Holding

The appellate authority may receive Form‑C in appeal if the dealer demonstrates sufficient cause for not filing it before the first assessing authority; the words "first assessing authority" do not limit the appellate power.

Summary

The Supreme Court examined whether a sales‑tax appellate authority could entertain a Form‑C declaration when it had not been filed before the first assessing authority under the Central Sales Tax Act, 1957. The revenue argued that Rule 12(7) limited the filing of Form‑C to the time of assessment by the first assessing authority, thereby stripping the appellate authority of any power to receive it. The Court held that the phrase "first assessing authority" does not exclude the appellate authority, which may accept Form‑C in appeal provided the dealer shows sufficient cause for the delay. It emphasized that acceptance of the form is not automatic; the dealer must satisfactorily explain the failure to file earlier, especially if additional time was already granted by the assessing authority. Consequently, the appeals filed by the States of Tamil Nadu and Andhra Pradesh were dismissed, leaving the lower assessments intact.

Issues considered

The scope of power of a sales‑tax appellate authority to receive Form‑C under Rule 12(7) of the Central Sales Tax Rules.
Whether the requirement that Form‑C be furnished "up to the time of assessment by the first assessing authority" bars its submission in appeal.
What constitutes "sufficient cause" for a dealer's failure to file Form‑C before the first assessing authority.

Legislation cited

Andhra Pradesh General Sales Tax Acts. 19, s. 21
Central Sales Tax Act, 1957s. 8(1), s. 8(2), s. 8(3), s. 8(4), s. 9
Central Sales Tax (Registration and Turnover) Rules, 1957s. Rule 12(7)
Income Tax Act (as amended, 1961)s. 13
Tamil Nadu General Sales Tax Act, 1959s. 31, s. 31-A, s. 36

Subjects

Central Sales TaxForm CAppellate authoritySufficient causeAssessmentTax exemptionRule 12(7)Inter‑state salesRevenue appeal

Judgment

r
STATE OF ANDHRA PRADESH ETC. A
l'.
;
HYDERABAD ASBESTOS CEMENT
PRODUCTION LTD. ETC. ETC.

APRIL 28, 1994
B
(M.M. PUNCHHI AND B.P. JEEVAN REDDY, JJ.]
I
-,\
Cemral Sales Tax Act, 1957/Central Sales Tax (Registratio11 and Tum-
over) Rules, 1957:

Ss.8( I), 8(4), Proviso/r.. 12(7) Proviso-Sale of goods to Govemment
c
or to registered deale~Sa/es Tax on-Declaration in Jann C' to avail benefii
1

under s.8(1 )-Power of appellate auth01ity to receive declaration fonns in
appeal--He/d 1nere use of words "the first assessing autho1ity" does not niean
1

that appellate autho1ity does not have power to receive Jann 'C' in ap-
peal-Power to be exercised only where sufficient cause is shown by dealer D
for not fili11g the fonns upto the time of assessment before first assessing
authority.

Under sub-section (1) of s.8 of Central Sales Tax Act, 1957, sales tax
at a lesser rate of 4% was required to be paid in case of sale of any goods to
the Government or sale of goods prescribed in s.8(3) of the Act to any
E
registered dealer. Sub- section (4) of s.8 provided that the provisions of s.
8(1) would not apply to any sale unles. the dealer selling the goods fur-
nished to the prescribed authority a declaration duly signed by the
authorised officer of the Government or the dealer to whon1 the goods w~re
~
sold. By Amendment Act 61 of 1972, a proviso each was added to sub-section F
(4) of Section 8 of the Act and to sub- rule (i) of Rule 12 of the Central Sales
Tax (Registration and Turnover) Rule 1957, inter a/ia, to the effect that the
declaration in Form-C should be furnished to the prescribed authority (who
was also the assessing authority) upto the time of assessn1ent by the first
assessing authority or upto such tinie as may be allowed by that authority.
G
In the appeals tiled by the revenue against the judgments of the High
Courts of Andhra Pradesh and Tamil Nadu, it was contended by the
Revenue before this Court that since the proviso to sub-rule (7) of Rule 12
specifically required that Form-C should be furnished "up to the time of
assessment by the first assessing authority" and also vested the power to H
785
786 SUPREME COURT REPORTS [l994J 3 S.C.R.

