1969 (1) TMI 58 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of section 21 of the U.P. Sales Tax Act regarding best judgment assessment in cases of reassessment for escaped turnover.

Detailed Analysis:
The judgment pertains to two references under section 11 of the U.P. Sales Tax Act, initiated by the Judge (Revisions) Sales Tax, U.P., at the instance of an assessee, M/s. Kashi Jewellers, concerning the assessment years 1958-59 and 1959-60. The assessee, a dealer in ornaments and bullions, initially disclosed turnovers for the respective years, which were later subject to reassessment proceedings under section 21 of the Act based on additional documents obtained by the assessing authority. The assessing authority, using its "best judgment," determined the escaped turnover for each year. Subsequent appeals and revisions led to the current references before the High Court, focusing on whether best judgment assessment is permissible in cases of reassessment for escaped turnover under section 21 of the Act.

The primary contention raised was regarding the interpretation of the explanation attached to section 21(1) of the Act. The assessee argued that best judgment assessment could not be made in cases of reassessment based on the wording of the explanation. The Court analyzed the language of the provision and concluded that the term "assessment" in the explanation encompassed both initial assessments and reassessments. The Court emphasized that the Legislature's use of the term "assessment" in a broader sense indicated that best judgment assessment could be applied in cases of reassessment as well.

Furthermore, the Court addressed the concerns raised about potential conflicts with previous judicial decisions, particularly referencing a Division Bench decision. The Court clarified that the previous decision did not establish an absolute rule against best judgment assessment during reassessment. Exceptions were recognized in cases where turnover had been excluded or incorrect principles were employed in estimating turnover. The Court reiterated that best judgment assessment allows the assessing authority to make an assessment based on the available facts and circumstances, even during reassessment proceedings.

Ultimately, the Court upheld the permissibility of best judgment assessment in cases of reassessment for escaped turnover under section 21 of the Act. Citing previous judgments and the legislative intent, the Court ruled in favor of the Commissioner of Sales Tax and awarded costs to be paid by the assessee. The references were answered in the affirmative, affirming the validity of best judgment assessment in reassessment scenarios under the U.P. Sales Tax Act.