1966 (10) TMI 139 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 21 of the U.P. Sales Tax Act regarding the utilization of additional information received after the expiry of the limitation period.
2. Validity of considering information on additional bales received after the limitation period for assessment under section 21.
3. Disclosure requirements for determining turnover in a best judgment assessment under section 21.

Analysis:
The judgment of the Allahabad High Court in this case revolved around the interpretation of section 21 of the U.P. Sales Tax Act regarding the utilization of additional information received after the expiry of the limitation period. The case involved an assessee who was a cloth dealer carrying on business in Bareilly, with the relevant assessment year being 1954-55. The assessing officer initially completed the assessment under rule 41(5) with a turnover of Rs. 1,92,000. Subsequently, information was received regarding the import of 36 bales, which had not been considered in the original assessment. Before the four-year limitation period expired, a notice under section 21 was issued, and the dealer was informed of the additional 350 bales received after the limitation period. The subsequent assessment under section 21 resulted in a revised turnover of Rs. 4,08,000, leading to an appeal by the assessee.

The main contention raised was whether the assessing officer could consider the information on the additional 350 bales received after the limitation period for the assessment under section 21. The Judge (Appeals) held that the assessing officer had the authority to consider such additional information as long as there was a reasonable belief that turnover had escaped assessment. However, the Judge (Appeals) found fault with the lack of disclosure regarding the basis for determining the revised turnover at Rs. 4,08,000, leading to a remand for reassessment. A revision was filed against the remand order, arguing that the information on the 350 bales received after the limitation period should not have been considered. The Judge (Revisions) upheld the remand order based on the merits of the case.

The Court emphasized that under section 21, the assessing authority can take action if there is a reasonable belief that any part of the dealer's turnover has escaped assessment, without specifying a particular turnover. As long as the notice is issued within the four-year period and before the one-year completion period expires, additional items that come to light can be considered for assessment. The Court relied on precedents from the Income-tax Act to support this interpretation, highlighting that reopening an assessment allows for the inclusion of additional items that were not previously assessed. Consequently, the Court answered the question in the affirmative, ruling against the assessee and directing them to pay the costs of the reference.

In conclusion, the judgment clarifies the scope of section 21 of the U.P. Sales Tax Act, affirming the authority of the assessing officer to consider additional information on turnovers that have escaped assessment, even if such information is received after the limitation period. The decision underscores the importance of a reasonable belief in initiating assessment proceedings and the flexibility to include newly discovered items in the assessment process.