1971 (4) TMI 88 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of assessment under section 21(1) of the U.P. Sales Tax Act within one year of the service of the second notice after the first notice.
2. Interpretation of the first proviso to subsection (2) of section 21 regarding the period of assessment.

Analysis:
The case involved a reference under section 11(1) of the U.P. Sales Tax Act regarding the validity of an assessment made under section 21(1) within one year of the service of a second notice after the first notice. The main issue was whether the assessment was valid despite the expiry of four years from the end of the assessment year 1957-58. The material facts highlighted that the first notice was served on the assessee on 24th February 1959, with a second notice served on 17th March 1962, leading to the assessment on 17th December 1962. The appellate and revising authorities considered the validity of the second notice and the assessment order based on it.

The provision in question, section 21(1) of the Act, allows the assessing authority to assess or reassess the dealer if the turnover has escaped assessment. Subsection (2) of section 21 sets a four-year limitation from the end of the assessment year for making an assessment. However, the first proviso to subsection (2) allows for an extension of one year from the date of service of the notice under subsection (1) if served within the four-year period. The critical aspect was determining which notice, the first or the second, constituted "the notice under sub-section (1)" for the purpose of the proviso.

The court emphasized that the notice under subsection (1) is the one that justifies the assessing authority in taking proceedings against the dealer. The second notice, issued in February 1962, was deemed a needless repetition of the first notice served in February 1959. The court concluded that as long as proceedings were ongoing based on the first notice, issuing a second notice on the same facts and circumstances was unnecessary. Therefore, the assessment made after the second notice was invalid as it did not meet the requirement of the first proviso to subsection (2) of section 21.

In conclusion, the court answered the reframed question in the negative, holding that the assessment was not validly made within the prescribed period. The assessee was awarded costs amounting to Rs. 100, and the reference was answered in the negative.