Supreme Court of India
M/S LARSEN & TOUBRO LTD.versusSTATE OF JHARKHAND AND ORS.
- Citation
- 2017 INSC 1274
- Decided
- 21 March 2017
- Disposal
- Appeal(s) allowed
- Bench
- MADAN B LOKUR
Holding
The re‑assessment order was without jurisdiction because the audit objection did not satisfy the requirement of "information" under Section 19, and the appeal was allowed.
Summary
Larsen & Toubro Ltd. filed returns under the Bihar Finance Act, 1981 for AY 1991‑92 and received an assessment order in 1996. An audit by the Auditor General identified an exemption of Rs 3.12 crore for consumables that, in the auditor’s view, should have been taxed, leading to a show‑cause notice in 2000 and a re‑assessment order in 2006 imposing additional tax of Rs 35.72 lakh. The company challenged the re‑assessment, contending that the audit objection did not constitute "information" under Section 19 of the Bihar Finance Act and therefore could not justify reopening the assessment. The Supreme Court examined the meaning of "information" and held that it is to be given a wide amplitude, encompassing audit objections and newly discovered facts, but found that the assessing officer was not satisfied that any turnover had escaped assessment. Consequently, the re‑assessment order was held to be without jurisdiction and set aside. The appeal was allowed, and the orders of the Deputy Commissioner and the High Court were vacated.
Issues considered
- The audit objection raised by the Auditor General qualifies as "information" under Section 19 of the Bihar Finance Act, 1981 for the purpose of reopening assessment.
- Whether the assessing officer was satisfied on the basis of the audit objection that any turnover escaped assessment, thereby justifying a re‑assessment.
Legislation cited
Subjects
tax reassessmentinformationaudit objectionBihar Finance ActSection 19sales taxconsumablesjurisdiction
Judgment
[2017] 4 S.C.R. 680
A M/S LARSEN & TOUBRO LTD.
v.
STATE OF JHARKHAND AND ORS.
(Civil Appeal No. 5390 of2007)
B
MARCH 21, 2017
[MADAN B. LOKUR AND R. K. AGRAWAL, JJ.)
Tax/Taxation - Bihar Finance Act, 1981 - s.19 - 'Information'
under, if covers ·'audit objection' - Held: The word "information"
c used in s.19 is of the widest amplitude and should not be construed
narrowly - It comprehends not only variety of factors including
information from external sources of any kind but also the discovery
of new facts or information available in the record of assessment
not previously noticed or investigated - On the basis of information
received, if the assessing officer is satisfied that reasonable ground
D exists, then in that case the power of the assessing authority extends
to re-opening of assessment - However; in the present case, the
Assessing Officer was not satisfied on the basis of information given
by the audit team that any of the turnover of the appellant-Company
had escaped assessment so as to invoke s.19 - Re-assessment order
E therefore held to be without jurisdiction and accordingly set aside
- Central Sales Tax Act, 1956 - Bihar Sales Tax Rules - rr. 12, 20 -
Form XIV. IXC.
Words & Phrases - "Information"- Meaning of in context
of Bihar Finance Act, 1981 - Discussed.
F Allowing the appeal, the Court
HELD: 1.1 Sub-Section (1) of Section 19 of Bihar Finance
Act, 1981 ('the State Act') very clearly prescribes that the
competent authority, upon information, if satisfied that reasonable
ground exists to believe that any turnover of a registered dealer
G or a dealer to whom grant of registration certificate has been
refused in respect of any period has, for any reason, escaped
assessment or any turnover of any such dealer assessed under
sub-Section (5) of Section 17 has been under-assessed or assessed
at a rate lower than that which was correctly applicable, may, within
H
680
MIS LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 681
eight years from the date of order of assessment, proceed to A
assess or reassess the amount of tax in respect of such turnover.
[Para 19] [690-E-F]
1.2 According to the Oxford Dictionary, 'information' means
facts told, heard or discovered about somebody/something. The
Law Lexicon describes the term 'information' as the act or B
process of informing, communication or reception of knowledge.
The expression 'information' means instruction or knowledge
derived from an external source concerning facts or parties ur as
to law relating to and/or having a bearing on the assessment. A
mere change of opinion or having second thought about it by the
competent authority on the same set of facts and materials on
c
the record does not constitute 'information' for the purposes of
the State Act. But the word "information" used in the aforesaid
Section is of the widest amplitude and should not be construed
narrowly. It comprehends not only variety of factors inclu:ling
information from external sources of any kind but also the D
discovery of new facts or information available in the record of
assessment not previously noticed or investigated. Suppose a
mistake in the original order of assessment is not discovered by
the Assessing Officer, on further scrutiny, if it came to the notice
of another assessor or even by a subordinate or a superior officer,
it would be considered as information disclosed to the incumbent E
officer. If the mistake itself is not extraneous to the record and
the informant gathered the information from the record, it will be
information in his possession within the meaning of Section 19 of
the State Act. In such cases of obvious mistakes apparent on the
face of the record of assessment, that record itself can be a source F
of information, if that information leads w a discovery or belief
that there has been an escape of assessment or under-assessment
or wrong assessment. [Para 21] [691-D-H; 692-A-B]
1.3 Assessment proceedings can be reopened if the audit
objection points out the factual information already available in G
the records and that it was overlooked or not taken into
consideration. Similarly, if audit points out some information or
facts available outside the record or any arithmetical mistake,
assessment can be re-opened. [Para 22] (692-C]
H
682 SUPREME COURT REPORTS (2017] 4 S.C.R.
A Commissioner of Income Tax v. P. V.S. Beedies Pvt. Ltd.