A extend the time in the assessing authority, the appellate authority had no
power to receive Form-C in appeal and grant relief; and that in vie"· of
sub-section (4) of Section 8 and sub-rule (7) of Rule 12 providing for a
benefit i.e., partial exemption from tax liability, the dealer desiring to avail
the benefit should comply with the relevant provisions strictly and fully.

B Dismissing the appeals, this Court

HELD : 1.1. Mere use of the words "the first assessing authority" in
sub-rule (7) of Rule.12 of the Central Sales Tax (Registration and Turn-
over) Rules, 1957 cannot and does not mean, in the context and scheme of
the enactments concerned that the appellate authorities did not have the
c power to receive Forn1-C in appeal. This po"'er can of course be exercised
only where sufficient cause is shown by the dealer for not filing the forms
upto the time of assessment before the first assessing authority.
(798-H, 799-A]
D 1.2. Receipt of declaration forms mentioned under R.12(7), in ap-
peal cannot be a matter of course; it should be allowed only where
sufficient cause is established by the dealer for not producing them before
the first assessing authority as contemplated by Rule 12(7). The require-
ment of the said sub-rule cannot be excluded from consideration by the
appellate court while judging the sufficiency of the cause shown. It must
E be remembered that that is the primary obligation of the dealer and his
failure to abide by it must be properly explained. If a dealer obtains
further time from the first assessing authority and yet fails to produce
the forms before him, it is obvious that the appellate authority would
adopt a stiffer standard in judging the sufficient cause shown by the
dealer for not producing them earlier. (799-A-C]
F
C.!.T v. .Macmilan, 33 I.T.R. 182, relied on.

Sratc of Tamil Nad11 v. Amlnrnnigan & Co., 51 S.T.C. 381 and
Rajeshwmi, Stone Polishers v. State of A.P., 52 S.T.C. 268, approved.

G Nannndas Manordass v. Conunissioner of Inconie Tax, 31 I.T.R. 381
909, referred to.

Sales Tax Officer v. Abraham, 20 S.T.C. 367, cited.

The State of Tamil Nadu v. Chellaram Garments (P) Ltd., 44 S.T.C.
H 239; Deputy Commissioner (Commercial Taxes), Coimbator Division, Coim-
STATE OF A.P. ,.. ASBESTOS CEME1'TPROD:\. LTD. [JEEVAI\ REDDY . .1.1 787

batore v. Parekulli Hajee Sons, 13 S.T.C. 680 and Deputy Commissioner of A
Cun11nercia/ Taxes, Madras Division v. Manohar Brothe1:\·, 13 S.T.C. 686,
disapproved.

CIVIL APPELLATE JURISDICTION : Civil Appeal 'fo. 7360 of
1993 etc. etc.
B
From the Judgment and Order dated 25.7.85 of the Andhra Pradesh
High Court in T.R. Case No. 160 of 1985.

C. Sitharamiah, T.V.S.N. Chari, Nikhil Nayyar and Ms. Promila
Choudhary for the Appellants in State of AP.
c
A. Mariarputham and Ms. Aruna Mathur for Mis Arputham, Aruna
& Co. for the Appellant for the State of Tamil Nadu.

Harish N. Salve Vivek Kohli, Ms. Meenakshi Grover Suman Khaitan,
Raj Chaterji for Mis. Khaitan & Co. for the Appellant in C.A No. 7360i93.
D
A.T.M. Sampath, P.N. Ramalingam, T.N. Banerjee, for Mr. H.K.
Dutt, Joseph Pookkatt, for the Mr. Raju Ramachandran, Sunil K. Jain for
Mis Jain Hansaria & Co. for the Respondents.

The Judgment of the Court was delivered by
E
B.P. JEEVAN REDDY, J. Rates of tax on sales effected in the course
of inter-state trade or commerce are prescribed by Section 8 of the Central
Sales Tax Act, 1956. The rates prescribed vary depending upon the person
to whom the goods are sold as well as the nature of the goods. A reading
of sub-sections (1) and (2) yields the following position:
F
(1) In the case of sale to government of any goods, the rate is 4%
(Section 8(1)(a))

(2) On sale of gomb of the description referred to in sub- section
(3) to a registered dealer other than the government @ 4% [Section G
8(1)(b)J

(3) In the case of sales not falling under sub-section (1) of Section
8, the tax on turnover shall be calculated at twice the rate applicable to the
sale or purchase such goods inside the appropriate State, if they are
declared goods. [Section 8(2)(a)] H
788 SUPREME COURT REPORTS ll994J 3 S.C.R.

