1960 (3) TMI 40 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the department to make an assessment based on a voluntarily filed return after the prescribed period.
2. Applicability of Rule 32 to first-time assessments where the return is rejected.
3. Interpretation of the term "escaped assessment" under Rule 32.

Issue-wise Detailed Analysis:

1. Jurisdiction of the department to make an assessment based on a voluntarily filed return after the prescribed period:

The respondent, a dealer in kirana, oil-seeds, tobacco, and cloth, voluntarily filed a return on 30th December 1955 for the assessment year 1952-53, showing a taxable turnover of Rs. 7,240. The Sales Tax Officer rejected the return as incorrect and incomplete, making a best judgment assessment on 2nd May 1956 on a turnover of Rs. 30,000. The Sales Tax Appellate Tribunal set aside the assessment as time-barred. The Government of Andhra Pradesh contended that the assessment was an original assessment and not barred by time as no time limit was prescribed by the Hyderabad General Sales Tax Act. The respondent argued that the return was not filed within the time prescribed by Rule 16(1) and that the assessment was barred by time under Rule 32(1).

The Court held that the omission of the clause "or for the part of the year to which the return relates as the case may be" in Rule 16(2) did not prevent the department from accepting a return submitted after the prescribed period. The Court stated, "There is no legal bar to complete the assessment on the return so made," and that the taxing authority could exercise discretion to excuse the delay and make the assessment based on the return.

2. Applicability of Rule 32 to first-time assessments where the return is rejected:

The Court examined whether the department could reject the return and make a best judgment assessment after the lapse of three years from the end of the year to which the tax relates, and whether such a case falls within the purview of Rule 32. The department argued that Rule 32 applies only to cases where a part of the turnover had escaped assessment and not to first-time assessments. The Court disagreed, stating that the word "reject" in Rule 13 includes non-acceptance of the return, and failure to believe or give credence to it amounts to rejection. The Court noted that "the assessing authority had rejected the return and determined the turnover to the best of his judgment."

The Court further clarified that Rule 32 covers cases where the whole of the turnover of the business has escaped assessment, which includes first-time assessments. The Court cited precedents from the Bombay High Court and the Madras High Court, which supported the view that Rule 32 applies to first-time assessments as well.

3. Interpretation of the term "escaped assessment" under Rule 32:

The Court analyzed the term "escaped assessment" and concluded that it applies to cases where no assessment has been made or where the return is ignored and the officer proceeds to make a best judgment assessment. The Court stated, "the language of rule 32 leaves no room for doubt that it covers a case of first assessment also."

The Court adopted the principle that if assessment proceedings are started in time, the final assessment need not be completed within three years, as the Act does not prescribe a definite period for finalizing the assessment. However, if no return is made or if the return is rejected, the assessment must be dealt with under Rule 32 within the prescribed period.

Conclusion:

The Court concluded that the assessment made by the department was barred by time under Rule 32 and dismissed the revision petition without costs. The judgment emphasized that Rule 32 applies to first-time assessments and that the term "escaped assessment" includes cases where the return is rejected or ignored. The Court stated, "In these circumstances, we cannot accept this revision case and it has to be dismissed without costs."

Petition dismissed.