(1998) 9 sec 272 : [1998] 2 Suppl. SCR 547;
Commissioner of Income Tax, UP., Lucknow v.
Mis Gurbux Rai Harbux Rai (1971) 3 SCC 654 : [1972]
1 SCR 357; Phool Chand Bajrang Lal and Another v.
Income Tax Officer &Another (1993) 4 SCC 77: [199~]
B
1 Suppl. SCR 28; Anandji Haridas and Co. (P) Ltd. v.
S. P. Kasture and Others AIR 1968 SC 565 : [1968]
SCR 661 - relied on.
1.4 The expression 'information' means instruction or
knowledge derived from an external source concerning facts or
c parties or as to law relating to and/or after bearing on the
assessment. On the basis of information received anci if tlie
assessing officer is satisfied that reasonable ground exists to
believe, then in that case the power of the assessing authority
extends to re-opening of assessment, if for any reason, the whole
D or any part of the turnover of the business of the dealer has
escaped assessment or has been under assessed and the
assessment in such a case would be valid even if the materials,
on the basis of which the earlier assessing authority passed the
order and the successor assessing authority proceeded, were
same. The question still is as to whether in the present case, the
E assessing authority was satisfied or not. [Para 27] [694-H;
695-A-C]
1.5 From a perusal of the last paragraph of the report of the
audit party, it is clear that the Assessing Officer was not s:..tisfied
on the basis of information given by the audit party that anr of the
F turnover of the appellant-Company had escaped assessment so
as to invoke Section 19 of the State Act. [Para 29) [699-B-C]
Mis Indian & Eastern Newspaper Society, New Delhi v.
Commissioner of Income Tax, New Delhi (1979) 4 SCC
248 : [1980] 1 SCR 442; Bhimraj Madan/al v. State of
G Bihar and Another (1984) 56 STC 273; Usha Sales
(Pvt.) Ltd. v. The State of Bihar (1985) 58 STC 217;
Deputy Commissioner of Sales Tax (Law), Board of
Revenue (Taxes), Ernakulam v. Mis Thomas Stephen &
Co. Ltd. Quilon (1988) 2 SCC 264 : [1988) 3 SCR 248;
H Commissioner of Customs, Mumbai v. Virgo Steels,
MIS LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 683
Bombay and Another (2002) 4 SCC 316 : (2002) 2 SCR A
934; Supreme Paper Mills Limited v. Assistant
Commissioner, Commercial Taxes, Calcutta and Others
(2010) 11 SCC 593 : (2010) 3 SCR 798; Chatturam
& Ors. v. CIT, Bihar AIR 1947 FC 32 - referred to.
Case Law Reference B
(1980) 1 SCR 442 referred to Para 11
(1984) 56 STC 273 referred to Para 11
(1985) 58 STC 217 referred to Para 11
(1988) 3 SCR 248 referred to P'lra 11 c
[2002) 2 SCR 934 referred to Para 15
[2010) 3 SCR 798 referred to Para 15
AIR 1947 FC 32· referred to Para 15
(1998] 2 Suppl. SCR 547 relied on Para 23 D
[1972] 1 SCR 357 relied on Para 24
[1993) 1 Suppl. SCR 28 relied on Para 25
[1968) SCR 661 relied on Para 26
E
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5390
of2007.
From the Judgment and Order dated 17.11.2006 of the High Court
of Jharkhand at Ranchi in WP No. 2630 of 2006.
Pravin H. Parekh, Sr. Adv., Sameer Parekh, Sumit Goel, F
Ms. Rukhmini Bobde, Ms. Ritika (For Mis. Parekh & Co.), Advs. for
the Appellant.
Amarendra Saran, Ajit Kumar Sinha, Sr. Advs., Somesh Jha,
R. K. Ojha, Anil K. Jha, Advs. for the Respondents.
The Judgment of-the Court was delivered by· G
R. K. AGRAWAL, J. 1. The present appeal has been filed against
the final judgment and order dated 17 .11.2006 passed by the Division
Bench of the High Court of Jharkhand at Ranchi in W.P. (T) No. 2630
of 2006 whereby the High Court dismissed the petition filed by Mis
H
684 SUPREME COURT REPORTS [2017] 4 S.C.R.
A Larsen & Toubro Ltd.-the appellant-Company while upholding the order
dated 27.02.2006 passed by the Deputy Commissioner, Commercial
Taxes, Urban Circle, Jamshedpur.
