1964 (10) TMI 77 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to reassessment of sales tax for the financial year 1958-59 under Article 226 of the Constitution of India based on the best judgment assessment. Interpretation of provisions of sub-section (4) of section 11 and section 11-A of the Punjab General Sales Tax Act, 1948 regarding the time limit for reassessment.

Analysis:
The petitioner-firm challenged the proceedings taken by the Assessing Authority for reassessment of sales tax for the financial year 1958-59 under Article 226 of the Constitution of India. The initial assessment was challenged, leading to a "best judgment assessment" imposing an additional tax liability on the petitioner-firm. The petitioner contended that the reassessment proceedings, initiated three years after the relevant period, were in violation of sub-section (4) of section 11 and section 11-A of the Punjab General Sales Tax Act, 1948. Sub-section (4) of section 11 allows the Assessing Authority to proceed to assess the tax due from the dealer within three years after the expiry of the relevant period if the dealer fails to comply with notice terms. Section 11-A permits reassessment within three years following the close of the relevant year upon discovering under-assessment or escaped assessment.

The Full Bench of the Court in a previous case clarified the interpretation of the phrase "proceed to assess" in the context of the time limit for reassessment. The Full Bench resolved conflicting views by emphasizing that the Assessing Authority must demonstrate that assessment was initiated within the statutory period. The Court held that a definite act or step indicating assessment initiation within the three-year period is required. In the present case, the notice for reassessment was served within three years, and the Assessing Authority had proceeded to assess before the expiry of the limitation period, culminating in the order of reassessment on 26th June 1961.

The petitioner argued that the period for reassessment should restart from the second notice issuance due to the appeal setting aside the initial judgment. However, the Court rejected this argument, emphasizing that the Assessing Authority had already proceeded with assessment within the three-year period as required by the statute. The appeal outcome did not nullify the initial assessment process, and the subsequent notice was deemed a continuation of the reassessment proceedings. Therefore, the Court concluded that the reassessment proceedings were not invalid based on the limitation period and upheld the Assessing Authority's actions as compliant with the statutory time limit requirements.

In conclusion, the Court dismissed the petition challenging the reassessment proceedings, ruling that the Assessing Authority had initiated the assessment within the prescribed period of limitation. The petitioner's argument for restarting the limitation period from the second notice issuance was rejected, and the Court upheld the validity of the reassessment process within the statutory timeframe.