A (4) In the case of sale of goods other than declared goods and nol
falling under sub-section (I), tax shall be levied at the rate of 10% or at
the rate applicable to the sale or purchase of such goods inside the
appropriate State, whichever is higher. !Section 8(2)(b)J

Sub-section (2-A) provides for a lo\ver rate of tax, or exemption from
B tax, as the case 1nay be, in certain situations which it is not necessary to
notice here. Sub-section (3) specifics the goods for the purpose of Section
8(1)(b); it is also not necessary lo notice the nature of these goods.
Sub-section (4), which is the main provision relevant for our purpose, reads
thus:
c "(4) The provisions of sub-section (1) shall not apply to any sale
in the course of inter-State trade or commerce unless the dealer
selling the goods furnishes to the prescribed authority in the
prescribed manner-

D (a) a declaration duly filled and signed by the registered dealer to
whom the goods are sold containing the prescribed particulars in
a prescribed form obtained from the prescribed authority; or

(b) if the goods are sold to the Government, not being a registered
dealer, a certificate in the prescribed form duly filled and signed
E by a duly authorised officer of the Government :

Provided that the declaration referred to in clause (1) is fur-
nished within the prescrbied time or within such further time as
thal authority may, for sufficient cause, permit.
F (The proviso to sub-section(4) was added by the Central Sales
Tax (Amendment) Act (Act 61of1972) with effect from !st April,
1973.)

Sub-section (4) thus prescril·~s a condition for applicability of sub-
G section(l) of Section 8. It says that if a dealer wishes lo avail of the lower
rate of lax prescribed by sub-section (l), he has to comply with the
requirements' prescribed by it. If the sale is to the government [Section
8(.I)(a)] the selling dealer must produce before the prescribed authority
(assessing authority) a certificate in the prescribed form duly filled and
signed by a duly aurhorised. officer of the government. The Rules made
H under the Act have prescribed the form of the certificate contemplated by
STATE OF A.P. ''·ASBESTOS CE~IENT PRODN. I:rD [JEEVAN REDDY. J.l 789

the clause - it is called 'Form-D'. Similarly, if the selling dealer says that A
he has sold the goods of the description referred to in sub-section (3) to a
registered dealer r(Section S(l)(b) I he shall have to produce a declaration
·duly filled and signed by a registered dealer to whom the goods are sold
containing the prescribed particulars in the prescribed form obtained from
the prescribed authority. The Rules made under the Act have prescribed
the form in which such a declaration has to be issued by the purchasing B
dealer - it is called 'Form-C'. In case Form-Dor Form-C is produced, the
assessing authoritywuuld levy tax on inter-state sales @4% only; otherwise
the sales will attract the higher rate of tax prescribed in sub-section (2).

Before we deal with the provision to sub-section (4), it would be
appropriate to refer to the Rule relevant in this behalf. It is Rule 12. It is c
a lengthy rule containing as many as ten sub-rules, Sub-rule (1) says that
the certificate and the declaration referred to in clauses (a) and (b) of
sub-section (4) of Section 8 shall be in Form-D and C respectively. The
other provisions in sub-rule (J) and sub-rules (2) to (6) deal with various
aspects relating to the said forms which it is not necessary to refer to for D
the purpose of this case. Sub-rule (7) reads as follows :
11
(7) The declaration in Form 'Ci or _Form 'F' or the certifiCate in
Form 'E-1' or Form 'E-11' shall be furnished to the prescribed
authority up to the time of assessment by the first assessing
authority : E
Provided that if the prescribed authority is satisfied that the
person concerned was prevented by .sufficient cause from furnish-
ing such declaration or certificate \vithin the aforesaid time, that
authority may allow such declaration or certificate to be furnished
' within such further time as that authority may permit." F

(It may be noted that proviso to sub-rule (7) was added in the year
1972 with effect from 1st April, 1972, i.e., the date on and from
which the proviso to sub-section (4) of Section 8 was added by the
Amendment Act 61 of 1972)." G

Sub-rule (7), it is evident, deal with Form-C and certain other Forms.
It does not deal with Form-D. The main limb of sub-rule says that the
declaration in Form-C shall be furnished to the prescribed authority (which
means the assessing authority) upto the time of assessment by the first
assessing authority. H
790 SUPREME COURT REPORTS [1994] 3 S.C.R.