2. Brief facts:
(a) The appellant-Company, having its registered office at Mumbai,
B is a public limited company and is involved in manufacturing, trading,
leasing and construction business throughout the country. At the relevant
time, the appellant-Company was involved in the execution of civil work
contracts for its client, viz., Tata Iron & Steel Company 1 td. (TISCO)
and had been filing its returns under the Bihar Finance Act, 1981
c (hereinafter referred to as 'the State Act') and also under the Central
Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act') in the
Commercial Taxes Department, Urban Circle, Jamshedpur.
(b) For the Assessment Year (AY) 1991-92, the appellant-
Company filed returns under the State Act. However, the assessment
D proceedings in relation to the above period, i.e., AY 1991-92 was
completed in the year 1996 and an assessment order dated 24.01.1996
was passed by the assessing authority.
(c) After the assessment proceedings, an audit team of the Auditor
General, Bihar, audited the assessment order dated 24.01.1996 ar,d found
E that the dealer was allowed exemption of Rs. 3,12,47,916/-, being the
amount of goods consumed by the appellant-Company during the course
of execution of works contract. The appellant-Company claimed that
such goods were purchased on payment of tax but no declaration in
Form IX-C along with other evidence was submitted whereas the
production or declaration ofF orm IX-C was mandatory, hence, the claim
F was not allowable and the said fact was conveyed to the afsessing
authority.
(d) On 28.09.2000, the office of Commissioner of Commercial
Tax, Urban Circle, Jamshedpur, served a show cause notice to the
appellant-Company to state as to why tax should not be levied on it for
G the amount of Rs. 3, 12,47,916/- which was wrongly exempted from being
taxed under the provision of the State Act.
(e) After affording an opportunity of hearing to the appellant-
Company, a re-assessment order dated 27.02.2006 was passed by the
Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur
H
MIS LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 685
[R. K. AGRAWAL, J.)
1~ whereby an additional demand of Rs. 35,72,4 75/- was created against A
the appellant-Company.
(f) Being aggrieved by the re-assessment order dated 27 .02.2006,
the appellant-Company preferred a writ petition being W.P. {T) No. 2630
of 2006 before the High Court. A Division Bench of the High Court,
vide order dated 17 .11.2006, dismissed the petition filed by the appellant B
-Company while upholding the order dated 27.02.2006 passed by the
Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur.
(g) Aggrieved by the order dated 17 .11.2006, the appellant-
Company has preferred this appeal by way of special leave.
3. Heard the arguments advanced by Mr. Pravin H. Parekh, C
learned senior counsel for the appellant-Company and Mr. Amarendra
Saran and Mr. Ajit Kumar Sinha, learned senior counsel for the
respondent-State and perused the records.
Point for consideration:
D
4. The only point for consideration before this Court is whether
on the information given by the audit team of the Auditor General, Bihar,
the Assessing Authority was satisfied that reasonable ground exists to
believe that a part of the turnover of the appellant-Company has escaped ·
assessment within the meaning of Section 19 of the State Act based on
which the assessing officer can re-open the assessment? E
Rival contentions:
5. Learned senior counsel for the appellant-Company contended
that an 'audit objection' cannot be construed as 'information' within the
meaning of Section 19 of the State Act, based on which the assessing F
officer can change his opinion and re-open the assessment. The 'audit
objection' relates to tax levied on turnover relating to 'consumables'
wherein there is no sale/deemed sale involved. Consumables by its very
nature are goods used for own consumption. The assessment order dated
24.0 l .1996 rightly records the said fact.
6. Learned senior counsel further contended that the original G
assessment order ~pecifically considered whether purchase tax i~ tq he
paid under the State Act on the disputed it1:1mij and the ~!\mil was q((l9igeg
in negative and hence taxing the items later qn is a meri;: change of
opipion by the Assessing Authority on the very same set of facts that
H
686 SUPREME COURT REPORTS [2017) 4 S.C.R.
A were available on the date of passing the assessment order dated
24.01.1996.
7. Learned senior counsel further contended that non-filing of
Form IX-C under Section 11 of the State Act read with Rule 12 of the
Bihar Sales Tax Rules, 1983 (hereinafter referred to as 'the Rules')
B does not attract the levy in the facts of the present case as the goods are
used for 'own consumption' and there is no sale or 'deemed sale' of the
said goods involving a transfer of property in the said goods to anybody.
8. It was further contended that Section 19 of the State Act read
with Rule 20 and Form XIV of the Rules specifically requires the
c satisfaction of the Prescribed Authority regarding requirement of re-
assessment before the issuance of the notice in this regard. The initiation
of the re-assessment proceedings and the subsequent re-assessment
order dated 27.02.2006 are illegal as there was no satisfaction on the
part of the Prescribed Authority about existence ofreasonable grounds
to believe that turnover has escaped assessment. Hence, the same are
D liable to be set aside. .
