1967 INSC 0148
Commissioner of Sales Tax, U.P., Lucknow
v.
Madan Lal Dayal Chand
(Supreme Court Of India)
HON'BLE JUSTICE J. C. SHAH HON'BLE JUSTICE S. M. SIKRI HON'BLE
JUSTICE VAIDYNATHIER RAMASWAMI
Civil Appeal No. 1198 of 1966 | 24-04-1967

SHAH, J.

1. The following question referred for opinion under section 11 of the U.P.
Sales Tax Act, 1948, was answered by the High Court of Allahabad, in both its
branches, in the affirmative :

"Whether section 18(4) takes away the right of election of the assessment year
conferred on every dealer by the first proviso to section 7 read with rule 39(1)
and whether tax is to be imposed on a new dealer on his turnover computed in
accordance with section 18(4) in spite of his election of the assessment year by
filing quarterly returns ?"

2. The Commissioner of Sales Tax has appealed to this Court with special leave.

3. The respondents commenced business in cotton textiles at Bulandshahr in
U.P. during the assessment year 1949-50 and they were assessed to sales tax
under section 18(3) of the U.P. Sales Tax Act, 15 of 1948, on their turnover of
that year. During the assessment year 1950-51 the respondents filed quarterly
returns. The Sales Tax Officer, Bulandshahr, rejected the contention of the
respondents that they were liable to be assessed on the turnover computed in
accordance with section 18(4) of the U.P. Sales Tax Act, 1948, and computed
the taxable turnover of the respondents at Rs. 1, 15, 711-11-3, and assessed
them to pay tax on that turnover. In appeal to the Judge (Appeals), Sales Tax,

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the order was confirmed. But the Judge (Revisions) in exercise of power under
section 10 of the Act set aside the order of the assessing authority and directed
that taxable turnover of the respondents be calculated in accordance with the
provisions of section 18(4) of the Act. The High Court of Allahabad agreed with
the view of the Judge (Revisions).

4. The Commissioner of Sales Tax contended in this appeal that the taxable
turnover of the respondents in respect of the year 1949-50 was liable to be
computed under section 7(2) of the Act read with rule 41(5) of the Rules framed
under the Act, and not under section 18(4). To appreciate the contention, the
relevant statutory provisions may first be noticed.Section 7 of the U.P. Sales
Tax Act, 15 of 1948, as amended by Act 25 of 1948, read as follows :

"(1) Subject to the provisions of section 18, every dealer whose turnover in the
previous year is Rs. 12, 000 or more in a year shall submit such return or returns
of his turnover of the previous year within sixty days of the commencement of
the assessment year in such form and verified in such manner as may be
prescribed :

Provided that the State Government may prescribe that any dealer or class of
dealers may submit, in lieu of the return or returns specified in this section, a
return or returns of his turnover of the assessment year at such intervals, in such
form and verified in such manner as may be prescribed, and thereupon, all the
provisions of this Act shall apply as if such return or returns had been duly
submitted under this section."

Sub-sections (2) and (3) section 7 provided that the assessing authority may,
after such enquiry as he considers necessary complete the assessment and assess
the tax on that basis; if no return is submitted by the dealer or if the return
submitted by him appears to be incorrect or incomplete, the assessing authority
shall, after making such enquiry as he considers necessary, determine the
turnover of the dealer to the best of his judgment and assess the tax on the basis
thereof. Sub-sections (3) and (4) of section 18 as they stood at the relevant time
read as follows :

"(3)(a) Every dealer or a reconstituted firm commencing business during the
course of an assessment year whose monthly turnover is estimated to be not less

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than Rs. 1, 000 shall give notice of the fact to the assessing authority within
fifteen days of such commencement and shall submit monthly statements of his
turnover within seven days of the expiry of each month in such form and
verified in such manner as may be prescribed in respect of the portion of such
year during which the business is continued.(b) If the assessing authority, after
making such enquiry as he considers necessary, is satisfied that such returns
submitted under clause (a) are correct and complete and that the average
monthly turnover is not less than Rs. 1, 000 he shall assess the dealer on the
total turnover shown in the returns.

