1960 (10) TMI 83 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of sales tax assessment orders Ex. P-1, Ex. P-2, and Ex. P-3 for the period from 20th October 1949 to 9th November 1950.
2. Assessment based on "best judgment" under section 11(4) of the Sales Tax Act.
3. Allegations of arbitrary assessment without proper disclosure of information and justification.
4. Compliance with fundamental principles in assessment proceedings.

Analysis:
The petitioner filed a petition under Articles 226 and 227 of the Constitution challenging the sales tax assessment orders Ex. P-1, Ex. P-2, and Ex. P-3 for the period from 20th October 1949 to 9th November 1950. The Sales Tax Authorities assessed the petitioner to pay sales tax based on their "best judgment" under section 11(4) of the Sales Tax Act. The Sales Tax Officer, Assistant Commissioner, and Commissioner of Sales Tax successively reduced the turnover amount, but the petitioner contended that the assessment was arbitrary and lacked proper justification.

The Sales Tax Officer relied on a report from the Sales Tax Inspector indicating that the petitioner had more contracts than disclosed. However, the petitioner denied working all the contracts mentioned. The assessment was based on an assumption without proper disclosure of information to the petitioner. The petitioner's claims regarding the dates of contracts were not denied by the respondents, raising doubts about the assessment process.

The judgment referred to legal precedents emphasizing the importance of disclosing information to the assessee and providing an opportunity to rebut it. The assessment in this case was found to lack transparency and justification. The assessment was deemed arbitrary and suspicious, with insufficient reasoning provided for determining the turnover amount. The judgment highlighted the necessity of following fundamental principles in assessment proceedings, as established in previous legal cases.

Ultimately, the High Court allowed the petition, quashing the assessment made by the Sales Tax Authorities. The court directed a reassessment in accordance with the law, emphasizing the importance of adhering to proper procedures and principles in such assessments. The petitioner was granted a refund of the outstanding security deposit, and no costs were awarded in this case.