9. Learned senior counsel further contended that it is relevant to
note the circumstances under which the appellant-Company was unable
to produce the relevant records. The assessment year (AY) in question
is 1991-92. The assessment order in relation to the same was passed
E on 24.01.1996. The show cause notice proposing to re-open the
assessment was served on the appellant-Company on 28.09.2000 which
was replied in detail by the appellant-Company vide letter dated
13.11.2000. Thereafter, for a period of five years, there was no
communication from the side of the respondents and the appellant-
F Company, under the bonafide belief that the letter dated 13.11.2000
had satisfied the requirements of show cause notice, forwarded all the
records to their dumping yards at Chennai. Learned senior counsel
contended that owing to the above circumstances the failure of the
appellant-Company to produce the aforesaid records was not at all willful.
G 10. Learned senior counsel finally contended that the order ofre-
assessment dated 27.02.2006 is illegal and the assessment proceedings
cannot be re-opened on the basis of audit objection, as the same does
not amount to 'information' as contemplated under Section 19 of the
State Act. The impugned order amounts to change of opinion on the
same set of facts and Jaw which were available even at the time of
H passing the order of assessment.
M/S LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 687
[R. K. AGRAWAL, J.]
11. In support of the above contentions, learned senior counsel A
has relied upon the following decisions, viz., Mis Indian & Eastern
IVe>''Spaper Society, New Delhi vs. Commissioner of Income Tax,
New Delhi (1979) 4 SCC 248, Bhimraj Madan/a/ vs. State of Bihar
ami Another (1984) 56 STC 273, Usha Sales (Pvt.) Ltd. vs. The State
of Bihar ( 1985) 58 STC 217 and Deputy Commissioner of Sales Tax B
(Law), Board of Revenue (Taxes), Ernakulam vs. Mis Thomas
Stephen & Co. Ltd. Qui/on ( 1988) 2 SCC 264.
12. Per contra, learned senior counsel for the respondent-State
submitted that the assessing authority has not revised the assessment on
the basis of the audit report only rather it had satisfied itself before
revisi_ng and the same can be seen from the fact that it had rejected part c
of the audit opinion and applied its mind before passing the order
impugned.
13. Learned senior counsel for the respondent-State further
submitted that the 'audit objection' in the present case is an 'information'
within the meaning of Section 19 of the State Act and the competent D
authority has rightly re-assessed the turnover and demanded legally
payable valid tax which was escaped. He further submitted that. the
word 'information' used in the Section is of the widest amplitude and
comprehends variety of factors including information from external
sources of any kind including discovery of new facts or information E
available in the record of assessment not previously noticed or
investigated.
14. Learned senior counsel for the respondent-State submitted
that if there is obvious mistake apparent on the face of the record of
assessment, that record itself can be a source of information, if that F
information leads to a discovery or belief that there has been an escape
of assessment. He finally submitted that there is no illegality in the re-
assessment order dated 27.02.2006 as well as in the order dated
17 .11.2006 passed by the High Court and the claim of the appellant-
Company is liable to be rejected.
G
15. In support ofhis submissions, learned senior counsel has relied
upon the following decisions, viz., Com111issio11er of Income Tax vs.
· P. V.S. Beedies Pvt. Ltd. ( 1998) 9 SCC 272, Anandji Haridas and Co.
(P) Ltd. vs. S.P. Kasture and Others AIR 1968 SC 565, Commissioner
of Customs, Mumbai vs. Virgo Steels, Bombay and Another (2002) 4
H
688 SUPREME COURT REPORTS [2017] 4 S.C.R.
A SCC 316, Supreme Paper Mills Limited vs. Assistant Commissioner,
Commercial Taxes, Calcutta and Others (20 l 0) 11 SCC 593 and
Chatturam & Ors. vs.
CIT, Bihar AIR 1947 FC 32.
Discussion:
16. In the instant case, an audit team of the Auditor General,
B audited assessment order dated 24.01.1996 and found that the dealer
was allowed an exemption of Rs. 3,12,47,916/- being the amount for
goods consumed by the appellant-Company during the course of
execution of works contract. It is the claim of the appellant-C_ompany
that those goods were purchased on payment of tax but no declaration
c in Form IX-C along with other evidence was submitted. The same fact
was brought to the notice of the assessing authority which in furtherance
thereof issued a show cause notice to the appellant-Company. The
production of Form IX-C was held to be mandatory and the claim of the
appellant-Company was disallowed and an order of re-assessment dated
27.02.2006 was passed by the competent authority for an additional
D amount of tax of Rs. 35,72,475/- after following the due procedure of
law.
17. The point arises for consideration is as to whether an 'audit
objection' can be construed as 'information' within the meaning of Section
19 of the State Act based on which the assessing officer was satisfied
E that reasonable grounds exist to believe that any part of the turnover of
the appellant-Company had escaped assessment under Section 19 of
the State Act.
