TMI Blog1972 (3) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of the turnover and of the tax is contained in section 7. Sub-section (1) thereof provides that every dealer, who is liable to pay tax, shall submit such return or returns of his turnover at such intervals within such period and in such form as may be prescribed. Under sub-section (2) if the assessing authority is satisfied that any returns submitted under sub-section (1) are correct and complete, he shall assess the tax on the basis thereof. Sub-section (3) then deals with a case where no return is filed or, if the return filed is incomplete or incorrect. This provision is important and may be quoted in full: "(3) If no return is submitted by the dealer under sub-section (1) within the period prescribed in that behalf or, if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such inquiry as he considers necessary, determine the turnover of the dealer to the best of his judgment and assess the tax on the basis thereof: Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity of proving the correctness and completeness of any retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other provision of this Act shall be made for any assessment year after the expiry of four years from the end of such year: Provided that where the notice under sub-section (1) has been served within such four years the assessment or reassessment to be made in pursuance of such notice may be made within one year of the date of the service of the notice even if the period of four years is thereby exceeded: Provided further that nothing contained in this section limiting the time within which any assessment or reassessment may be made shall apply to an assessment or reassessment made in consequence of, or to give effect to, any finding or direction contained in an order under section 9, 10 or 11. Explanation-Where the assessment proceedings relating to any dealer remained stayed under the orders of any civil or other competent court, the period during which the proceedings remained so stayed shall be excluded in computing the period of limitation for assessment provided under this sub-section." The question then arises as to when does turnover escape assessment? Now, the obvious case where turnover escapes assessment is when an assessment has once been made and thereafter it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings are commenced by that notice. Reference may be made to the leading case of Commissioner of Agricultural Income-tax v. Sultan Ali Gharami[1951] 20 I.T.R. 432. That was a case under the Bengal Agricultural Income-tax Act whose provisions for a regular assessment and the assessment of escaped income are identical to the provisions of the Income-tax Act. At page 440 it was observed: "Under the Indian Income-tax Act it is well settled that a notice under section 22(2) cannot be issued after the expiry of the year of assessment and if no notice under that section has been issued during the assessment year, nor has the assessee filed a return, the assessment proceedings can be initiated thereafter only by the issue of the notice under section 34." In Maharaja of Patiala v. Commissioner of Income-tax, Central, Bombay[1943] 11 I.T.R. 202., it was held by the Bombay High Court that a notice under section 22(2) had to be issued within the assessment year and no valid assessment could be made on the basis of a return filed in response to a notice under section 22(2) issued after the expiry of the assessment year. Under the Income-tax Act, therefore, the position is that income escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutes and the three relevant sections therein are intended to gather the revenue which has improperly escaped." It is thus clear that the same meaning has to be given to the expression "escaped assessment" under the U.P. Sales Tax Act as it bears under the Income-tax Act. It follows, therefore, that if income escapes assessment under the Income-tax Act when an assessee does not file a return within the assessment year and no assessment proceedings are commenced against him in that years, the same would be the position under the U.P. Sales Tax Act. Assessment proceedings under the U.P. Sales Tax Act commence as under the Income-tax Act when a return is filed by a dealer or when a notice is served upon him under rule 5(1)(b) or when the Sales Tax Officer makes a provisional assessment against him for any quarter under rule 41(3). The general notice under rule 5(1)(a) does not commence assessment proceedings, nor does the statutory obligation under rule 41(1) requiring every dealer liable to pay tax to file quarterly returns commence such proceedings. In Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax[1963] 14 S.T.C. 976 (S.C.)., the Supreme Court while dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of escapement. If an assessment is possible under section 7(3), it would not be a case where turnover can be said to have escaped assessment. Turnover escapes assessment only where a regular assessment is not possible. It is, therefore, necessary to hold that no assessment under section 7(3) is possible if assessment proceedings have not been commenced till the end of April of the year next following the assessment year in question. After all, an assessment order is only a final act in the process of assessment and the final act cannot be taken unless the process has been set in motion at an earlier stage. There is another reason why the two provisions must be held not to apply simultaneously. The period of limitation for an assessment under section 7(3) is four years while it is five years if the assessment is made under section 21, provided of course a notice under that section is served within four years. There is no indication in the Act as to when section 7(3) or section 21 would apply. The first proviso to sub-section (2) of section 21 which prescribes a larger period of limitation would contravene article 14 of the Constitution and would thus become ultra vires. