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TMI Blog1988 (2) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Officer being convinced that the assessee had effected sales of foreign watches, took proceedings for assessment against the assessee. For the assessment year 1972-73, he issued notice under section 21 of the Act, which was served on the assessee on 30th of March, 1977. In due course, assessment for that year was completed with which we are not concerned in these proceedings. For the assessment years 1973-74 and 1974-75 assessments were completed under section 7(3) of the Act, after due notice to the assessee. These assessments were challenged in appeal before the Assistant Commissioner (Judicial), Sales Tax. The taxable turnover for both these years was partially reduced by the appellate authority. The assessee feeling still aggrieved, approached the Sales Tax Tribunal in second appeal for the years in dispute. The Revenue also filed cross-appeals against the order of the appellate authority. The appeals by the assessee, and those filed by the Revenue were disposed of by a common order passed by the Sales Tax Tribunal along with the appeals for the assessment year 1972-73. Before the Sales Tax Tribunal, one of the contentions of the assessee was that the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch return or returns of his turnover, at such intervals, within such period, in such form and verified in such manner, as may be prescribed. Section 7(2) provides that if the assessing authority after such inquiry as he considers necessary is satisfied that any return submitted under sub-section (1) are correct and complete, he shall assess the tax on the basis thereof. Sub-section (3) deals with the cases where no return is filed or incorrect and incomplete return is filed. This provision reads as under: "(3) If no return is submitted by the dealer under sub-section (1) within the period prescribed in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete the assessing authority shall, after making such inquiry as he considers necessary, determine the turnover of the dealer to the best of his judgment and assess the tax on the basis thereof: Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity of proving the correctness and completeness of any return submitted by him." Section 21 of the Act provides for assessment of tax on the turnover not assessed during the year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7(3) and under section 21 of the Act. Which of these two provisions will apply to a particular case will, however, depend on the circumstances of each case. If the circumstances are such as to attract the provisions of section 21(1), the assessment will be made under that provision otherwise under section 7(3) of the Act. The powers contemplated by section 7(3) and section 21 are independent of each other and can be resorted to independently according to the material available to the assessing authority. In order the assessing authority may proceed under section 21, it is necessary that the assessing authority must have reason to believe that the turnover of the assessee had escaped assessment either in whole or in part on account of any of the factors stated in sub-section (1) of section 21. The formation of belief regarding escaped assessment, constitutes the sine qua non for taking action under this section. Another condition contemplated by subsection (1) of section 21 is that before making an assessment under that section the assessee must be served with a notice as required by the said provision. Section 7(3) of the Act places no such restriction on the assessing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate authority held the service was legal and proper, but it remanded the case, to the Sales Tax Officer as in its opinion, proper opportunity was not allowed to the assessee to produce his books, etc., and further there was no basis for estimate of the turnover. The assessee went up in revision contending assessment was liable to be annulled as there was not a valid service of notice under section 21. The revising authority, was of the opinion, that as it was a case of first assessment, section 21 of the Act was not applicable and the assessment could be justified under section 7(3) of the Act. He, accordingly, dismissed the revision without going into the contention about the service of notice. The assessee contested the matter further by way of reference before this Court. Out of three questions referred for the opinion of this Court, question Nos. 1 and 2 were as under: (1) Whether on the facts and circumstances of the case, the question of service of notice under section 21(1) of the Act was material? (2) Whether under the facts and circumstances the assessment order can be deemed to be an assessment under section 7(3)? The question No. 1 was answered in the affirmative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be initiated without issue and service of notice. Service of a notice for purpose of initiating proceedings under section 21 is not a mere procedural requirement but is a condition precedent. If no notice is issued or the notice issued is shown to be invalid or no notice has been served on the dealer the proceedings and the consequential order under section 21 will be illegal and void irrespective of the fact that the dealer gets knowledge of the proceedings under section 21. The words, 'after issuing' also do not make any difference as it has been held to mean the entire process of sending the notice and serving it. In Banarsi Debi v. Income-tax Officer [1964] 53 ITR 100 at page 108, it was observed by the Supreme Court: 'To summarize: The clear intention of the legislature is to save the validity of the notice as well as assessment from an attack on the ground that the notice was given beyond the prescribed period. That intention would be effectuated if the wider meaning is given to the expression "issued". The dictionary meaning of the expression "issued" takes in the entire process of sending the notice as well as the service thereof. The said word used in section 34(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t judgment assessment under section 7(3), jurisdiction may be assumed, but the turnover shall not be determined without making such inquiry as the assessing authority considers necessary." From the decisions cited above, it follows that for a valid initiation of proceedings under section 21, a valid service of notice under section 21 is necessary. Unless there is a service of notice under section 21, it cannot be held that there was any initiation of proceedings under that section. On mere issuance of notice but without service thereof, it cannot be said that the Sales Tax Officer had foreclosed the option he had under the Act to proceed under section 7(3). The findings recorded are that there was no service of notice under section 21 on the assessee. Thus being the factual position obtaining for the assessment years in dispute, in my opinion, the Sales Tax Officer was not debarred from proceedings under section 7(3) of the Act. Admittedly, the assessee had not filed any returns for the years in dispute and the Sales Tax Officer was competent to take action for assessment under section 7(3) of the Act. In view of the aforesaid discussion, these revisions are without merits an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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