A. At this stage, we may consider the reasons for which the proviso to
sub-section (4) was added by the Amending Act 61 of 1972 and the proviso
to sub-rule (7) of Rule 12 was inserted. In Sales Tax Officer v. Abraham,
(20) S.T.C. 367), it was held by this court that the phrase "in the prescribed
manner" occurring in Section 8(4) of the Act confers upon the Rule-making
authority the power to prescrible a Rule stating the particulars to be
B mentioned in the prescribed form, the nature and the value of the goods
sold, the parties to whom they are sold and to which authority the form is
to be furnished but that it docs not authorise the Rule-making authority tci
prescribe the time limit within which the declaration is to be filed by the
registered dealer. With a view to remedy the lacuna pointed out by this
c court, the Parliament enacted the aforesaid (Amendment) Act 61 of 1972.
The proviso empowers the Rule-making authority lo prescribe the time
within which Form-C, i.e., the declaration referred lo in clause (a) of
sub-section (4) is to be furnished. The proviso not only empowers the
Rule-making authority to prescribed such time but also to provide that for
D sufficient reasons, the assessing authority may permit the said forms to be
filed within the time prescribed. Pursuant to the said proviso, the Rule-
making authority introduced the proviso to sub-rule (7). While the main
limb of sub-rule (7) says that Form-C can be furnished "upto the time of
the assessment by the first assessing authority the proviso says that if the
1
\

prescribed authority is satisfied that the dealer was prevented by sufficient
E cause from furnishing such certificate within the aforesaid time limit he
11 11

may allow such certificate to be furnished within such further time as he
may permit. Reading sub-rule (7) as a whole it follows that Form-C shall
be furnished upto the time of assessment by the first assessing authority
but in a proper case the prescribed authority (which means in the context
F the assessing authority) may permit such forms to be filed within such
further time as he may permit. This necessarily means that the assessing
authority will complete the assessment but al the same time permit the
dealer to file Form-C within the time specified by him. In case the dealer
files the Form-C within the time specified, it is obvious, the assessing
authority \vill revise the order of assessment granting the requisite relief.
G
Having noticed the relevant provisions of law, we may now turn to
the question arising in these matter. It is this : where a dealer does not
furnish Form-C before the first assessing authority upto the time of assess-
ment, can he be permitted to file the said Forms in the appeal preferred
H by him, i.e., before the first or the second appellate authority? In other
STATE OF AP., . ASBESTOS CEMENTPRODi\. L'IU. IJEEVAN REDDY J.J 791

words, the question is whether the appellate authority, whether the first or A
the second appellate authority has the power to receive Form-C in appeal
and to grant relief, in cas~ the dealer satisfies the appellate authority that
he had sufficient cause for not producing the said certificate before the
first assessing authority? The 'Revenue says that the appellate authorities
have no such power inasmuch as Rule 12 expressly provides that such
B
Forms shall be furnished "upto the time of assessment by the fim assessing

, authority" and also because power to extend the time for filing these forms
is vested by the proviso to sub-rule only in the assessing authority. The
contention is that sub-section ( 4) of Section 8 read with sub-rule (7) of
Rule 12 provides for a benefit, for a partial exemption from the tax
liability. If any dealer wishes to avail of such benefit or partial exemption, c
he has to comply with the relevant provisions strictly and fully. The benefit
of the said provisions can be extended only if the relevant conditions are
satisfied and in the manner prescribed by the Act and the Rule and in no
other manner. The requirements prescribed by Rule 12(7) have to be
followed in letter and spirit. No equities are involved in such a matter non D
can the concept of substantial compliance be invoked in such a case. On
the other hand, the dealers' case is that the power of the appellate authority
is co·extensive with that of the first assessing authority and, therefore, \vhat
can be done hy the first assessing authority can equally be done by the
appellate authority, whether first or the second appellate authority. It is E
pointed out that the power of appeal under the State Sales Tax enactments
concerned herein (which have to be read into the Central Sales Tax Act
by virtue of Section (9)) is different in character and scope from an appeal
under the Code of Civil Procedure. An appellate authority under the Tamil
Nadu and Andhra Pradesh sales tax enactments has the power not only to
F
confirm, reduce or annul the orders under appeal but also to enhance the
., tax liability even though the appeal is preferred by the dealer. In short, the
appeal - in particular the first appeal - is in the nature of a re-assessment
where the whole assessment is open even though the dealer may have filed
the appeal confined to certain aspects. The learned counsel for the dealers
point out that no particular sanctity attaches to the use of. the appdlatiun G
"first assessing authority" in suh-rule (7) of Rule 12. They also point out
that the Andhra Pradesh Sales Tax Appellate Tribunal is expressly em-
powered by the Regulations made under the Act to receive additional
evidence which too indicates the power of the Tribunal lo receive Form·C
by way of additional evidence. Almost all the High Courts except the H
792 SUPREME COURT REPORTS [1994) 3 S.C.R.

