1973 (7) TMI 74 - HC - VAT and Sales Tax

Issues Involved:

1. Jurisdiction to initiate proceedings under Section 18(1) of the Bihar Sales Tax Act, 1959.
2. Legality of best judgment assessment under Section 18(1) of the Bihar Sales Tax Act, 1959.
3. Imposition of penalty under Section 18(2) of the Bihar Sales Tax Act, 1959.
4. Projection of alleged suppression of sales to earlier periods.
5. Sufficiency of compliance with declaration requirements for tax-paid goods.
6. Entitlement to deduction for tax-free and tax-paid goods in best judgment assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction to Initiate Proceedings under Section 18(1):

The court examined whether there was a causative and rational connection between the information regarding escaped assessment in the possession of the Sales Tax Officer and his satisfaction under Section 18(1) of the Bihar Sales Tax Act, 1959. It was concluded that the information must relate to the period under assessment. The court found that the information derived from the surprise inspection related to a different period (1963-64) than the assessment year in question (1962-63). Therefore, the initiation of proceedings under Section 18(1) was not justified.

2. Legality of Best Judgment Assessment under Section 18(1):

The court scrutinized whether the completion of assessment on the alleged escaped turnover to the best of judgment under Section 18(1) was justified. It was determined that there was no evidence on record that the turnover for the period 1962-63 actually escaped assessment. The court emphasized that there must be material evidence connecting the clandestine transactions found in one year to the previous year for the provisions of Section 18(1) to be attracted. The absence of such material rendered the best judgment assessment unjustified.

3. Imposition of Penalty under Section 18(2):

The court examined the imposition of penalty under Section 18(2) without issuing the prescribed mandatory notice and without affording the assessee an opportunity to be heard. It was held that if the provisions of Section 18(1) were not attracted, the powers under Section 18(2) could not be invoked. Consequently, the imposition of penalty was deemed illegal.

4. Projection of Alleged Suppression of Sales:

The court addressed whether the alleged suppression of sales for the period 25th July, 1963, to 12th January, 1964, could be projected back to the period 30th January, 1963, to 31st March, 1963. It was concluded that such projection was based on mere presumption, suspicion, and conjecture without positive evidence. The court reiterated that there must be material evidence connecting the suppression of sales to the previous assessment year.

5. Sufficiency of Compliance with Declaration Requirements for Tax-paid Goods:

The court examined whether the production of declarations before the appellate authority could be deemed sufficient compliance with the requirements of the Bihar Sales Tax Act, 1959, and the Rules framed thereunder. It was held that the appellate authority had the power to take into evidence the form IXC declarations and set aside the assessment, directing the assessing authority to pass a fresh order after further enquiry. This power extended to the Tribunal in its revisional jurisdiction.

6. Entitlement to Deduction for Tax-free and Tax-paid Goods in Best Judgment Assessment:

The court addressed whether a dealer is legally entitled to get a reasonable deduction on account of the sale of tax-free and tax-paid goods in a best judgment assessment. It was held that the dealer is entitled to a deduction for tax-free goods by estimate or otherwise. However, for tax-paid goods, no deduction could be granted without producing documentary evidence. The court emphasized the necessity of bifurcation between tax-free and tax-paid goods for claiming such deductions.

Conclusion:

The court answered the reframed questions in favor of the assessee, holding that the provisions of Section 18(1) were not attracted, and the imposition of penalty under Section 18(2) was illegal. The appellate authority and the Tribunal had the power to take additional evidence in the form of declaration forms at the appellate stage. The dealer was entitled to a deduction for tax-free goods but not for tax-paid goods without documentary evidence. No order for costs was made.

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