2009 (5) TMI 877 - HC - VAT and Sales Tax

Whether, on the facts and circumstances of the case, the Tribunal is correct in law in holding that assessment framed falls under section 11(3) of the Act and not under section 11(4) or 11(5) so as to attract bar of limitation? Is Tribunal correct in law in upholding assessment for the financial year when the unit of assessment is a return period and a quarter in the case in question? Held that - Assessment has been framed by accepting returns filed on record. Even otherwise there is no addition on guess-work or estimate. . . . The Division Bench judgment of this court in the case of Avtar Singh Ranjit Singh v. State of Punjab 1982 (4) TMI 269 - PUNJAB AND HARYANA HIGH COURT , has no application to the facts of the instant case because in that case there were categorical findings by the Financial Commissioner showing that terms of show-cause notice were partly complied with. Therefore, the argument that the assessment should be considered to have been framed on the basis of best judgment assessment of the Assessing Authority within the meaning of section 11(4), is wholly unsustainable and is liable to be rejected. Accordingly, the first question is liable to be answered against the dealer-petitioner and in favour of the Revenue. The scheme of the Act as well as that of the Rules would show that the power vests in the Assessing Authority in specific cases to fix a different return period. In that regard reference may be made to rules 20, 22 and 23 of the Rules. Therefore, it cannot be concluded that unit of assessment is only one quarter and not the year. The question, thus, deserves to be answered against the dealer-petitioner and in favour of the Revenue.

Issues Involved:
1. Whether the assessment falls under section 11(3) of the Act and not under section 11(4) or 11(5) to attract the bar of limitation.
2. Whether the Tribunal is correct in upholding the assessment for the financial year when the unit of assessment is a return period and a quarter in the case in question.

Issue-wise Detailed Analysis:

Issue 1: Applicability of Section 11(3) vs. Section 11(4) or 11(5)
The primary question is whether the assessment falls under section 11(3) or sections 11(4) or 11(5) of the Punjab General Sales Tax Act, 1948, thereby attracting the bar of limitation. The relevant provisions of section 11 are analyzed to determine this.

- Section 11(1): If the assessing authority is satisfied with the returns without requiring the presence of the dealer or additional evidence, the tax is assessed based on the returns.
- Section 11(2): If the assessing authority is not satisfied, it requires the dealer's presence or additional evidence to verify the returns, involving the issuance of a notice.
- Section 11(3): This section is a continuation of section 11(2), where the assessment is made after hearing the evidence produced by the dealer and any other evidence required by the assessing authority. There is no specified time limit for passing the assessment order under this section.
- Section 11(4) and 11(5): These sections deal with best judgment assessments. Section 11(4) applies when a dealer fails to comply with the notice terms after filing returns, and section 11(5) applies when no returns are filed. Both sections require the assessment to be completed within five years.

The court found that the dealer-petitioner had filed returns and responded to the notice by producing account books, which did not match the returns. The variations in the purchase and sale of goods were established, and additions were made accordingly. Since the dealer complied with the notice under section 11(2), the assessment falls under section 11(3) and not under sections 11(4) or 11(5). Therefore, the argument that the assessment should be considered a best judgment assessment under section 11(4) is unsustainable. The first question is answered against the dealer-petitioner and in favor of the Revenue.

Issue 2: Unit of Assessment - Financial Year vs. Quarterly Returns
The second question involves whether the Tribunal correctly upheld the assessment for the financial year when the unit of assessment is a return period and a quarter.

- Section 2(i): Defines "turnover" to include the aggregate sales and purchases during a given period.
- Section 5(1A) and (2): Specifies the rate of tax and deductions allowed, using the term "year," which is defined as the financial year.
- Section 11: Does not prohibit making an assessment at the end of the financial year, even if quarterly returns are filed.

The court noted that while quarterly returns are required, the unit of assessment is the financial year. Rule 20 of the Punjab General Sales Tax Rules, 1949, allows for quarterly and annual returns, but there is no restriction in section 11 against annual assessments if no quarterly assessment is made. The scheme of the Act and the Rules supports the financial year as the unit of assessment. The court referred to the case of Niamat Rai Milkh Raj Ahuja v. State of Punjab, which did not address the specific question of the unit of assessment being a financial year or a quarter. Thus, the second question is also answered against the dealer-petitioner and in favor of the Revenue.

Conclusion:
Both questions are answered against the dealer-petitioner. The assessment falls under section 11(3), not sections 11(4) or 11(5), and the unit of assessment is the financial year, not the quarter. The reference is answered in these terms.

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