A Madhya Pradesh High Court have upheld the contention,; urged by the
dealers. In Madras High C0urt, a Bench had taken the view in The State
of Tamil Nadu v. Chellaram Gannents (P) Ltd., 44 S.T.C. 239, that the
appella_te authority has no such power and that the only course open to it
in such a case is to sent the matter back to the assessing authority for the
purpose of considering the entertainability of Form-C. (Indeed, this ap-
B pears to be the view taken by the Madras High Court in two earlier
decisions, viz., Deputy Commissioner (Commercial Taxes), Coimbatore
Division, Coimbatore v. Parekutti Hajee Sons, 13 S.T.C. 680 and Deputy
Commissioner of Commercial Taxes, Madras Division v. Manohar Brothers,
13 S.T.C. 686. Later on, however, a Full Bench of that court held in State
C of Tamil Nadu v. Arnlmurngan & Co., 51 S.T.C. 381 that the appellate
authorities do have such po,vcrs, disagreeing with the earlier judgment in
Chellaram Garments.

The matters before us are from two States, Tamil Nadu and Andhra
D Pradesh. Sub-section (1) of Section 9 of the Central Sales Tax Act provides
that the tax under the Act shall be levied and collected by the Government
of India in accordance with the provisions of sub-section (2). Sub-section
(2) says that the machinery under the respective State Sales Tax enactment
shall be the machinery for assessing, re-assessing and calculating the
Central Sales Tax Act on behalf of the Government of India. The
E authorities under the State enactment can exercise all or any of the powers
conferred upon them by the relevant State enactment for the purposes of
assessing, re-assessing and calculating the Central Sales Tax. All the
provisions of the State enactments relating to asscssn1cnt, appeals,
revisions, reviews and other proceedings are made equally applicable for
F the said purpose. In view of this, it would be relevant to notice the nature
and character of the appellate power under the aforesaid two State enact-
ments. Section 31 of the Tamil Nadu General Sales Tax Act, 1959 provides
for an appeal to the Appellate Assistant Commissioner against the orders
passed by the appropriate authority under the sections specified therein.
Sub-section (3) of Section 31 provides that in an appeal against an order
G of assessment, the Appellate Assistant Commissioner shall have the power
to 11 confirm, reduce, enhance or annul the assessment or the penalty or
both 11 1 to set aside the assessment and direct the assessing authority to make
a fresh assessment after such further enquiry as may be directed, as also
to pass such other orders as he may think fit. Similar powers are available
H even where the appeal is ag<iinst an order other than an order of assess-
STATE OF A.P. '·ASBESTOS CEMENT PRODN.LfD. [JEEVAN REDDY, J.J 793

ment. Section 31-A provides for an appeal to the Deputy Commissioner A
against the orders specified therein. Sub- section (3) of Section 31-A
confers powers_ upon the Deputy Commissioner similar to those conferred
by Section 31(3). Section 36 provides for an appeal to the Appellate
Tribunal against the orders of the Appellate Assistant Commissioner as
well as the Deputy Commissioner. Sub-section (3) of Section 36 again is in
the same terms as sub-section (3) of Section 31 and sub section (3) of
B
section 31-A. The position under the Andhra Pradesh General Sales tax
Act is no different. Section 19 provides for an appeal to the specified
authority. Sub-section (3) of Section 19 (which corresponds to sub-section
(3) of Section 31 in the Tamil Nadu Act) reads :
c
"(3) The appellate authority may, after giving the appellant an
opportunity of being heard and sabject to such rules of procedure
as may be prescribed :

(a) confirm, reduce, enhance or annul the assessment or the
penalty, or both; or D

(b) set aside the assessment or penalty, or both, and direct the
assessing authority to pass a fn.::sh ofder after such further enquiry
as may be directed ; or
E
(c) pass such other orders as it may think fit."

