1987 (9) TMI 399 - HC - VAT and Sales Tax

Summary

Issues:
1. Can a proceeding under section 12(8) of the Orissa Sales Tax Act be initiated for a period when the assessment proceeding is pending before the assessing authority?

Analysis:

The case involved a registered partnership firm dealing in garments challenging the initiation of a proceeding under section 12(8) of the Orissa Sales Tax Act for the assessment year 1974-75 while the assessment proceeding was pending. The firm argued that as the assessment was incomplete, there was no basis for alleging "escaped assessment" or "under-assessment." The assessing officer issued a notice under section 12(8) based on a fraud report and lack of cooperation from the firm. The counter-affidavit supported the initiation, citing the need for verification due to alleged under-stated turnover and lack of cooperation from the firm. The Division Bench referred the matter to a larger Bench due to doubts regarding the correctness of a previous decision supporting the Revenue's stand.

The relevant provision under section 12 of the Act prescribes the procedure for assessment and sets a limitation of thirty-six months for passing an assessment order. Section 12(8) empowers the Commissioner to call for returns and assess the tax due if the turnover has escaped assessment or been under-assessed within the specified period. The court analyzed the scope of section 12(8) and emphasized that it deals with the assessment of escaped tax, even if the escapement results from a mistake by the assessing officer.

The court examined a previous decision of the Orissa High Court, which construed "escaped assessment" broadly, allowing assessment even without prior notice or assessment under section 12(5). However, the court found errors in applying this decision and overruled it. Referring to a Supreme Court case, the court held that a turnover cannot be deemed to have escaped assessment if the assessment proceeding was pending and no final order had been made. The court emphasized that the assessing authority cannot use section 12(8) to overcome the limitation period and must complete assessments promptly. The court allowed the writ application, quashing the notice under section 12(8) as the assessment proceeding was incomplete, and the assessing authority lacked jurisdiction to initiate the proceeding.

In conclusion, the court ruled in favor of the firm, emphasizing the importance of completing assessments within the prescribed time frame and prohibiting the use of section 12(8) when assessment proceedings are pending.