1969 (1) TMI 59 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax under the U.P. Sales Tax Act for the assessment year 1957-58 based on account books. Initiation of reassessment proceedings under section 21 due to information received regarding unrecorded transactions. Determination of escaped turnover and best judgment assessment. Question of permissibility of best judgment assessment under section 21 when turnover escaped is partial, not total, and after a former regular assessment.

Analysis:
The judgment delivered by the High Court of Allahabad involved a case where the assessee, a sarrafa dealer in Kanpur, had his turnover assessed for the year 1957-58 based on account books. Subsequently, upon information about unrecorded transactions, reassessment proceedings were initiated under section 21 of the U.P. Sales Tax Act. The Sales Tax Officer found discrepancies in entries from parchas and made a best judgment assessment of the escaped turnover. The appellate and revising authorities upheld this assessment, reducing the quantum of escaped turnover successively. The main issue raised was whether a best judgment assessment is permissible under section 21 when the turnover escaped is only partial, not total, especially after a former regular assessment had taken place.

The court analyzed the provisions of section 21(1) of the Sales Tax Act, which allow for assessment or reassessment if the turnover has escaped assessment, whether in whole or part. The judgment highlighted that if an original assessment had been made but part of the turnover had escaped assessment, reassessment under section 21 is warranted. The court emphasized that the Sales Tax Officer can reassess the dealer without disturbing the turnover already determined if specific conditions are met, such as separate branches of business with independent turnovers. However, in cases where the original assessment was based on unreliable account books and the turnover had escaped assessment, the Sales Tax Officer is entitled to reassess the entire turnover through best judgment assessment.

The court referred to a previous case to distinguish scenarios where the Sales Tax Officer had already estimated the entire turnover to the best of his judgment. In such cases, the court held that the Sales Tax Officer could still make a best judgment assessment under section 21 if the original assessment was unsound and the turnover had escaped assessment. The court emphasized that the objective of section 21 is to empower the Sales Tax Officer to reassess the dealer's turnover, allowing for best judgment assessment to achieve the statute's purpose. Therefore, the court concluded that the Sales Tax Officer was justified in making a best judgment assessment of the assessee's turnover for the assessment year 1957-58, even after an original assessment had been conducted.

In conclusion, the court answered the raised question by affirming the permissibility of a best judgment assessment under section 21 for partial turnover escapement, maintaining that the Sales Tax Officer was entitled to reassess the entire turnover if the original assessment was unsound. The judgment provided a comprehensive analysis of the legal provisions and precedents to support the decision, emphasizing the authority of the Sales Tax Officer in reassessment proceedings under section 21.