1976 (2) TMI 176 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of reassessment orders under Section 16 of the Tamil Nadu General Sales Tax Act, 1959.
2. Retrospective amendment of Section 16 and its implications.
3. Validity of the validating provision in Section 3 of the Tamil Nadu Act No. 18 of 1966.
4. Estimation of suppressed turnover and assessment of penalty.

Issue-wise Detailed Analysis:

1. Validity of reassessment orders under Section 16 of the Tamil Nadu General Sales Tax Act, 1959:

The assessing officer initially determined the total turnover and taxable turnover for the assessment years 1961-62 and 1962-63 based on the account books and additional sums due to discrepancies. Subsequent surprise inspections led to the discovery of slips indicating escaped turnovers. The assessing officer issued notices under Section 16 and reassessed the turnovers using the best of judgment method. However, the Full Bench held that Section 16, as it stood, did not authorize the determination of escaped turnover by best of judgment. Consequently, the reassessment orders were quashed.

2. Retrospective amendment of Section 16 and its implications:

Following the Full Bench's decision, the government amended Section 16 with retrospective effect from April 1, 1959, through Tamil Nadu Act No. 18 of 1966. The amended Section 16 explicitly allowed the assessing officer to determine escaped turnover by best of judgment. The amendment aimed to validate earlier assessments made under the original Section 16. The retrospective operation of the amendment meant that any order made without jurisdiction under the original provision became valid under the amended provision.

3. Validity of the validating provision in Section 3 of the Tamil Nadu Act No. 18 of 1966:

Section 3 of the amending Act validated all assessments, reassessments, levies, or collections of tax or penalty made under Section 16 before the publication of the Act, notwithstanding any judgment, decree, or order of any court. The provision aimed to deem all such actions as valid and in accordance with law. The court held that the validating provision effectively removed the basis of the earlier judicial decision by retrospectively changing the law, thus making the original assessments valid. The court distinguished between reversing a judicial decision and making it ineffective through retrospective legislation.

4. Estimation of suppressed turnover and assessment of penalty:

For the assessment year 1961-62, the assessing officer estimated the escaped turnover based on slips recovered during inspections, resulting in a figure of Rs. 26,37,640.30. For 1962-63, the estimate was based on discrepancies between slips and regular accounts, resulting in Rs. 41,34,821. The Tribunal reduced these estimates by 50%, considering the possibility of non-uniform suppression throughout the year. The court further reduced the estimates by half, acknowledging the inclusion of probable escaped turnover in the original assessment. The penalty levied was based on actual suppression found, not on the estimated turnover, and was upheld by the court.

Conclusion:

The tax revision petitions were dismissed, subject to the reduction in the estimated total turnover. The court upheld the retrospective amendment and the validating provision, confirming the validity of the reassessment orders made under the amended Section 16. The penalty levied based on actual suppression was also upheld. The petitions were dismissed with costs, and counsel's fee was set at Rs. 150 in each case.

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