1955 (4) TMI 30 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of the assessment order passed by the Sales Tax Officer under the U.P. Sales Tax Act, 1948.
2. Compliance with the mandatory provisions of the proviso to sub-section (3) of section 7 of the Act regarding providing an opportunity to explain alleged discrepancies.

Detailed Analysis:
1. The petitioner, as the karta of a joint Hindu family firm engaged in the extraction and supply of minerals, filed a return under section 7(1) of the U.P. Sales Tax Act, 1948, declaring a turnover. The Sales Tax Officer, after scrutinizing the accounts, passed an assessment order estimating a higher turnover based on discrepancies found in the sales figures. The petitioner challenged the assessment order through a writ petition under Article 226 of the Constitution, seeking to quash the order on the grounds of jurisdictional error. The court noted that the order was erroneously labeled under clause (2) instead of clause (3) of section 7 but found this to be a clerical error rather than a legal one. The court held that a writ of certiorari is issued for legal errors apparent on the record, which was not the case here. Thus, the first ground of challenging the order was dismissed.

2. The second ground of challenge focused on the lack of opportunity given to the petitioner to explain the alleged discrepancies, as mandated by the proviso to sub-section (3) of section 7 of the Act. The Sales Tax Officer claimed the petitioner's counsel could not explain the discrepancies, while the petitioner's accountant disputed this claim in a rejoinder affidavit. The court observed that the assessment order did not reflect that the petitioner was asked to explain the discrepancies or given a chance to do so after the initial account check. The court found that the Sales Tax Officer did not follow the principles of natural justice by not providing a hearing opportunity before passing the order. As a result, the court held the assessment order to be illegal due to the violation of procedural fairness. The petitioner was granted a writ of certiorari to quash the order, and the Sales Tax Officer was directed to conduct a fresh assessment in compliance with the law.

In conclusion, the court allowed the petition, emphasizing the importance of adhering to procedural fairness and providing opportunities to be heard before making significant decisions like tax assessments. The judgment highlighted the necessity of following statutory provisions and principles of natural justice in administrative actions to ensure fairness and transparency in the legal process.