1979 (4) TMI 141 - HC - VAT and Sales Tax

Issues Involved:
1. Justification for annulling the assessment order for want of notice.
2. Requirement and implications of notice in best judgment assessment under section 7(3) of the U.P. Sales Tax Act.
3. Procedural and jurisdictional aspects of issuing notice under section 7(3) versus section 21.
4. Consequences of non-issuance or non-service of notice.

Detailed Analysis:

1. Justification for Annulling the Assessment Order for Want of Notice:
The primary issue was whether the additional revising authority was justified in annulling the assessment order for the year 1967-68 due to the absence of notice to the assessee. The Court examined the necessity of notice in the context of best judgment assessments under section 7(3) of the U.P. Sales Tax Act. It concluded that the dealer is entitled to notice before a best judgment assessment is made, even if no return is filed. However, the absence of notice does not annul the proceedings but requires the assessment order to be set aside and the dealer to be given an opportunity to be heard.

2. Requirement and Implications of Notice in Best Judgment Assessment under Section 7(3):
The Court analyzed section 7(3) of the U.P. Sales Tax Act, which deals with the determination of turnover and assessment of tax. The section mandates that if no return is submitted, the assessing authority must determine the turnover to the best of its judgment after making necessary inquiries. The Court emphasized that the term "inquiry" implies a broader scope, necessitating notice to the dealer. The judgment clarified that the power to assess to the best of judgment is distinct from the jurisdiction to determine turnover without notice. The Court held that for a valid best judgment assessment, notice to the dealer is essential, even if the dealer has not filed a return.

3. Procedural and Jurisdictional Aspects of Issuing Notice under Section 7(3) versus Section 21:
The Court compared the procedural requirements of section 7(3) with section 21 of the Act, which deals with escaped assessments. It noted that while section 21 explicitly requires notice as a condition precedent for reassessment, section 7(3) implies the necessity of notice through its procedural requirements. The Court distinguished between the two sections, stating that in section 7(3), notice is procedural and pertains to the exercise of jurisdiction, whereas in section 21, it is jurisdictional and a condition precedent. Consequently, the failure to issue notice under section 7(3) is a procedural irregularity that can be remedied, unlike in section 21 where it affects jurisdiction.

4. Consequences of Non-Issuance or Non-Service of Notice:
The Court addressed the implications of not issuing or serving notice in the context of best judgment assessments. It concluded that the absence of notice does not render the assessment proceedings void but requires the assessment order to be set aside. The dealer must then be afforded an opportunity to be heard. The Court rejected the argument that non-issuance or non-service of notice should lead to the annulment of proceedings, emphasizing that such procedural irregularities can be corrected by the assessing authority or through appellate and revisional mechanisms.

Conclusion:
The Court answered the referred question in the negative, favoring the Commissioner of Sales Tax and against the assessee. It held that in best judgment assessments under section 7(3), where no return is filed, the dealer is entitled to notice. However, if the assessment order is passed without notice or service of notice, the order should be set aside, and the dealer should be given an opportunity to be heard. The proceedings are not liable to annulment. The revising authority's order annulling the assessment was set aside, and the matter was remanded for reconsideration in light of the Full Bench's decision. The petition was allowed without any order as to costs.

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