18. Learned senior counsel for the appellant-Company argued
that it is mere a change of opinion which resulted in re-assessment order
F and is not information as contemplated under Section 19 of the State
Act. Learned senior counsel for the respondent-State submitted that
'audit objection' in the present case is definitely' information' within the
meaning of Section 19 and the High Court has rightly uphold the re-
assessment order dated 27.02.2006.
G 19. In view of the above, it is relevant to quote Section 19 of the
Bihar Finance Act, 1981 which is as under:-
" 19. Tunwver 1>f registered dealer escaping assessment -
(1) Ifupop information which has come into his possession, the
prescribed authority is satisfied that reasonable grounds exist to
H
MIS LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 689
[R. K. AGRAWAL, J.]
believe that any turnover of a registered dealer or a dealer to A
whom grant of registration certificate has been refused under the
third proviso to sub-section (2) of Section 14, in respect of any
period has, for any reason, escaped assessment or any turnover
of any such dealer or a dealer assessed under sub-section (5) of
Section 17 has been under-assessed or assed at a rate lower than
B
that which was correctly applicable or any deductions therefrom
has been wrongly made, the prescribed authority may, subject to
such rules may, be made by the State Government under this part,
and-
(a) Within eight years from the date of the order of the
assessment or reassessment where the said authority has C
reasons to believe that the dealer has concealed, omitted
or failed to disclose willfully the particulars of such
turnover or has furnished incorrect particulars of such
turnover and thereby returned figures below the reason
amount, D
(b) Within eight years' from the date of the order of the
assessment or reassessment in any other case.·
Serve on the dealer a notice containing all or any of the
requirements which may be included in a notice under sub-section
(2) of Section 17 and proceed to assess or reassess the amount of E
tax due from the dealer in respect of such turnover, and the
provisions of this part shall, so far as may be, apply accordingly as
ifthe notice under this sub-section was a notice under sub-section
(2) of Section 17:
Provided that the amount of tax shall be assessed or re- F
assessed after allowing such deductions as were permissible during
the said period and at rates at which it would have been assessed
had the turnover not escaped assessment or full assessment, as
the case may be.
Explanation: - Production before the prescribed authority of G
accounts, registers or documents from which material facts could,
with due diligence, have been discovered by the said authority,
will not necessarily amount to full disclosure within the meaning
of this section.
H
690 SUPREME COURT REPORTS [2017] 4 S.C.R.
A (2) (a) The prescribed authority shall, in a case falling under
clause (a) of sub-section (I), direct that the dealer shall pay by
way of penalty a sum not exceeding three times but not less
than an amount equivalent to the amount of tax which is or
may be assessed on the escaped turnover.
B (b) The penalty imposed under clause (a) shall be in addition
to the amount of tax which is or may be assessed on the escaped
turnover, and the order imposing penalty may precede the
assessment of escaped turnover.
(c) For determining the amount of penalty under clause (a),
c where the penalty precedes assessment under clause (b) the
prescribed authority shall quantify the amount of suppression
and tax thereon provisionally in the prescribed manner.
(d) No order shall be passed under this sub-section without
giving the dealer an opportunity of being heard in the prescribed
D manner.
3) Any assessment or reassessment made and any penalty
imposed under this section shall be without prejudice to any
action which is or may be taken under section 49."
Sub-Section ( l) of Section 19 very clearly prescribes that the competent
E authority, upon information, if satisfied that reasonable ground exists to
believe that any turnover of a registered dealer or a dealer to whom
grant of registration certificate has been refused in respect of any period
has, for any reason, escaped assessment or any turnover of any such
dealer assessed under sub-Section (5) of Section 17 has been under-
F
assessed or assessed at a rate lower than that which was correctly
applicable, may, within eight years from the date oforder ofassessment,
proceed to assess or reassess the amount of tax in respect of such
turnover.
20. For ready reference, the relevant portion of the assessment
G order dated 24.01.1996 is also extracted hereunder:-
"The Company has used the following work under its Tender work on
its level and if we separate the both, then it is like this.
Camp equipments Rs. 227301.00
Electric goods for work site Rs. 773223.00
H
MIS LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 691
[R. K. AGRAWAL, J.]
Electrode Welding Cable and Accessories Rs. 871294.00 A
Fuel & Lubricants Rs. 3189205.00
General Consumables Rs. 2945086.00
(Handgloves) contenvest
Oxygen & D.A. Gas Rs. 21223.00 B
Plywood for Shuttering Rs. 2826674.00
Safety Appliances Rs. 408392.00
Spares Rs. 8232442.00
Staging Materials Rs. 3888798.00
c
Shuttering & Walk-way (For Timber) Rs. 4191982.00
Tools and Tackles Rs. 3672296.00
D
Total Rs. 3,12,47,916.00"
21. It is also pertinent to understand the meaning of the word
'information' in its true sense. According to the Oxford Dictionary,
'information' means facts told, heard or discovered about somebody/
something. The Law Lexicon describes the term 'information' as the
E
act or process of informing, communication or reception of knowledge.