(c) If no returns are submitted by the dealer under clause (a) before the period
specified, or if the returns submitted by him appear to the assessing authority to
be incorrect or incomplete, the assessing authority shall, after such enquiry as he
deems necessary, determine to the best of his judgment, the average monthly
turnover and the total turnover for the period of the assessment year during
which the business is carried on and, if the average monthly turnover is not less
than Rs. 1, 000 he shall assess the tax on the basis of the total turnover so
determined by him.

(4) The assessing authority shall fix the turnover of the dealer for the next
succeeding assessment year at the amount of average monthly turnover
determined by him in accordance with clause (b) or (c) of sub-section (3), as the
case may be, multiplied by 12 and shall assess the tax thereon."

5. In exercise of the powers conferred by section 24 of the Act, the State
Government framed rules to carry out the purposes of the Act. Rules 39, 40 and
41 are relevant :

"39. (1) Any dealer may elect to submit returns of his turnover of the
assessment year in lieu of the returns of the turnover of the previous year, and
shall signify such election in the return filed by him in Form IV :

Provided that a dealer who did not carry on business during the whole of the
previous year shall elect to submit his returns of the assessment year.

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(2) ... ... ..."40. Every dealer who elects to submit return of his previous year
shall, within sixty days of the commencement of the assessment year, submit to
the Sales Tax Officer a return in Form IV showing his turnover for the previous
year :

Provided ... ... ...

"41. (1) Every dealer whose estimated turnover during the assessment year is
not less than Rs. 15, 000 and who elects to submit returns of such year shall
before the last day of July, October, January and April submit to the Sales Tax
Officer, a return of his gross turnover for the quarters ending June 30,
September 30, December 31 and March 31, respectively, in Form IV :

Provided ... ... ... ... (2) ... ... ... ... (3) ... ... ... ... (4)

(5) Upon the expiry of the assessment year the Sales Tax Officer shall, after
such enquiry as he may deem necessary, determine the turnover of the
assessment year and shall assess the tax thereon.

6. The respondents commenced business during the course of the assessment
year 1949-50; they had evidently no previous year in respect of which their
return of turnover could be submitted. They submitted, as they were enjoined by
the proviso to rule 39(1) read with section 18 of the Act, their turnover in
respect of the broken period, and they were assessed to tax on that turnover. For
the year 1950-51 the respondents filed quarterly returns and the assessing
authority assessed the respondents under section 7(2) of the Act read with rule
41(5). The respondents contend that even though they had submitted their
quarterly returns for the year 1950-51 and those returns disclosed a taxable
turnover of Rs. 1, 15, 711-11-3 they were liable to be assessed to tax by the
express terms of section 18(4) on the turnover computed at 12 times the
monthly average determined in the assessment year 1949-50.Ordinarily a dealer
is required by section 7(1) of the Act to submit his return of turnover for the
previous year. But that rule is subject to two exceptions. The dealer may elect
under rule 39(1) to return his turnover for the assessment year. Again a dealer

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who commences business as a dealer in the course of an assessment year is
enjoined to submit monthly statements of his turnover during that year. It the
dealer elects to make a return of the turnover for the assessment year, instead of
the previous year, he will be assessed to tax under section 7(2) and (3) read with
rule 41(5). If the dealer has commenced a new business during an assessment
year, he is liable to be assessed under section 18(3)(b) and (c). He cannot in the
year in which he has commenced business seek to submit the return of his
turnover of the previous year, for he has no previous year qua his business
dealings. So far the legal position is clear. But sub-section (4) of section 18
provides that on the basis of the average monthly turnover of a dealer who has
commenced business during the course of any year, the assessing authority shall
fix the turnover of the dealer for the next succeeding year, and shall tax him
accordingly. The provision is mandatory, both as to the method of computation
of the turnover and as to the assessment of tax on the turnover; it is not subject
to any exception expressly enacted.

