1968 (10) TMI 91 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the remand assessment order under section 18(1) read with section 16 of the Bihar Sales Tax Act, 1959, post the Deputy Commissioner's order dated 30th May 1964.
2. Scope of section 18(1) of the Act in including the power to assess the escaped turnover to the best of judgment.

Detailed Analysis:

Issue 1: Validity of the Remand Assessment Order
The first issue revolves around whether the remand assessment order passed under section 18(1) read with section 16 of the Bihar Sales Tax Act, 1959, after the Deputy Commissioner's order dated 30th May 1964, is legally valid. The dealer, Messrs Mittal & Co., was initially assessed to sales tax for the year 1962-63, with an increased turnover by Rs. 29,455. During an appeal, a surprise inspection led to the seizure of five books of account, revealing clandestine transactions. The assessing authority then initiated proceedings under section 18(1), believing that the turnover had escaped assessment. The dealer objected, but the objection was overruled, and the dealer's appeal was dismissed by the Appellate Assistant Commissioner.

The Deputy Commissioner, in his order dated 30th May 1964, directed that the assessee's book figures should be accepted for assessment, as there was no specific evidence of suppression of turnover. However, the assessing authority later passed a fresh assessment order, increasing the gross turnover by 150%. The dealer's subsequent appeal led to a slight modification, reducing the enhancement to 100%.

The Tribunal held that the assessing authority was justified in taking action under section 18(1) and that the earlier appellate order was no bar to reopening the assessment if reasonable grounds existed for believing that the turnover had escaped assessment. The High Court agreed, stating that the assessing authority was justified in taking action under section 18(1) as reasonable grounds existed to believe that the turnover for the period had escaped assessment. Therefore, the remand assessment order was deemed legal and valid.

Issue 2: Power to Assess Escaped Turnover to the Best of Judgment
The second issue concerns whether section 18(1) of the Act includes the power to assess the escaped turnover to the best of judgment. The dealer contended that the assessing authority could only assess the tax due on the turnover that had escaped assessment, based on the actual amount discovered from the seized books. The State argued that the assessing authority was right in using section 16 of the Act to reassess the turnover under section 18.

The High Court examined the legislative history and relevant judgments, including a Full Bench decision of the Madras High Court. The Court distinguished the Madras case, noting that the Bihar Act explicitly includes "best of judgment" assessment in a proceeding under section 18. Section 18 allows the prescribed authority to serve a notice containing requirements similar to those under section 16(2) and to assess or reassess the escaped turnover. The Court concluded that section 18 implicitly allows recourse to section 16(3) for best of judgment assessment. Therefore, the provisions of section 18(1) include the power to assess the escaped turnover to the best of judgment.

Conclusion:
The High Court answered both questions against the assessee. The remand assessment order under section 18(1) read with section 16 was legally valid, and section 18(1) of the Act includes the power to assess the escaped turnover to the best of judgment. There was no order as to costs.