1992 (2) TMI 349 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of liability to pay tax under section 4 of the Bengal Finance (Sales Tax) Act, 1941.
2. Effect of quashing assessment for a previous year on the liability order for the subsequent year.
3. Authority of the assessing authority to determine liability based on exceeded taxable quantum without a specific order.

Analysis:
The judgment pertains to a reference made by the Appellate Tribunal, Sales Tax, Delhi, regarding the assessment years 1966-67 and 1967-68. The key issue revolves around the liability to pay tax under section 4 of the Bengal Finance (Sales Tax) Act, 1941. The dealer, engaged in the business of footwear, was initially found to have exceeded the taxable quantum for the year 1966-67, leading to reassessment. Subsequently, for the year 1967-68, the assessing authority computed the taxable turnover at Rs. 99,000 based on findings from the previous year.

The Assistant Commissioner upheld the assessment for 1967-68, citing the dealer's liability as evidenced by loose papers seized in 1966. However, the Appellate Tribunal allowed the dealer's appeal, contending that the liability order for 1967-68 needed fresh determination due to the quashing of the assessment for the previous year. The Tribunal's decision was challenged, leading to the High Court's analysis.

The Court emphasized that liability to pay tax arises under section 4(2) of the Act when the gross turnover exceeds the taxable quantum, triggering a tax liability after two months. The liability is not contingent on an order but is determined by statute. The Court rejected the Tribunal's view that quashing the assessment for 1966-67 affected the liability order for 1967-68, emphasizing that liability arises when the taxable quantum is exceeded, not through an order.

The Court further reasoned that even if the assessment for 1966-67 was time-barred, the assessing authority could still determine the dealer's liability based on actual turnover exceeding the taxable quantum. The Tribunal's misdirection on legal principles and facts led to an erroneous conclusion that fresh liability determination was required for 1967-68. The Court held that the liability was established in 1966-67 and upheld the assessment for 1967-68.

In conclusion, the Court answered the reference question in the negative, affirming the assessing authority's determination of liability based on the exceeded taxable quantum without the need for a fresh order. The judgment clarifies the statutory basis for tax liability determination and rejects the notion that quashing an assessment for a previous year impacts the liability order for the subsequent year.