Sub-section (4) says that before passing orders under sub-section (3), ·
the appellate authority may make such enquiry as it thinks fit or remand
the case to any subordinate officer or authority for inquiry and report on
any specified point or points. Section 21 provides for a second appeal to F
the Appellate Tribunal and sub-section (4) of Section 21 is again in the
same terms as Section 19(3). In exercise of the power conferred upon it by
sub-section (3) of the Andhra Pradesh Act, the Sales tax Appellate
Tribunal has made certain Regulations regulating its procedure and dis-
posal of its business. Regulation 11 empo\vcrs the Tribunal inter a/ia to G
receive additional evidence. Sub-regulation (1) is practically in the same
terms as Rule 27 of Order 41 of the Code of Civil Procedure. Regulation
11(1) reads as below :

"11. Fresh evidence and witnesses: (1) The party or the respondent
shall not be entitled to produce additional evidence, whether oral H
794 SUPREME COURT REPORTS [1994] 3 S.C.R.

A or documentary, before the Tribuno.;, but

(a) If the authority from whose order the appeal is preferred has
refused to admit evidence which ought to have been admitted, or

(b) if the party or the respondent seeking to adduce additional
B evidence satisfies the Appellant Tribunal that such evidence, not-
withstanding the exercise of due diligence, was not \Vithin his
knowledge or could not be produced by him at or before the time
when the order under appeal was passed, or

(c) if the Tribunal requires any documents to be produced or any
c witnesses to be examined to enable it to pass orders, or

( d) for any other sufficient reason the Tribunal may allow such
evidence or documents to be produced or witnesses examined :

Provided that the other party shall, in such cases, be entitled
D to produce rebutting evidence, if any."

It appears that the Tamil Nadu and Andhra Pradesh enactments
have generally adopted the provisio9s relating to appeals in the Indian
Income Tax Act, 1922/Incomc Tax Act, 1961. Sub-section (3) of Section 31
of the Indian Income Tax Act, 1922 provided that "in disposing of an
E
appeal, the Appellate Assista1,t Commissioner may, in the case of an order
of assessment,-.(a) confirm, reduce, enhance or annul the assessment, or
(b) set aside the assessment and direct the Income-tax Officer to make a
fresh assessment after making such further inquiry as the Income-tax
Officer thinks fit or the Appellate Assistant Commissioner may direct, and
F the Income-tax Officer shall thereupon proceed to make such fresh assess-
ment, and determine where necessary the amount of tax payable on the
basis of such fresh assessment." construing the said provision, it was held
by Chagla, C.J., (speaking for the Bench comprising himself and Ten-
dnlkar, .T.) in Na17011das Manordass v. Conunissioner of Inconie Tax, (31
G I.T.R. 909) that :

"........ in giving the power of enhancing that assessment, the legis-
lature has strikingly deviated from the ordinary principles that
govern the court of appeal. Although the Department cannot
appeal against the order of the Income-tax Officer and although
H the appeal is only by the assessee, even so the Legislature confers
STATE OF A.P. '·ASBESTOS CEMENTPRODN.LTD. !JEEVAN REDDY,J.J 795

upon the Appellate Assistant Commissioner the power to make an A
order which is obviously to the prejudice of the appellant. There-
fore, although the appellant may only complain of particular points
in the assessment and he may be satisfied with regard to the rest
of the assessment, the Appellate Assistant Commissioner's powers
are not confined to consider only these points about which the
assessee has a grievance but he may consider those points about
which the assessee is satisfied and order the enhancement of the
assessment. Now, it is clear that going by the plain words used by
the Legislature there are no words of limitation or qualification
upon the power of the Appellate Assistant Commissioner in en-
hancing the assessment or setting aside the assessment and direct- C
ing a fresh assessment to be made by the Income-tax Officer ...... .
It is clear that the Appellate Assistant Commissioner has been
constituted a revising authority against the decisions of the Income-
tax Officer; a revising authority not in the narrow sense of r::!vising
those matters about which the assessee makes a grievance, but a D
revising authority in the sense that once the appeal is before him
he can revise not only the ultimate computation arrived at by the
Income-tax Officer but he can revise every process which led to
the ultimate computation or assessment. In other words, what he
can revise is not merely the ultimate amount which is liable to tax,
., but he is entitled to revise the various decisions given by the E
Income-tax Officer in the course of the assessment and also the
various incomes or deductions which came in for consideration of
the Income-tax Officer."

The said view was affirmed by this court in C.I. T. v Macmillan (33 p
l.T.R. 182).

