1971 (11) TMI 158 - HC - VAT and Sales Tax

Issues Involved:
1. Necessity of providing a subsequent opportunity to the assessee in best judgment assessment.
2. Compliance with principles of natural justice in best judgment assessment.
3. Interpretation of Section 18 of the M.P. General Sales Tax Act and Rule 33.

Issue-wise Detailed Analysis:

1. Necessity of providing a subsequent opportunity to the assessee in best judgment assessment:

The primary issue referred for the court's opinion was whether, in making a best judgment assessment, a subsequent opportunity to show cause against the proposed best judgment estimate is required over and above the initial opportunity to show cause against the proposal to assess the dealer to the best of judgment. The Tribunal had previously held that the assessee should be given an opportunity at both stages: before deciding to resort to the best judgment assessment and before making the actual estimate. The Commissioner of Sales Tax contended that Section 18 does not necessitate two opportunities, arguing that once the decision to resort to best judgment assessment is made, further opportunity to plead against the proposed assessment is unnecessary.

2. Compliance with principles of natural justice in best judgment assessment:

The court examined several precedents to determine the necessity of providing opportunities to the assessee. The principle emphasized in the decisions discussed is that when the assessing authority is required to assess any assessee to its best judgment based on any information, comparable cases, flat average rate, or any other material on record, it is only fair and proper that such information or material should be brought to the notice of the assessee to enable him to offer any explanation in his favor. This ensures compliance with the principles of natural justice, which mandate that the assessee should not be adversely affected without being heard.

3. Interpretation of Section 18 of the M.P. General Sales Tax Act and Rule 33:

The court noted that Section 18 and Rule 33 do not compel the assessing authority to divide the process of assessment into two parts or stages. After rejecting the books of account on the grounds available under Section 18(4), the assessing authority is required to point out the discrepancy to the assessee and offer an opportunity to explain. The court clarified that it is not necessary for the assessing authority to announce its decision to resort to best judgment assessment first and then make a proposed estimate subsequently. The assessing authority must consider all available materials, apply its mind, and come to a fair conclusion after bringing the material on record to the notice of the assessee.

Conclusion:

The court concluded that in making the best judgment assessment, it is not always necessary to provide a subsequent opportunity to the assessee to show cause against the proposed best judgment estimate over and above the initial opportunity. However, if the assessment is based on any fact, information, comparable cases, or average rate, such material must be brought to the notice of the assessee to allow for an explanation. This opportunity need not be given in two stages but must adhere to the principles of natural justice to ensure the assessee is not adversely affected without being heard.

Final Judgment:

The court answered the reference by stating that a subsequent opportunity to show cause against the proposed best judgment estimate is not always necessary, provided the principles of natural justice are followed. The parties were directed to bear their own costs of the reference.

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