1970 (5) TMI 66 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the proceedings for assessment should be considered as proceedings for 'escaped assessment' under section 21 of the U.P. Sales Tax Act or as the first assessment under rule 41(5) of the U.P. Sales Tax Rules.

Detailed Analysis:

Issue 1: Nature of Assessment Proceedings
The central issue is whether the proceedings for assessment should be considered as proceedings for 'escaped assessment' under section 21 of the U.P. Sales Tax Act or as the first assessment under rule 41(5) of the U.P. Sales Tax Rules.

Facts and Background:
- The assessee, a partnership firm, operated from 13th February 1957 to 8th July 1957 and dissolved on 5th October 1957 without notifying the sales tax authorities.
- The firm did not file any return for the assessment year 1957-58.
- The Sales Tax Officer issued three notices under rule 41(5) of the U.P. Sales Tax Rules in 1959 and 1960.
- An ex parte assessment order was made on 1st December 1960 under rule 41(5).

Legal Proceedings:
- The assessment order was set aside on appeal, and the case was remanded for fresh assessment.
- The assessee's revision application contended that the entire assessment proceeding should have been annulled.
- The Additional Judge (Revisions) quashed the entire proceeding, holding that it was a case of 'escaped assessment' under section 21, relying on the Supreme Court decision in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax.

Legal Provisions:
- Section 7(1) and 7(3) of the U.P. Sales Tax Act: Mandates dealers to submit returns and allows the Sales Tax Officer to make a best judgment assessment if no return is submitted.
- Section 21 of the U.P. Sales Tax Act: Allows assessment of tax on turnover that has 'escaped assessment.'

Supreme Court Precedents:
- Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax: Turnover escapes assessment if no proceedings are initiated and no return is filed.
- Anandji Haridas and Co. (P.) Ltd. v. S.P. Kushare: Turnover can be assessed under either section 11(4)(a) or section 11-A of the C.P. and Berar Sales Tax Act, 1947.
- Additional Assistant Commissioner of Sales Tax v. Firm Jagmohandas Vijay Kumar: Proceedings under section 8(1)(b) of the Madhya Bharat Sales Tax Act, 1950, once initiated, turnover does not escape assessment unless proceedings are closed.

Court's Analysis:
- The court considered section 7(3) and section 21 of the U.P. Sales Tax Act in pari materia with section 11(4)(a) and section 11-A of the C.P. and Berar Sales Tax Act, 1947.
- It held that the Sales Tax Officer acted within his jurisdiction under section 7(3) when making the assessment.
- The assessment made under section 7(3) cannot be considered as made under section 21.
- The court found that the assessment order under consideration must be seen as an order under section 7(3) of the Act read with rule 41(5) of the Rules.

Conclusion:
- The court concluded that the assessment proceedings were rightly made under section 7(3) and not under section 21.
- The question referred was answered accordingly, and the Commissioner of Sales Tax was entitled to costs assessed at Rs. 150 with counsel's fee assessed in the same figure.

Reference Answered Accordingly:
- The assessment order is an order under section 7(3) of the U.P. Sales Tax Act read with rule 41(5) of the U.P. Sales Tax Rules, not under section 21 of the Act.