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Officer did not make any provisional assessment under rule 41(3), nor was any other proceeding taken against him before the expiry of the assessment year. Subsequently after more than three years had passed from the end of the assessment year, a notice under rule 41(5) was served upon the dealer and the Sales Tax Officer passed the assessment order under that rule. The dealer's appeal failed, but the revising authority allowed the revision and annulled the assessment holding that no assessment could have been made by the Sales Tax Officer without initiating proceedings under section 21. At the instance of the Commissioner the following question of law has been referred: "Whether upon the facts and in the circumstances of the case the assessment order passed under rule 41(5) was a valid one?" For the reasons already stated I would answer the question in the negative in favour of the assessee and against the department. As the question raised in this case was not free from difficulty, I would make no order as to costs. S.T.R. No. 138 of 1970-The assessment year involved in this case is 1961-62. In this case the dealer did not file any return, nor were the assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Writ No. 3049 of 1970-In this case the assessment year involved is 1959-60. The dealer, which is a partnership concern, did not file any return nor did it pay any tax with regard to that year. On 24th March, 1964, information was received by the Sales Tax Officer that the turnover of the dealer had escaped assessment. A notice under section 21 was accordingly served upon the dealer on 29th March, 1964. The assessee disputed the service of the notice. This contention was overruled by the appellate authority which, however, set aside the assessment order and remanded the case to the Sales Tax Officer for a fresh assessment. The assessee went up in revision and challenged the validity of the service of the notice as well as the assessment order on the ground of limitation. The revising authority held that the service effected on 29th March, 1964, by affixation was a valid service. The revising authority, however, held that as the assessment was made after the expiry of four years, the same was barred by time. In the opinion of the revising authority the first assessment could only be made under section 7(3) and not under section 21. He accordingly annulled the assessment. The Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment under rule 41(3), the Act contemplates assessment of the turnover of the entire year as the charging section 3 imposes liability of tax on the turnover of the entire year. In the normal course, therefore, proceedings for final assessment can be commenced by the assessing authority only after the expiry of a month from the end of the assessment year and not during the assessment year. By virtue of section 21(2) of the Act which prescribes limitation, assessment can be made irrespective of the fact that the assessment is under section 7 or under section 21, within four years from the end of the assessment year. Under section 21, however, an additional period of one year becomes available if notice for assessment is issued within four years. The scheme of the Act requires every dealer to file returns of his turnover every quarter and pay along with it the tax due on that turnover. If he does so, the assessment proceedings by the assessing authority can be commenced only after the year is over. If, however, the dealer fails to file quarterly returns or to pay the tax due, it becomes open to the assessing authority to make a provisional assessment under rule 41(3) and to pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing in the Act which may debar the assessing authority from making final assessment under section 7(3) if no provisional assessments were made under rule 41(3). The assessing authority can proceed to make a final assessment under section 7(3) of the Act after the assessment year is over, even though he may not have made a provisional assessment or initiated proceedings for assessment within the course of the assessment year. In the result, we answer the questions in S.T.R. No. 138 of 1970 and S.T.R. No. 612 of 1965 in the affirmative and that in S.T.R. No. 550 of 1969 in the negative. The writ petition is not maintainable as there is still no operative order affecting the rights of the petitioner. It is accordingly dismissed. In the circumstances of the case the parties will bear their own costs in each case. By the Court We answer the questions referred as follows: Sales Tax Reference No. 612 of 1965: In the affirmative. Sales Tax Reference No. 550 of 1969: In the negative. Sales Tax Reference No. 138 of 1970: In the affirmative. The writ petition is dismissed. In each case the parties will bear their own costs. References answered accordingly. Writ petition dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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