The expression 'information' means instruction or knowledge derived
from an external source concerning facts or parties or as to law relating
to and/or having a bearing on the assessment. We agree that a mere
change of opinion or having second thought about it by the competent
authority on the same set of facts and materials on the record does not F
constitute 'information' for the purposes of the State Act. But the word
"information" used in the aforesaid Section is of the widest amplitude
and should not be construed narrowly. It comprehends not only variety
of factors including information from external sources of any kind but
11lso the discovery of new facts or information available in the record of
0
assessment not previously noticed or investigated. Suppose a mistake iri
the original order of assessment is not discovered by the Assessing
Officer, on further scrutiny, if it came to the notice of another assessor
or even by a subordinate or a superior officer, it would be considered as
information disclosed to the incumbent officer. If the mistake itself is not
H
692 SUPREME COURT REPORTS r2017] 4 S.C.R.
A extraneous to the record and the informant gathered the information
from the record, the immediate source of information to the Officer in
such circumstances is in one sense extraneous to the record. It will be
information in .his possession within the meaning of Section 19 of the
State Act. In such cases of obvious mistakes apparent on the face of the
B . record of assessment, that record itself can be a source of information,
if that information leads to a discovery or belief that there has been an
escape of assessment or under-assessment or wrong assessment.
22. There are a catena of judgments of this Court holding that
assessment proceedings can be reopened if the audit objection points
out the factual information already available in the records and that it
C was overlooked or not taken into consideration. Similarly, if audit points
out some information or facts available outside the record or any
arithmetical mistake, assessment can be re-opened. ·
23. In P. V.S. Beedies (supra), this Court has held as under:-
"3. We are of the view that both the Tribunal and the High
D Court were in error in holding that the information given by internal ·
audit party could not be treated as information within the meaning
of Section 147(b) of the Income Tax Act. The audit party has
merely pointed out a fact which has been overlooked by the Income
Tax Officer in the assessment. The fact that the recognition granted
E
to this charitable trust had expired on 22-9-1992 was not noticed
by the Income Tax Officer. This is not a case of information on a
question oflaw. The dispute as to whether reopening is permissible
after audit party expresses an opinion on a question oflaw is now
being considered by a larger Bench of this Court. There can be
no dispute that the audit party is entitled to point out a
F factual error or omission in the assessment. Reopening of
the case on the basis of a factual error pointed out by the
audit party is permissible under law. In view of that we hold
that reopening of the case under Section 147(b) in the facts of
this case was on the basis of factual information given by the
internal audit party and was valid in law. The judgment under
G
appeal is set aside to this extent."
(emphasis supplied)
24. Similarly, in Commissioner ofIncome Tax, U.P., Lucknow
vs. Mis Gurbux Rai Harbux Rai (1971) 3 SCC 654, this Court has
held as under:-
H
M/S LARSEN & TOUBRO LTD. v. STATE OP. JHARKHAND 693
[R. K. AGRAWAL, J.]
"6. Section 15 of the Act provides that ifin consequence of definite A
information which has come into the possession of the Excess
Profits Tax Officer he discovers that profits of any chargeable
accounting period have escaped assessment, etc., he may at any
time serve a notice containing all or any of the requirements which
may be included'in a notice under Section 13 and may proceed to B
assess or reassess the amount of such profits liable to excess
profits tax. The power so conferred can be exercised in the course
of the original assessment or reassessment. It is essential,
according to the law laid down by this Court, that before any
action can be taken or an order made under Section JO-A there
should be a proceeding which should be pending for assessment C
or reassessment of excess profits tax ..... "
"7. On the first question the submission of Mr M.C. Chagla for
the assessee is that there was no definite information which had
come into possession of the Tax Officer from which it could be
said that he had discovered that profits of the relevant chargeable D
accounting period had escaped assessment. We are unable to
agree. The Appellate Assistant Commissioner had made an order
on October 10, 1947, in the proceedings relating to the assessment
of income tax of the assessee that there had been only a partial
partition in respect of the movable property business of Gurbux
Rai. That was certainly an information which came into the E
possession of the Excess Profits Tax Officer not because of any
change of opinion by himself but because of the decision of the
Appellate Assistant Commissioner in the income tax proceedings.
This Court has consistently- held that the Income Tax
Officer would have jurisdiction to initiate proceedings under F
Section 34(1)(b) of the Income Tax Act, 1922, which is in
pari materia with Section 15 of the Act if he acted on
information received from the decision of the superior
authorities or the court even in the assessment
proceedings. (See R.B. Bansilal Abirchand Firm v. C/Tl
and Assistant Controller ofEstate Duty, Hyderabad v. Nawab G
Sir Osfiian Ali Khan Bahadur, H.E.H. The Nizam of
Hyderabad and others. It has next been urged that the alleged
object of having a partial partition, namely, of reducing the liability
to excess profits tax had never been examined by the Appellate
Assistant Commissioner in the income tax proceedings and H
694 SUPREME COURT REPORTS [2017] 4 S.C.R.
A therefore it could not be said that there had been escapement of
income as a result of information derived from his order. The
Appellate Assistant Commissioner apparently did not go into that
question because the proceedings before him related to assessment
of income tax. Section 10-A of the Act is a special provision which
deals with the transactions designed to avoid or reduce liability to
B
excess profits tax. The information which came into possession
of the Excess Profits Tax Officer of partial partition having been
effected was relevant for the purpose of Section 15 and once he
had initiated proceedings under that section he was perfectly
competent and had jurisdiction to examine for the purpose of
c Section I 0-A whether partial partition had been effected for
avoidance or reduction ofliability to excess profits tax. The first
question, therefore, should have been answered against the
assessee and in favour of the Revenue."