Clearly, therefore, the power of appeal under the said two enact-
ments is altogether different from the power of the appellate courts under
the Code of Civil Procedure. Even if the appeal by the dealer is confined G
to a particular aspect of assessment, it is open to the appellate authorities
to enhance the assessment. They can also annul the order of assessment
and order a fresh assessment. /> s held by Chagla, C.J., the appellate
authorities under the said enactments are in the nature of the revising
authorities "not in the narrow sense of revising those matters about which
the assessee has a grievance, but a revising authority in the sense that once H.
796 SUPREME COURT REPORTS p994J 3 S.C.R.

A lhc appeal is before him: he can re\·ise not only the uhin1atc computation
arriYc<l at by lncnn1c tax ()fficcr. but he can revise crcry process which led
-·
to the ultin1ate con1p11tatiu11 or a.1·se~·sn1cnt." In such a situation, it is idle to
conlenJ Lhal because of the language of Ruic 12(7), the appellate
authorities cannot do \vhat the first assessing authority could do.

B We arc unable to agree \Vith the Revenue's contention that because
Rule 12(7) speaks of ''upto the Lime of assessment by the first assessing
authority" - or for that n1attcr the proviso to the said sub-rule-it excludes 1
by necessary implication, the appellate authorities. The decision in Mac-
ntillan furnishes a complete ans\ver to this contention. We may elaborate
Sectioo 13 of the Indian Income Tax Act, 1922 (correc.ponding to Section
c 145 of the present Act) read as follows :

"13. Income, profits and gains shall be computed, for the purposes
of Ss. 10 and 12, in accordance with the method of accounting
regularly employed by the assessee :
D
Provided that, if no method of accounting has been regularly
employed, or if the method employed is such that, in the opinion
of the Income-tax Officer, the Income, profits and gains cannot
properly be deduced therefrom, then the computation shall be
made upon such basis and in such manner as the Income- tax
E Officer may determine."

Relying upon the words "in the opinion of the Income Tax Officer"
occurring in the proviso to Section 13, it was contended by the asses.see
that the power or duty of rejecting the method of 2Ccounting on the ground
that income, !Jrofits and gains cannot be properly deduced therefrom is
F given to the Jncome Tax Officer alone and not to any other authority in
the hcirarchy of authorities mentioned in Section 5 of the Aot. On the other
hand, the contention of the Revenue was that reading Section 13 together
with Section 31(3), it should be held lhat the Appellate Assistant Commis-
sioner has the same jurisdiction as that of the Income Tax (Jfficer in the
said matter. Re_iecting the contention put forward by the asses.see, this
G
court made the following observations, which deserve to be quoted at
length in view of their relevance to the contention urged by the Revenue
before us :

H
"We arc unable to accept this line of argument as correct, and our
reasons are these. Firstly, \Ve think that learned counsel is reading
-
STATE OF A.I'., . ASBESTOS CEME1'TPRODN. LTD. [JEEVANREDDY.J.] 797

