1991 (4) TMI 383 - HC - VAT and Sales Tax

Summary

Issues:
Validity of demand notice issuance within the limitation period.

Analysis:
The case involved a reference under section 21(1) of the Bengal Finance (Sales Tax) Act, 1941, for the assessment year 1967-68. The dealer filed returns late for that year, paying the due tax with a delay for each quarter. The assessing authority levied a penalty for the delay in filing returns and paying tax for the first three quarters, totaling Rs. 23,000. An appeal was made against the demand notice issued on 31st December 1971, contending it was invalid due to lack of payment deadline. The Assistant Commissioner directed issuance of a fresh demand notice, which was done with a payment deadline of 20th July 1972. Subsequent appeals and revisions challenged the timeliness of the demand notice, all of which were dismissed. The case was referred to the High Court to determine if the assessment order was within the limitation period.

The key question in the case was whether the demand notice issuance falls within the four-year period prescribed for assessment under section 11(2a) of the Act. The Court analyzed the relevant provisions of the Act, specifically sections 11(2a) and (3) along with section 20(1). Section 11(2a) sets the time limit for making an assessment, emphasizing that no assessment should be made after four years. Sub-section (3) mandates the payment of assessed tax by the dealer based on a notice issued for this purpose. The Court clarified that the limitation period applies to the assessment order, not the notice issued under section 11(3).

The Court relied on precedents and interpretations to argue that the assessment encompasses not only computing income but also determining the tax payable. Despite decisions pertaining to the Income-tax Act, the Court emphasized that the assessment order quantified the tax due and payable within the four-year period. The Court rejected the argument that the notice of demand was more critical than the assessment order, emphasizing that the tax determination in the assessment order was the crucial aspect. Ultimately, the Court answered the question in favor of the department, stating that the assessment order was passed within the prescribed time limit, and the notice of demand did not invalidate the assessment order.

In conclusion, the Court's decision affirmed that the assessment order's timeliness is crucial under section 11(2a), and the notice of demand issuance falls under a different timeline for filing appeals. The judgment clarified the distinction between the assessment order and the demand notice, emphasizing the significance of the tax determination in the assessment process.