1969 (8) TMI 71 - SC - VAT and Sales Tax

Whether on a proper interpretation of sub-sections (4) and (5) of section 11 of the Punjab Act the period of limitation was three years for making the assessment from the last date on which the return was to be filed? Whether the order of assessment was valid even after it was made after a period of three years provided the necessary notice had been issued within that period? Held that - Appeal allowed. It is undoubtedly open to the Legislature or the rule-making authority to make its intention quite clear that on the expiry of a specified period no final order of assessment can be made. Then the taxing authorities would certainly be debarred from completing the assessment beyond the period prescribed as was the case in Sub-section (3) of section 34 of the Income-tax Act, 1922; but such is not the case here and we would hold that the assessment proceedings relating to the year 1962-63 were within time.

Summary

Issues:
1. Jurisdiction of Sales Tax Officer under rule 33 for reopening assessments.
2. Interpretation of rule 33 regarding the time limit for completing assessment proceedings.
3. Comparison with similar provisions in other sales tax statutes.
4. Determination of the turnover and assessment of tax within the prescribed period.

Detailed Analysis:
1. The judgment involves an appeal regarding the jurisdiction of a Sales Tax Officer to reopen assessments under rule 33. The respondent, a non-resident dealer, sought bifurcation of assessments for 1961-62 and 1962-63 into separate units. The Sales Tax Officer issued notices in 1965 for reopening assessments due to escaped turnover. A Single Judge held that for 1961-62, the notice was beyond the three-year time limit under the rule, while for 1962-63, the time limit would expire in 1966. The High Court set aside an extension granted for assessment completion, leading to the appeal.

2. The crux of the issue lies in interpreting rule 33's time limit for assessment proceedings. The appellant contended that proceedings need only commence within three years, not necessarily complete within that period. Citing precedents, including State of Punjab v. Tara Chand Lajpat Rai, it was argued that once initiated within the timeframe, proceedings can continue until a final assessment order. The rule states that the authority may determine escaped turnover and assess tax within three years, emphasizing completion within the period.

3. Comparisons were drawn with provisions in other sales tax statutes, such as the Punjab General Sales Tax Act. Precedents like State of Punjab v. Murlidhar Mahabir Parshad were referenced to support the argument that initiation of proceedings within the prescribed time suffices, even if the final assessment occurs later. The appellant highlighted the distinction in language between rules and statutes but emphasized the need for timely completion of assessments.

4. The judgment delves into the interpretation of "determine" in rule 33 and the necessity of assessing tax within the stipulated period. Despite the specific language used, the court emphasized that assessment proceedings must be considered pending from initiation until a final order. It was noted that the purpose of rule 33 could be undermined by undue delays or collateral actions. The court concluded that the assessment proceedings for 1962-63 were within the time limit, allowing the appeal and setting aside the High Court's judgment for further consideration.

In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's judgment and remanding the case for pending issues' disposal. The court clarified the interpretation of rule 33, emphasizing the need for timely completion of assessment proceedings within the prescribed period to avoid defeating the purpose of tax legislation.