more into the expression "in the opinion of the Income-tax Officern A
occurring in the proviso to S..13 than what is warranted by the
language used. Whether the method of accounting is regularly
employed or not ;s undoubtedly a matter which the Appellate
Assistant Commissioner can go into when he has siezin of the
appeal. It is not challenged that if the Income-tax Officer decides
against the assessee and determines that the income, profits and
B
gain:- ;.,annot properly be deduced from the assessee'~ method of
accounting, the determination is liable to be set aside on appeal
by the assessee. What then is the reason for holding that a subjec-
tive determination of a named authority (whatever expression may
he used) is inviolate in one case but not so in the other? We have c
carefully examined the other sections of the Act to which learned
counsel for the respondent has referred; but we are unable to agree
with him that the language used therein supports the very subtle
distincition that he has drawn. Let us take, for example, S.23 which
deals with assessment. Under sub-s (3), the Income-tax Officer D
assesses the total income of the asessee and determines the sum
payable on the basis of such assessment; under sub-s.(4) the
Income-tax Officer makes the assessment to the "best of his judg-
rnent'1 - an expression much stronger than "in the opinion of the
Income-tax Officer". It is not disputed that in an appeal from an
assessment under S.23, the Appellate Assistant Commissioner can E
interfere with the determination or judgment of the Income-tax
Officer, and in such an appeal the Appellate Assistant Commis-
sioner can make his own assessment and exercise the power which
the Income-tax Officer could exercise. Since 1989 an appeal lies
from a "best of judgment" assessment made under sub-s.(4) of S.23, F
but the right is restricted to "the amount of income assessed or the
amount of tax determined." Why can he not then interfere with the
opinion of the Income-tax Officer under the proviso to S.13? It is
contended that hoth sub-Ss.(3) and (4) ofS.23 prescribed objective
conditions for the exercise of the power referred to therein. It is
true that under both sub-sections the assessment must be a fair G
and honest estimate and not arbitrary or capricious. Apart from
that howeve1, we do not see what other distinctive, objective
conditions there are which put those sub-sections in a different
, category.
' H
798 SUPREME COURT REPORTS [1994) 3 S.C.R.
1
A The words 'in the opinion of the Income-tax ()fficer" are not
to be construed in the sense of a mere discretionary po\ver; but in
the context of the words used in the proviso to S.13 they impose
a statutory duty on the Income-tax Officer to examine in every case
the method of accounting and to see (i) whether or not it is
regularly employed and (ii) to determine whether the income,
B profits and gains can properly be deduced therefrom. Section 30
of the Act gives the assessee a right of appeal in respect of certain
orders including an Oider of assessment made under S.23. Section
31 deals with the hearing of an appeal and powers of the Appellate
Assistant Commissioner. Before disposing of the appeal, the Ap-
c pellate Assistant Commissioner may, if he thinks fit, make a further
equiry himself or cause it to be made by the Income-tax Officer,
and in disposing of the appeal he may, in the case of an order of
assessment, confirm, reduce, enhance or annul the assessment; he
may set it aside and order a fresh assessment. There is nothing in
the language of S.31 of the Act which imposes any restriction on
D
the powers of an Appellate Assistant Commissioner so as to
prevent him from exercising the power under the proviso to S.13.
The restriction, if any, must be inferred from the language of the
proviso itself. It is contended that the use of the words " in the
opinion of the Income-tax Officer" in the second part of the proviso
E to S.13 suggests a complete elimination of the Appellate Assistant
Commissioner's jurisdiction to decide for the first time that the
method of accounting is such that the income, profits and gains
cannot be properly deduced therefrom. It is true that the decision
as to the method of accounting is to be arrived at first by the
Iucome- tax Officer after a careful scrutiny of the accounts whether
F
they are simple of complicated, and the power is to be reasonably
and judicially exercised, which excludes any subjective or arbitrary
decision by the Income-tax Officer. It cannot, however, be said that
a power so exercised is clothes with finality and would be excluded
from review by the Appellate Assistant Commissioner; and in
G reviewing the order the appellate authority can exercise the same
powers which the Income-tax Officer could exercise."

The aforesaid observations show that the mere use of the words "the
first assessing authority" in sub-rule (7) of Rule 12 cannot and does not
H mean, in the context and scheme of the enactments concerned herein, that '
STA1EOF A.P. v. ASBESTOS CEMENf PRODN. LTD. !JEEVAN REDDY, J.] 799

... the appellate authorities do not have the power to receive Form-C in A
appeal. This power can of course be exercised only where sufficient cause
is shown by the dealer for not filing them upto the time of assessment
before the first assessing authority. If in a given case, a dealer had
obtained further time from the first assessing authority and yet failed to
produce them before him, it is obvious that the appellate authority would
adopt a stiffer standard in judging the sufficient cause shown by the dealer
B
for not producing them earlier. It is necessary to reiterate that receipt of
those forms in appeal cannot be a matter of course; it should be allowed
only where sufficient cause is established by the dealer for not producing
them before the first assessing authority as contemplated by Rule 12(7).
The requirement of the said sub-rule cannot be excluded from considera- c
tion by the appellate court, while judging the sufficiency of the cause
shown. It must be remembered that that is the primary obligation of the
dealer and his failure to abide by it must be properly explained. Insofar as
the.Sales Tax Appellate Tribunal under the Andhra Pradesh Act is con-
cerned, it is governed by Regulation 11(1) referred to hereinabove which
D
again is nothing but a reiteration of the very same power.

The reasoning in the decision of the Full Bench of the Madras High
Court in Aru/murugan & Co. is practically on the same lines as indicated
above. We are in agreement with the said view. It is also brought to our
notice that the Andhra Pradesh High Court has taken the same view in E
Rajeshwari Stone Polishers v. State of Andhra Pradesh, (52 S.T.C. 268).

For the a.hove reasons, the appeals (all of them preferred by the
States of Tamil Nadu and Andhra Pradesh) are dismissed. There shall be
no order as to costs.
' F
R.P. Appeal allowed.

'