7. Counsel for the State, however, contended that having regard to the scheme
of the proviso to section 7(1) and rules 40 and 41, sub-section (4) of section 18
is subject to an implied exception or reservation. Counsel says that sub-section
(1) of section 7 alone and not the proviso thereto is subject to the provisions of
section 18, and therefore when under the rules framed by the Government it is
prescribed that a dealer or class of dealers may submit a return or returns of his
turnover of the assessment year, and if the dealer avails himself of that option,
sub-section (4) of section 18 has no application. In other words, the argument is
that a dealer commencing business during the course of an assessment year is
liable to be assessed in that year on the monthly statements of his turnover
under section 18(3)(b) and (c), and the right to claim that his turnover be
determined in the next succeeding year, in the manner provided by section 18(4)
can only be exercised where the dealer has not opted to submit his return of
turnover for the year of assessment. This, counsel says, is implicit in the scheme
of the Act which gives an option to the dealer to elect to submit a return of
turnover either for the previous year or of the assessment year; to hold that
section 18(4) is mandatory and is not subject to any implication is to make the
option to submit returns of the turnover for the assessment year futile, when the
dealer has commenced business during the course of the previous year. Counsel
says that the State had given an option to the respondents in respect of the year
1950-51 and they had exercised that option and submitted their returns for that
year quarterly as provided by rule 39 and once that option was exercised for the

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year 1950-51 the tax had to be assessed under section 7(2) read with rule 4(5)
on the turnover returned by the respondents.We are unable to agree with the
contentions raised by counsel for the State. It appears that when the Act was
originally enacted, it was intended that sales tax shall be levied on a dealer on
his turnover of the previous year. Provision was also made in section 18 for
determining the turnover of a dealer who commenced business during the
course of an assessment year. Otherwise the dealer commencing his business
during the course of an assessment year would have escaped liability to pay tax
altogether, and even in respect of the next succeeding year he would have been
liable to pay tax wholly unrelated to his true turnover of that year. In order to
provide against these contingencies, section 18 was enacted. The scheme of the
Act, as it stood originally enacted, was consistent and practical. But when the
Legislature added the proviso to sub-section (1) of section 7 by Act 25 of 1948
giving an option to the dealer to submit in lieu of his return of the previous year
the return of turnover of the current year, the significance of section 18(4) in the
altered set up was apparently forgotten. Sub-section (4) of section 18 became
inconsistent with the scheme of assessment of a dealer who exercised an option
under rule 39(1) to submit his turnover of the assessment year. We may assume
that it may not have been intended by the Legislature that a dealer who has
exercised an option to submit his turnover for the year of assessment instead of
the previous year, should still for the year immediately following the year in
which he has commenced business be assessed to tax on a notional turnover.
But if the Legislature has failed to make an adequate provision enabling
assessment to be made in the light of the option, it cannot be assumed that
section 18(4) became subject to such an implied limitation. The Court in
construing a taxing statute must look at what is clearly expressed, and cannot
make assumptions as to the intention of the Legislature. The Court will not
introduce by interpretation in a taxing statute a provision which if the
Legislature had appreciated the true position under the statute as enacted might
have made, but has not made.The scheme of the Act as it stood at the relevant
time was, that a person commencing business as a dealer in a particular year
was liable to be assessed under section 18(3), clauses (b) and (c), and he was
also liable to be assessed in the next year immediately following on the turnover
equivalent to twelve times the monthly average of the turnover in the year in
which he commenced business. If the Legislature chose to impose an obligation
upon the assessing authority to compute the turnover in the manner prescribed
and made no exception in the matter of determination of tax, it would be
difficult to hold that when the assessee exercised an option under rule 39 his
turnover and the assessment to tax were brought within the pale of rule 41(5).

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8. Rule 41(5) cannot be read so as to modify an express provision of the Act.
The statutory obligation imposed upon the authority to tax the dealer under sub-
section (4) of section 18 remains absolute for the year following immediately
the year in which the business was commenced by the dealer, and the method
prescribed for determination of the turnover must be applied.

9. The High Court was, therefore, right in answering both the branches of the
question in the affirmative.

10. The appeal fails and is dismissed with costs.

11. Appeal dismissed.

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