1978 (1) TMI 154 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of penalty proceedings under section 14(3) of the A.P. General Sales Tax Act for assessment years 1967-68 to 1972-73.
2. Legality of penalty proceedings under section 14(3) for the assessment year 1973-74.

Issue-wise Detailed Analysis:

1. Legality of Penalty Proceedings for Assessment Years 1967-68 to 1972-73:

The primary issue in these revisions is whether the assessments for the years 1967-68 to 1972-73, which led to the initiation of penalty proceedings, were made in accordance with section 14(3) of the A.P. General Sales Tax Act. The petitioner, a proprietary firm, argued that the assessments were not made to the best of the judgment of the assessing authority, rendering the penalty proceedings and penalties levied illegal.

The court noted that the petitioner had filed returns in form A-1 after an inspection, showing turnovers that matched the detected material. The Deputy Commercial Tax Officer accepted these turnovers and made assessments accordingly. The court observed that the expression "best judgment assessment" implies not merely accepting the return filed by a dealer but involves rejecting the turnover submitted by the dealer and making an assessment based on the best judgment of the assessing authority.

The court referred to the Supreme Court's interpretation in Velukutty's case, which emphasized that a best judgment assessment involves an element of guesswork, which should have a reasonable nexus to the available material and circumstances of each case. The court found that the assessments for the years 1967-68 to 1972-73 did not involve any such guesswork or rejection of the returns filed by the petitioner. Instead, the assessing authority accepted the returns as complete and correct, which does not qualify as a best judgment assessment.

The court concluded that the assessments made for these years did not fall within the scope of section 14(3) and rule 15, as they did not involve any rejection of the returns or an element of guesswork. Therefore, the penalty proceedings initiated based on these assessments were deemed illegal.

2. Legality of Penalty Proceedings for Assessment Year 1973-74:

For the assessment year 1973-74, the petitioner returned a turnover of Rs. 1,03,251.88, to which the assessing authority added Rs. 3,070, making an assessment on the total turnover. Penalty was levied invoking sections 14(3) and 14(8) of the Act.

The court found that the penalty proceedings for the year 1973-74 were covered by sub-section (1-A) of section 14, which allows for treating a return as incorrect or incomplete if it includes turnover or particulars that would not have been disclosed but for an inspection. The court affirmed that the penalty was rightly levied based on the best judgment assessment, which involved rejecting the entire return filed by the petitioner.

Conclusion:

The court allowed the revisions for the assessment years 1967-68 to 1972-73, setting aside the penalty proceedings and penalties levied for these years. However, the court dismissed the revision for the assessment year 1973-74, affirming the penalty proceedings and penalties levied for that year.

- T.R.C. Nos. 24 to 28 of 1977: Allowed.
- T.R.C. No. 29 of 1977: Dismissed with costs.