1963 (10) TMI 18 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the assessment to sales tax.
2. Validity of notices issued under section 11(5) of the Central Provinces and Berar Sales Tax Act, 1947.
3. Limitation period for issuing notices and making assessments.
4. Assessment of a dissolved firm.
5. Scope of revisional powers of the Commissioner under section 22-A.

Detailed Analysis:

1. Legality of the Assessment to Sales Tax:
The petitioner questioned the legality of the sales tax assessment made against the partnership firm by the Sales Tax Officer, Raipur, for the period from 17th February 1950 to 30th November 1951. The taxable turnover was determined at Rs. 1,96,000, and the sales tax payable was Rs. 6,125. The petitioner contended that the firm was dissolved on 13th September 1949, and thus could not be assessed for the period in question. However, the Sales Tax Officer held that there was no dissolution during the material period and that the firm was liable for the tax.

2. Validity of Notices Issued Under Section 11(5):
The petitioner challenged the legality of the notices issued on 8th December 1952, 23rd October 1953, 6th May 1954, and 24th May 1954, under section 11(5) of the Act. The Court held that the satisfaction of the Commissioner that the dealer is liable to pay tax and has wilfully failed to apply for registration are conditions for making an assessment, not for issuing a notice. The petitioner had the opportunity to contest these points before the taxing authorities but did not do so.

3. Limitation Period for Issuing Notices and Making Assessments:
The petitioner argued that the assessment was barred by limitation as per the law when the notices were issued. The Court noted that an amendment to section 11(5) by the Madhya Pradesh Sales Tax (Amendment) Act, 1953, gave retrospective effect from 1st June 1947, allowing assessments to be made "at any time within three calendar years from the expiry of such period." Therefore, the notices issued were within the permissible time frame, and the assessment was not barred by limitation.

4. Assessment of a Dissolved Firm:
The petitioner contended that a dissolved firm could not be assessed for transactions done while it was in existence. The Court held that the liability of the firm to pay tax arises during its existence and continues even after dissolution. Sections 47 and 49 of the Partnership Act imply that for the purpose of winding up, the partnership is deemed to continue, and the assessment can be made against the firm for transactions effected while it was in existence. The Court rejected the petitioner's reliance on cases that suggested otherwise, emphasizing that the firm is deemed to continue for discharging its tax liabilities.

5. Scope of Revisional Powers of the Commissioner Under Section 22-A:
The petitioner argued that the Commissioner should not have disturbed the finding of the Appellate Assistant Commissioner regarding the dissolution of the firm. The Court clarified that the revisional powers of the Commissioner under section 22-A are very wide, allowing him to consider the whole case and not limited to the matters specifically raised by the party. The Commissioner's order declining to interfere with the Appellate Assistant Commissioner's decision was deemed not to be prejudicial to the dealer.

Conclusion:
The High Court dismissed the petition, upholding the assessment order made by the Sales Tax Officer, Raipur, and the decisions of the appellate authorities. The assessment of Rs. 6,125 was found to be legal and valid. The petitioner's arguments regarding the validity of notices, limitation period, and assessment of a dissolved firm were rejected. The Court emphasized the broad revisional powers of the Commissioner under section 22-A and validated the retrospective amendment to the limitation period for assessments. The petition was dismissed with costs, and the security deposit was ordered to be refunded to the petitioner after deduction of costs.

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