1969 (4) TMI 98 - HC - VAT and Sales Tax

Summary

Issues Involved: Validity of notice under Rule 33 for reassessment under Section 19(1) of the Madhya Pradesh General Sales Tax Act, 1958; Compliance with statutory provisions; Requirement of specifying the amount of escaped turnover in the notice; Reason for reassessment based on irregular accounts.

Issue-wise Detailed Analysis:

1. Validity of Notice under Rule 33 for Reassessment under Section 19(1):
The petitioner contended that the notice issued under Rule 33 was the foundation of jurisdiction for reassessment under Section 19, and thus, it must strictly comply with Rule 33 and Form No. XVI. The notices in question did not contain the particulars of escapement, i.e., the amount of turnover that escaped assessment. The court, however, held that Section 19 does not explicitly require a notice. The section mandates that the dealer be given a reasonable opportunity of being heard and that the inquiry be conducted as necessary. Rule 33 and Form XVI, which provide for a notice, are steps in the process of reassessment to ensure the dealer's reasonable opportunity of being heard. The court emphasized that any irregularity or defect in the notice does not invalidate the reassessment proceedings unless it is shown that the dealer was prejudiced and was not afforded a reasonable opportunity of being heard.

2. Compliance with Statutory Provisions:
The court referred to Section 19(1) of the Act, which allows reassessment if any sale or purchase of goods chargeable to tax has been under-assessed or has escaped assessment. The court noted that the rule-making power under Section 51 of the Act enabled the State Government to make rules for carrying out the purpose of the Act, including reassessment procedures under Rule 33. The court concluded that the requirement of notice under Rule 33 is a procedural step to ensure compliance with the statutory mandate of providing a reasonable opportunity to the dealer, rather than a foundational jurisdictional requirement.

3. Requirement of Specifying the Amount of Escaped Turnover in the Notice:
The petitioner argued that the notice was invalid as it did not specify the amount of escaped turnover. The court held that while the notice did not mention the exact amount of turnover that had escaped assessment, it did indicate that reassessment proceedings were to be taken for sales that had escaped assessment. The court found this sufficient, stating that the exact amount of escaped turnover could only be determined after hearing the dealer. The court further noted that the petitioner was informed of the reasons for reassessment and had the opportunity to inspect the relevant records.

4. Reason for Reassessment Based on Irregular Accounts:
The petitioner contended that the reason given in the notices-that turnover had escaped assessment due to irregular accounts-was not valid, as the initial assessments were also best judgment assessments based on the same ground. The court disagreed, stating that non-maintenance of accounts could lead to escapement of turnover from assessment, even if the initial assessments were best judgment assessments. The court emphasized that the petitioner had been informed of the reasons for reassessment and had been given the opportunity to inspect the records, including the report by the flying squad, which formed the basis for the reassessment notices.

Conclusion:
The court dismissed the petition, holding that the irregularities pointed out in the notices were not such as to vitiate the reassessment proceedings. The court emphasized that the petitioner had been afforded a reasonable opportunity of being heard and that any defects in the notices had not prejudiced the petitioner. The petition was dismissed with costs, and the outstanding amount of security deposit was ordered to be refunded to the petitioner.