1993 (11) TMI 226 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the notice issued under Section 10-B of the U.P. Sales Tax Act, 1948.
2. Appropriate provision for reassessment of escaped turnover.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued Under Section 10-B of the U.P. Sales Tax Act, 1948:

The petitioner challenged the notice dated December 8, 1987, issued under Section 10-B of the U.P. Sales Tax Act, 1948, for the assessment year 1981-82. The petitioner argued that the entire turnover was disclosed and assessed by the Sales Tax Officer on January 30, 1984. The notice was issued on the grounds that the supply of cotton rope to D.G.S. & D., Kanpur, had escaped assessment. The petitioner contended that Section 10-B, which allows the Commissioner of Sales Tax to examine records for legality or propriety, was improperly invoked for reassessment of escaped turnover.

2. Appropriate Provision for Reassessment of Escaped Turnover:

The core issue was whether proceedings for reassessment of escaped turnover could be initiated under Section 10-B or if Section 21 of the Act was the correct provision. Section 10-B allows the Commissioner to call for and examine records to ensure the legality or propriety of orders. However, the court noted that the respondent did not invoke Section 10-B to examine the legality of the original assessment order but to levy tax on the escaped turnover. The court emphasized that reassessment for escaped turnover should be initiated under Section 21, which specifically deals with situations where any part of the turnover has escaped assessment.

The court referred to Section 21, which states that if the assessing authority believes any part of the turnover has escaped assessment, it may issue a notice and reassess the dealer. The court concluded that Section 21 was the only provision under which proceedings for reassessment of escaped turnover could be initiated. The court also drew parallels with Section 263 of the Income-tax Act, 1961, which similarly confines revisional jurisdiction to existing records and does not allow for reassessment based on new information.

The court cited the case of Ganga Properties v. Income-tax Officer, where the Calcutta High Court held that revisional jurisdiction is confined to materials on record and cannot be used for reassessment. The court agreed with this view, stating that revisional powers under Section 10-B could not be used to assess escaped turnover based on new material.

Judgment:

The court allowed the petition, quashing the notice dated December 8, 1987, issued under Section 10-B. It restrained the respondents from proceeding against the petitioner for reassessment for the assessment year 1981-82 based on the impugned notice. The court concluded that any reassessment should be initiated under Section 21, not Section 10-B, as there was no illegality or impropriety in the original assessment order. The parties were directed to bear their own costs.

Petition allowed.