The penalty notice under section 15-A (1) (l) of the Act dated 11.2.2000 and 10.8.2000, Annexures 8 and 10 to the writ petition issued for the assessment years 1973-74 are quashed. However, there shall be no order as to costs.
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