1984 (3) TMI 354 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether an original best judgment assessment can be framed by the Commissioner in exercise of his revisional powers under section 21 of the Punjab General Sales Tax Act, 1948, without being time-barred.
2. Whether the record of proceedings prepared on a sales tax return can inherently include purchases entered by the dealer in the absence of a purchase tax return filed for the purpose.

Issue-wise Detailed Analysis:

Issue 1: Revisional Powers and Time Bar
The court examined whether the Commissioner could frame an original best judgment assessment under section 21 of the Punjab General Sales Tax Act, 1948, without being constrained by the time bar. The petitioner, a registered firm engaged in the sale and purchase of oil-seeds and manufacture of oil, had filed quarterly sales tax returns for the assessment year 1970-71. The Assessing Authority issued a notice under section 11(2) of the Act on 1st December, 1976, and finalized the assessment on 26th June, 1978, imposing a penalty for additional demand. The petitioner did not appeal this order.

The Commissioner, upon review, noted that the petitioner had not paid tax on certain purchases and proceeded to assess the petitioner to the best of his judgment, levying a tax of Rs. 37,147. The petitioner challenged the Commissioner's authority to open the case and frame the best judgment assessment without original proceedings by the Assessing Authority. The Tribunal upheld the Commissioner's jurisdiction but remanded the case for re-determination of the quantum of purchase transactions.

The court held that the Commissioner's revisional jurisdiction under section 21 is contingent upon the existence of a record of proceedings. The court emphasized that the exercise of revisional jurisdiction is a conscious act and not accidental. The Commissioner cannot assume jurisdiction based on an inauthentic purchase tax return. The court concluded that the Commissioner could not confer jurisdiction on the Assessing Authority to frame a best judgment assessment beyond the statutory time limit. The court referred to a Full Bench decision in Hari Chand Rattan Chand & Co. v. Deputy Excise and Taxation Commissioner, which supported the view that the Commissioner cannot bring to tax any turnover not disclosed to the Assessing Authority or discovered during the assessment after the expiry of the limitation period.

Issue 2: Inclusion of Purchases in Sales Tax Return
The court addressed whether the record of proceedings prepared on a sales tax return could include purchases entered by the dealer without a filed purchase tax return. The petitioner contended that no purchase tax return had been filed, and the return noted by the Tribunal for the quarter ending June 1970 was not signed by any partner and was not considered by the Commissioner.

The court noted that section 11 of the Act allows the Assessing Authority to make a best judgment assessment if returns are not filed by the prescribed date. The court highlighted that the proceedings for best judgment assessment must be initiated within five years. The court held that filing a sales tax return does not automatically initiate proceedings for purchase tax returns. The court emphasized that the returns for sales tax and purchase tax are separate and must be filed accordingly.

The court concluded that the Commissioner could not frame a revised assessment or best judgment assessment under section 21 of the Act without a purchase tax return and without issuing the requisite notice within the five-year period. The court held that filing a sales tax return does not mean that proceedings are initiated for an aggregated taxable turnover inclusive of purchase deals.

Conclusion:
The court answered both questions in the negative, in favor of the assessee and against the Revenue. The petition was allowed, and the impugned orders related to the purchase tax were quashed. No costs were awarded due to the complexity of the case.