1996 (5) TMI 401 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the evidence produced on the file indicates the Assessing Authority's intention to proceed with best judgment assessment?
2. Whether the action of the Assessing Authority was initiated within the statutory limitation period of 5 years?

Analysis:
The case involved M/s. Milkhi Ram Sadhu Ram, a commission agent, who did not pay tax on the purchase of chillies despite a stay order being vacated in March 1977. The Assessing Authority issued a notice on March 7, 1977, and subsequent adjournments were sought by the assessee. The Assessing Authority passed an order in March 1982, declaring tax payable. The Deputy Excise and Taxation Commissioner quashed the order, but the Joint Excise and Taxation Commissioner upheld it. The Sales Tax Tribunal dismissed the revision petition, leading to a reference under section 22(1) of the Act.

The main argument by the assessee's counsel was that the assessment proceedings were time-barred under section 11(4) of the Act. The counsel relied on previous cases to support the contention that a separate notice under section 11(4) was required within the limitation period for assessment to be valid. The Senior Deputy Advocate-General argued that the notice served on the assessee clearly indicated the intention to proceed with best judgment assessment.

The court analyzed the provisions of section 11(1) to (4) of the 1948 Act and referred to previous judgments to interpret the requirement for initiating assessment proceedings. The court noted that the Assessing Authority must take effective steps towards best judgment assessment within the prescribed period. The court emphasized that the term "proceed to assess" does not mean passing the final assessment order but initiating the assessment process within the time limit.

Referring to the Supreme Court's interpretation in State of Punjab v. Tara Chand case, the court held that assessment proceedings commence when a notice is issued to the dealer under section 11(2) within the prescribed time limit. The court further cited Indian Aluminium Cables Ltd. v. Excise and Taxation Officer case to clarify the distinction between "proceed to assess" and "assess."

Ultimately, the court concluded that the Assessing Authority had initiated steps for best judgment assessment within the limitation period as required by section 11(4) of the Act. The court held that the notices issued indicated the intention to proceed with assessment, and the proceedings were deemed to have been initiated within the statutory timeframe. Consequently, the court answered the two questions referred by the Tribunal in favor of the department.

In conclusion, the reference was answered affirmatively in favor of the department, confirming that the Assessing Authority had properly indicated its intention to proceed with best judgment assessment within the statutory limitation period of five years as prescribed under section 11(4) of the Act.