Harinarain Chhotey Lal vs Commissioner of Sales Tax

R.L. Gulati, J.—This is a reference u/s 11(1) of the U.P. Sales Tax Act (hereinafter referred to as the Act).

The assessee is a dealer in foodgrains, oil-seeds, etc. During the assessment year 1959-60 he neither filed any return nor paid any tax. The Sales Tax Officer served upon the assessee on 19th March, 1964, a notice u/s 21 of the Act for the assessment year in question. The notice was served by affixation. The assessee did not appear on the appointed date and the Sales Tax Officer made a best judgment assessment on a turnover of Rs. 3,90,000. The assessee appealed and questioned the legality of the service of the notice u/s 21 of the Act. The appellate authority held the service as legal and proper but he remanded the case to the Sales Tax Officer as, in his opinion, proper opportunity had not been allowed to the assessee to produce his account books, etc., and there was no basis for the estimate of the turnover. The assessee went up in revision and contended that the assessment should have been annulled and not remanded inasmuch as the service of notice u/s 21 was not a valid service. The revising authority was of the opinion that as it was a first assessment, Section 21 of the Act was not applicable and the assessment could be justified u/s 7(3) of the Act. He accordingly did not go into the contention relating to the service of the notice and dismissed the revision. At the instance of the assessee, however, the Judge (Revisions), Sales Tax, Agra, has referred the following three questions for the opinion of this court:

(1) Whether the question of service of notice u/s 21 was not material?

(2) Whether, under the facts and circumstances, the assessment order can be deemed to be an assessment u/s 7(3)?

(3) Whether, under the facts and circumstances, the remand order passed by the learned Assistant Commissioner (J.), Sales Tax, was a proper order?

At one time this court held the view that Section 21 of the Act was applicable only where an assessment had once been made by the Sales Tax Officer, but he had failed to assess either in whole or in part the turnover. It had no application to a case where the assessment was being made for the first time. Such an assessment could be made u/s 7(3) at any time within four years from the end of the assessment year in question. This view has been superseded by a decision of a Full Bench of this Court in Commissioner of Sales Tax, U.P. v. Sugan Chand Shyam Lal Agra 1970 A.L.J. 895 which has been affirmed by a Bench of five Judges in the case of Commissioner of Sales Tax Vs. Jag Mohan Nath, . The view now taken is that where an assessee does not file a return nor does he pay any tax during the assessment year, the turnover of that year escapes assessment and Sections 21 and 7(3) both apply simultaneously. The choice is to be made by the Sales Tax Officer depending on the circumstances of each case. Now, in the instant case, the assessee had not filed any return nor had paid any tax under the assessment year in dispute. The Sales Tax Officer proceeded u/s 21 thus exercising the choice vested in him. Once the choice is made and proceedings are initiated u/s 21, the assessment order when passed must be justified with reference to that Section. It cannot be justified with reference to Section 7(3) of the Act. Now it is well-settled that a notice u/s 21 is a jurisdictional notice and until it is properly served upon the assessee within four years from the end of the assessment year in question, no valid assessment can be made. In these circumstances, it was necessary to decide the question relating to the validity of the notice. Question No. (1) has been framed in the negative. We have pointed out several times before that a question should not be framed in the negative. Thus we reframe the question as under:

Whether, on the facts and in the circumstances of the case, the question of the service of the notice u/s 21 of the Act was material?"

and answer it in the affirmative.

We have already pointed out that the assessment order could not be deemed to have been passed u/s 7(3) as it had been passed in pursuance of the notice u/s 21. We, accordingly, answer question No. (2) in the negative.

It is not necessary to answer question No. (3) as its answer would depend upon as to whether the service of the notice u/s 21 was valid or not. We accordingly return no answer to that question.

The reference is answered accordingly. The assessee is entitled to costs which we assess at Rs. 100.