1958 (7) TMI 37 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Limitation period for issuing a notice under Section 11(2) of the Central Provinces and Berar Sales Tax Act, 1947.
2. Limitation period for making an assessment under Section 11(1) of the Central Provinces and Berar Sales Tax Act, 1947.

Issue-wise Detailed Analysis:

1. Limitation period for issuing a notice under Section 11(2) of the Central Provinces and Berar Sales Tax Act, 1947:

The petitioner, a registered dealer, challenged the validity of a notice issued by the Commissioner of Sales Tax under Section 11(2) on the grounds that it was served more than three years after the end of the chargeable accounting year. The Court noted that Section 11(2) is invoked when the Commissioner is not satisfied with the return submitted by the assessee and seeks to initiate proceedings that could potentially increase the tax liability. The Court emphasized that such a notice must be issued within three years to prevent undue harassment and uncertainty for the assessee. The principle established in the case of Commissioner of Income-tax, Bombay City v. Narsee Nagsee Co. was applied, which highlighted the necessity of a limitation period to protect the assessee from indefinite apprehension regarding tax liabilities. The Court concluded that issuing a notice under Section 11(2) beyond three years would be tantamount to assessing an escaped turnover, which is prohibited by Section 11-A. Hence, the notice issued by the Commissioner after three years was deemed invalid.

2. Limitation period for making an assessment under Section 11(1) of the Central Provinces and Berar Sales Tax Act, 1947:

The Court examined whether an assessment under Section 11(1) could be made more than three years after the end of the chargeable accounting period. Section 11(1) involves a formal assessment where the Commissioner, upon being satisfied with the return submitted by the assessee, appropriates the tax paid to the revenue of the State. The Court observed that Section 11(1) does not prescribe a specific period of limitation for making such an assessment. The Court distinguished this from Section 11(2), where fresh proceedings are initiated due to dissatisfaction with the return. The Court held that since the return and tax payment are completed within the prescribed period, the formal assessment under Section 11(1) does not subject the assessee to any additional tax liability or peril. Therefore, no limitation period should be imported into Section 11(1), and the assessment can be made beyond three years. However, the Court expected the Sales Tax Commissioners to exercise their duties responsibly and make assessments expeditiously.

Conclusion:

The Court quashed the notices issued by the Commissioner under Section 11(2) as they were issued beyond the three-year limitation period. It also issued a writ of prohibition against the Sales Tax Commissioner, preventing any proceedings based on these notices. The Court affirmed that while no limitation period applies to assessments under Section 11(1), notices under Section 11(2) must be issued within three years to be valid. The petition was allowed, and the petitioner was awarded costs.