(emphasis supplied)
D 25. In Mis Phool Chand Bajrang Lal and Another vs. l11co111e
Tax Officer & Another (1993) 4 SCC 77 this Court has held as under:-
"25 ..... He may start reassessment proceedings either because
some fresh facts come to light which were not previously disclosed
or some information with regard to the facts previously disclosed
comes into his possession which tends to expose the untruthfulness
E of those facts. In such situations, it is not a case of mere change
of opinion or the drawing of a different inference from the same
facts as were earlier available but acting on fresh information ..... "
26. The contention whether finding the information from the very
facts that were already available on record amounts to information for
F the purpose of Section 19 of the State Act, it would be sufficient to refer
'to a judgment of this Court in Anandjiharidas & Co. vs. S.P. Kasture
AIR 1968 SC 565 wherein it was held that a fact which was already
there in records doesn't by its mere availability becomes an item of
"information" till the time it has been brought to the notice of assessing
G authority. Hence, the audit objections were well within the parameters
ofbeing construed as 'information' forthe purpose of section 19 of the
State Act.
27. The expression 'information' means instruction or knowledge
derived from an external source concerning facts or parties or as to law
relating to and/or after bearing on the assessment. We are of the clear
H
MIS LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 695
[R. K. AGRAWAL, J.]
view that on the basis of infonnation received and if the assessing officer A
is satisfied that reasonable ground exists to believe, then in that case the
power of the assessing authority extends to re-opening of assessment, if
for any reason, the whole or any part of the turnover of the business of
the dealer has escaped assessment or has been under assessed and the
assessment in such a case would be valid even if the materials, on the
B
basis of which the earlier assessing authority passed the order and the
successor assessing authority proceeded, were same. The question
still is as to whether in the present case, the assessing authority was
satisfied or not.
28. At this stage, we deem it appropriate to reproduce the matter
dealt with between the audit team and the assessing authority which led C
to the initiation of re-assessment proceedings under Section 19 of the
State Act which is as under:-
"Part - II
Section- 'N
Para 1. Non levy of purchase tax Rs. 24,19,385.31 D
Name of the dealer Mis Larsen & Toubro
Ltd., ECC Construction
Group, Jamshedpur
Registration No. JU 848 ® E
Nature of Business Works Contract
Asstt. Year 1991-92
Date of Order . 24.01.1996
GT.O. Determined Rs. 17,57,01,372.00 F
Less: Sale of tax paid goods Rs. 1,31,75,779.63
Rs. 16,25,25,592.37
Less: Works done by sub-contractor Rs. 27,17,304.00
G
Rs. 15,98,08,208.37
Less: Labour charges and
overhead charges Rs. 11,91,66,742.38
Rs. 4,06,41,465.99 H
696 SUPREME COURT REPORTS [2017) 4 S.C.R.
A Tax was levied
@4% on Rs. 17,48,096.90 Rs. 69,923.00
@ 8% on Rs. 1,96,71,099.14 Rs. 15,73,678.93
@ 9% on Rs. 1,45,34,488.10 Rs. 13,08,103.92
B @ 10% on Rs. 2,048.00 Rs. 204.80
@ 11 % on Rs. 4,82,125.70 Rs. 53,033.86
@ 12% on Rs. 42,03,608.15 Rs. 5,04,432.97
c Rs. 35,09,387.36
Add: Tax@ l % on Rs. 5,55,08,612.25 Rs. 5,55,086.12
Rs. 40,64,473.48
D Surcharge @ 10% on Rs. 39,94,549.60 Rs. 3,99,454.00
Rs. 44,63,928.44
E Penalty U/S 16 (8) Rs. 920.00
. Rs. 44,64,848.44
The Scrutiny of assessment order revealed that the dealer was
allowed exemption of Rs. 11,91,66, 742.38 on account of labour
F charges and overhead charges claimed as detailed below:
Labour Charges Rs. 7,02,77,549.00
Overhead charges Rs. 1,87,15,545.00
Goods consumed in course of
G execution of work Rs. 3,12,47,916.00
Rs. 12,02,41,010.00
Out of the above claim, a sum of Rs. 10,74,267.62 to us disallowed as
below:
H
M/S LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 697
[R. K. AGRAWAL, J.]
