1972 (3) TMI 70 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of Section 21 versus Section 7(3) of the U.P. Sales Tax Act for assessment when a dealer fails to file a return.
2. Interpretation of the term "escaped assessment."
3. Limitation periods for assessments under Section 21 and Section 7(3).
4. Validity of assessments made without initiating proceedings under Section 21.
5. Whether assessments can be made under Section 7(3) after the assessment year ends without provisional assessments.

Detailed Analysis:

1. Applicability of Section 21 versus Section 7(3) of the U.P. Sales Tax Act:
The primary question was whether Section 21 or Section 7(3) or both apply for making an assessment where a dealer fails to file a return of his turnover within the prescribed time. The court analyzed the relevant provisions of the U.P. Sales Tax Act, specifically Section 3 (charging section), Section 7 (machinery for assessment), and Section 21 (assessment of escaped turnover).

2. Interpretation of the Term "Escaped Assessment":
The court drew an analogy from the Income-tax Act of 1922 to explain the concept of "escaped assessment." It was noted that under the Income-tax Act, income escapes assessment if no return is filed by an assessee and no notice is served upon him within the assessment year. The court held that the same meaning should be given to the term "escaped assessment" under the U.P. Sales Tax Act. Therefore, if no assessment proceedings are commenced within the specified time, the turnover escapes assessment.

3. Limitation Periods for Assessments:
The court examined the limitation periods for assessments under Section 21 and Section 7(3). Section 21 allows for an additional year if a notice is served within four years, while Section 7(3) allows assessments to be made within four years. The court emphasized that these provisions operate in mutually exclusive fields, and the power to make a regular assessment and the power to make an assessment of escaped income are distinct.

4. Validity of Assessments Made Without Initiating Proceedings Under Section 21:
The court held that no assessment under Section 7(3) is possible if assessment proceedings have not been commenced by the end of April of the year following the assessment year. If turnover escapes assessment, Section 21 is the only provision under which it can be taxed, and Section 7(3) does not apply.

5. Assessments Under Section 7(3) After the Assessment Year Ends Without Provisional Assessments:
The court clarified that the assessing authority can proceed to make a final assessment under Section 7(3) after the assessment year is over, even if no provisional assessment was made or proceedings were initiated within the assessment year. The court emphasized that the statutory obligation to file returns does not proprio vigore initiate assessment proceedings.

Case-Specific Judgments:

S.T.R. No. 612 of 1965:
The court held that the assessment order passed under Rule 41(5) was invalid as no assessment proceedings were commenced before the expiry of the assessment year. The question was answered in the negative in favor of the assessee.

S.T.R. No. 138 of 1970:
The court held that the first assessment could be made under Section 21 as the turnover had escaped assessment due to the dealer's failure to file a return. The question was answered in the affirmative against the assessee.

S.T.R. No. 550 of 1969:
The court held that the first assessment could be made under Section 21 as the turnover had escaped assessment due to the dealer's failure to file a return. The question was answered in the negative, allowing the assessment under Section 21.

Writ No. 3049 of 1970:
The court dismissed the writ petition, holding that the first assessment can be made under Section 21, and the first proviso to sub-section (2) of Section 21 does not violate Article 14 of the Constitution.

Conclusion:
The court concluded that the questions in S.T.R. No. 612 of 1965 and S.T.R. No. 138 of 1970 are answered in the affirmative, while the question in S.T.R. No. 550 of 1969 is answered in the negative. The writ petition was dismissed, and in each case, the parties were ordered to bear their own costs.

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