1972 (5) TMI 50 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the notice issued under Section 21 of the U.P. Sales Tax Act.
2. Constitutionality of the first proviso to sub-section (2) of Section 21 under Article 14 of the Constitution.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 21:
The petitioners argued that there was no material on record to show that the Sales Tax Officer had reasons to believe that any part of their turnover had escaped assessment, rendering the notice under Section 21 invalid. However, this point was not raised before the appellate or revising authorities and was being raised for the first time in the present petition. The court declined to permit the petitioners to raise this issue at this stage.

2. Constitutionality of the First Proviso to Sub-Section (2) of Section 21:
The petitioners contended that the first proviso to sub-section (2) of Section 21 is obnoxious to Article 14 of the Constitution. The court examined Section 21 of the U.P. Sales Tax Act, which allows the assessing authority to reassess a dealer if it has reason to believe that any part of the turnover has escaped assessment, provided a notice is issued within four years from the end of the relevant assessment year. The first proviso allows the assessment to be made within one year of the date of service of the notice, even if the four-year period is exceeded.

The court noted that Section 7(3) and Section 21(1) deal with the same class of dealers-those who have not filed a return. However, Section 7(3) does not require the assessing authority to have reasons to believe that the turnover has escaped assessment, nor does it mandate the service of a notice. In contrast, Section 21 requires both conditions to be met, which justifies the extended limitation period provided by the first proviso.

The court found that the first proviso does not create inequality but rather ensures fairness between the parties by compensating for the time spent in collecting materials and serving notice. The court also distinguished this case from the Supreme Court decision in Anandji Haridas v. S.P. Kushare, noting significant differences in the statutory provisions.

The court further held that the assessing authority's discretion under Section 21 is guided by the duty to act in the interests of public revenue and prevent tax evasion, as emphasized in M.M. Ipoh v. Income-tax Commissioner. Therefore, the first proviso to sub-section (2) of Section 21 does not violate Article 14 of the Constitution.

Conclusion:
The court dismissed the petition, holding that the first proviso to sub-section (2) of Section 21 is constitutional and does not violate Article 14. The petitioners' argument regarding the invalidity of the notice under Section 21 was not entertained as it was raised for the first time in the present petition. The petition was dismissed with costs.