1978 (9) TMI 160 - HC - VAT and Sales Tax

Summary

Issues:
Validity of notice under section 21 based on an anonymous complaint.

Analysis:
The judgment revolves around the validity of a notice issued under section 21 of the Sales Tax Act based on an anonymous complaint received by the Sales Tax Officer after the completion of the assessee's assessment. The Sales Tax Officer had initially received information about the assessee importing kerosene oil but did not act on it during the assessment. Subsequently, an anonymous complaint was received, prompting the issuance of a notice under section 21. The key question was whether the information in the anonymous complaint could form a valid basis for issuing the notice.

The relevant part of section 21 states that the assessing authority can issue a notice if there is a "reason to believe" that turnover has escaped assessment. The court emphasized that this belief must be reasonable and prudent, based on relevant material rather than suspicion or rumor. Precedents from Income-tax cases were cited to highlight the importance of valid information post-assessment for initiating proceedings under section 21.

The court acknowledged that while previous decisions under the Sales Tax Act had held that information need not be obtained post-assessment, the counsel for the assessee argued for reconsideration in light of Supreme Court pronouncements. However, the court did not delve into this aspect, focusing on the requirement of a reasonable belief for initiating proceedings under section 21.

Ultimately, the court held that the anonymous complaint, which merely raised suspicion without substantial evidence, could not form a reasonable basis for the Sales Tax Officer to believe that turnover had escaped assessment. Noting that similar information existed during the original assessment without action, the court ruled in favor of the assessee, concluding that the notice issued based on the anonymous complaint was invalid. The question was answered in the negative, favoring the assessee, who was also awarded costs amounting to Rs. 200.

In conclusion, the judgment clarifies the stringent requirement of a reasonable belief based on relevant material for issuing a notice under section 21 of the Sales Tax Act. It underscores the importance of substantial evidence over mere suspicion or anonymous complaints in initiating assessment proceedings.