1974 (5) TMI 98 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of best judgment assessment under section 21 of the U.P. Sales Tax Act.
2. Jurisdiction of the assessing authority to reassess under section 21 after an initial best judgment assessment.
3. Applicability of the explanation to section 21(1) in cases of partial turnover escape.
4. The scope of reassessment proceedings under section 21 of the U.P. Sales Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Best Judgment Assessment under Section 21 of the U.P. Sales Tax Act:
The primary issue was whether the assessing authority could make a best judgment assessment under section 21 of the U.P. Sales Tax Act when the original assessment had also been completed to the best of judgment. The court clarified that section 21(1) allows the assessing authority to reassess if there is reason to believe that any part of the turnover has escaped assessment. This jurisdiction is not dependent on whether the original assessment was based on best judgment or reliable returns. The explanation to section 21(1) explicitly states that the assessing authority can make an assessment to the best of its judgment in suitable cases.

2. Jurisdiction of the Assessing Authority to Reassess under Section 21:
The court emphasized that the jurisdiction to initiate proceedings under section 21 arises when the assessing authority has reasons to believe that any part of the turnover has escaped assessment. This jurisdiction is independent of the circumstances under which the original assessment was made. The court referenced the case of Pooran Mal Kapoor Chand, noting that the original assessment's best judgment basis does not preclude the authority from reassessing under section 21 if new information suggests a turnover escape.

3. Applicability of the Explanation to Section 21(1) in Cases of Partial Turnover Escape:
The court discussed the explanation to section 21(1), which allows for best judgment assessments even if only part of the turnover has escaped assessment. It referenced the case of Bhagat Ram Jai Narain, where it was concluded that the explanation applies to both full and partial turnover escapes. The court disagreed with the limited interpretation suggested in Pooran Mal Kapoor Chand, asserting that the explanation should be applied broadly to achieve the statute's objective of accurate tax assessment.

4. The Scope of Reassessment Proceedings under Section 21 of the U.P. Sales Tax Act:
The court reviewed the scope of section 21, affirming that the assessing authority can reassess the entire range of turnover, including making a best judgment assessment if warranted by new information. It cited the case of Footer Mal Megh Raj, which established that reassessment is permissible if new material justifies a higher turnover estimate than originally assessed. The court also referenced the Orissa High Court's interpretation in State of Orissa v. Sri Rama Electrical Stores, which supported the view that reassessment can include best judgment assessments even if the original assessment was also based on best judgment.

Conclusion:
The court concluded that the Sales Tax Officer had jurisdiction to reopen assessment proceedings under section 21(1) even if the original assessment was based on best judgment. The reassessment could consider new information indicating a higher turnover, and the explanation to section 21(1) supported this approach. The court answered the referred question in the affirmative, favoring the Commissioner of Sales Tax, U.P., and made no order as to costs due to the absence of representation for the assessee.

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