Tax paid claim disallowed Rs. 3,50,698.37 A
Recovery of cement taxable Rs. 2,20,972.50
Amount of plant hire charges Rs. 5,02,596.75
Rs.10,74,267.62 B
The dealer had furnished the statement of material utilized in
the contract work and goods consumed for own use. Scrutiny of
assessment order revealed that the dealer was allowed exemption
on Rs. 3,12,47,916.00 being the amount of goods consumed or
used itself in course of execution of work, details of which were c
discussed in the assessment order. It had been stated by the
assessing authority that such goods were purchased on payment
of tax, but no declaration in form IX C along with other evidences
were kept on record. Production of declaration form in IX C
was mandatory one and hence the claim was not allowable. ·
D
The entire materials received from outside the State or
purchased within the State without payment of tax was normally
leviable to tax at specified rates under section 12 of B.F. Act
1981. Under section 4 of the Act ibid, every dealer liable to pay
under section 3 of the Act, if otherwise disposes the goods in any
manner other than by way of sale in the State was also liable to E
purchase tax. In this connection a reference to the judgement of
Hon 'ble Karnataka High Court and duly confirmed by the Hon' ble
Supreme Court in the case ofChevvabbo Vs. State ofKarnataka
( 1986) 62 STG 194 Se) is invited ....... Disposal of goods in this
section (Similar to those Karnataka) was clarified as transfer of F
title over the goods otherwise than sale, included gifts, own use or
consumption section 4 of the Act (B.F. Act) is similar to section 7
A of Tamil Nadu General Court in the case of the State of Tamil
Nadu Vs. M.K. Kandaswami (1975 36 STC 191) where it was
held that (1) this Section is a separate charging provision in the
Act and is not subject to section 3 and (ii) brings to tax goods, the G
sale of which would normally have been taxed at the same point
or other in the State but could not be taxed even due to destroying
them or other reasons. Thus the purchase tax was leviable on
goods consumed for own use. Since cost price/purchase price
was reflected as value of goods consumed for own use of the H
698 SUPREME COURT REPORTS [2017] 4 S.C.R.
A dealer, the tax at the rate specified in section 12 of the Act ibid
was leviable. In this case, even if same charges like Electrodes,
Welding Cables, welding appliances, fuel and lubricants, oxygen
and P.A. Gas safety, safety appliances valued at Rs. 44,90, 114.00
was not considered as taxable, the consumable goods worth Rs.
2,67 ,57 ,802.00 attracted levying of tax at specified rates.
B
The case may please be re-examined in the light of above
observation and levying of purchase tax amounting to
Rs.24, 19,385.31 (including additional tax and surcharge) as
calculated below may be considered under intimation to audit.
c s. Name of Purchase value Rate Non-levy of
Goods applicable purchase tax
No. of goods
l. Camp
Equipment,
general
D consumable,
plywood for
shuttering
spares and Rs. 8% Rs.
staying 1,81,20,301.00 14,49,624.08
material
E 2. Electrical Rs. 12% Rs. 5,95,824.60
Goods and 49,65,205.00
Timber
3. Tools & Rs. 4% Rs. 1.46,891.84
Tackles 36,72,296.00 Rs.21,92,340.52
F . Rs. 20,454.48
Addi. Tax@ Rs.22,12,795.00
1%on Rs.
20,45,448.68 2,06,590.31
Rs.24,19,385.31
Surcharge@
G 10% on
20,65,903.16
The use of fuel and lubricants may please be bifurcated and value
oflubricants only may be levied to tax.
On being pointed out in audit, it was stated that since the goods
H had not been transferred to contractee co-under the provisions of
M/S LARSEN & TOUBRO LTD. v. STATE OF JHARKHAND 699
[R. K. AGRAWAL, J.]
works contract, but it had been consumed and so it does not come A
under the purview of taxation. The reply is not tanable in view of
the above judgements and hence the case needed to be reviewed."
(emphasis supplied)
29. From a perusal of the last paragraph of the aforementioned
report of the audit party, it is clear that the Assessing Officer was of the B
opinion that as the goods had not been transferred to appellant-Company
but had been consumed, so it does not come under the purview of
taxation. In other words, the Assessing Officer was not satisfied on the
basis of information given by the audit party that any of the turnover of
the appellant-Company had escaped assessment so as to invoke Section
19 of the State Act. From the above, it also appears that the assessing C
officer had to issue notice on the ground of direction issued by the audit
party and not on his personal satisfaction which is not permissible under
law.
30. In view of the above discussion, we are of the considered
view that the order dated 27 .02.2006 passed by the Deputy Commissioner, D
Commercial Taxes, Urban Circle, Jamshedpur is without jurisdiction and
the High Court was not right in dismissing the petition filed by the appellant-
Company. We, therefore, allow the appeal and set aside the order dated
27 .02.2006 passed by the Deputy Commissioner, Commercial Taxes,
Urban Circle, Jamshedpur as well as the order dated 17 .11.2006 passed E
by the Division Bench of the High Court of Jharkhand. Howe.ver, the
parties shall bear their own costs.
Divya Pandey Appeal allowed.
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