776
C.T.O. MORADABAD
_v._
H. FARID AHMED & SONS.
_September_ 12, 1975
[V. R. KRISHNA IYER AND S. MURTAZA FAZAL ALI, JJ.J
_U.P._ _Sales Tux Act, Section 7A and_ 7(3) _and rule_ 41(3) _of_ _the_ _Rules--_
_provisional best judgn1ent_ _assess1nc11t,_ _if_ _could_ _be_ _n1ade_ _when assessee filed a_
_return._
By an order dated 31st December, 1968, the sales-tax officer found from
the turn-over .of the respondent firm as revealed from the quarterly returns
filed by th~ assessec that it disclosed an assessable income. He proceeded to
make a provisional assessment in respect o.f the portion of the assessment year
1968 concerned purporting to act under section 7A of the U.P. Sales Tax _A.ct._
The respondent challenged the same before the High Court prayjng that the
sales..tax officer had no jurisdiction to make a provisional assessment, because.
the assessee had in fact filed a return. The High Court of ~-'\.liah1bad accepted
the contention and quashed the ord~r of the sales-tax officer. 'The High Court
held that as conditions mentioned in section 7(3) did not apply to the facts
of the case in as much as it was not a case in which the assessee had not
filed a return at all, no assessment could have been made by the sales-tax
officer.
Allowing the appeal by special ]cave,
HELD : Section 7 A clearly authorises the assessing authority to make 1,
provisional assessment in respect of the assessment year to the best of his judgn1ent, and does not contain any pre-conditions at all. On the other hand. it
applies the .provisions of the Act which includes the provisions of section 7 (3),
which· is the provision that confers power on the assessing authority to make
an assessment to the best of his judgment. It is true that sub-rule (3) of n1le
41 contains a provision that the provisional assessment to the best of the judgment can be made where no return is submitted, but this rule has to be read
as supplemental to the provisions of the parent Act. What this rule implies
is that whether the return is filed by the assessee or not, the assessing authority
will have the pawer to make provisional assessment. There is no inconsistency
between 5ection 7 A and rule 41 (3) of the Rules framed under the Act.
[778-A-B, D-FJ
CNIL APPELLATE JURISDICTION : Civil Appeal Nos. 95 and 96
of 1971.
From the Judgment and Order dated 3rd October, 1969 of the
Allahabad High Court in Writ Petitions Nos. 351 and 462/69.
_S._ C. _Manchanda_ and 0. _P._ _Rana,_ for the Appellants.
_Promod Swarup_ and _S._ _Markendeya,_ for the Respondent.
The Judgment of the Court was delivered by
FAzAL ALI, J. These appeals by the sales-tax officer have come
up to this Court by certificate of fitness granted by the High Court
of Allahabad. The appeals involve a very short point, turning upon
the interpretation of rule 7 A of the U.P. Sales Tax Act (hereinafter
referred to as the Act). It appears that the respondent is a partnership firm, carrying on business in the--.district of Moradabad. The
assessment quarters in question are two quarters of 1968. By an
order dated 3 lst December, 1968, the sales-tax officer found from the
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s. T. 0. _v._ H. FARID AHMED & SONS _(Fazal Ali,_ /.) 777.
turn-over of the firm as revealed from the quarterly returns !iled by
the assessee that it disclose an assessable income. The sales-tal<'.
officer, therefore, proceeded to make a provisional assessm"nt in respect of the portion of the assessment year concerned, purporting
lo act under section 7 A of the U.P. Sales Tax Act. The assessee
being aggrieved by this order, instead. of going in appeal against the
order, challenging the same before the High Court praying that the
sales-tax officer had no jurisdiction to make a provisional assessment,
·because the asscssee had in fact filed a return. This argument appears
to have found favour with the High Court which quashed the order.
of the sales-tax officer and held that the sales-tax officer could have
made a provisional. assessment to the best of his judgment only if no
return had been filed by the assessee.
Mr. Manchanda appearing in support of the appeals bas contended
that the High Court has completely overlooked the purport. and ambit
of section 7 A of the Act, which does not exclude but in fact implies
the provisions of the· Act, including section 7 (3). The sheet-anchor
of the High Court's judgment is section 7 (3) which runs thus :
"If no return is submitted by the dealer under subsection (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 autho'
rity shall after making such enquiry rn; 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."
The High Court was of the opinion that as conditions mentioned in
section 7(3) did not apply to the facts of the present case inasmuch·
as it was nor a case in which the assessee had not filed a return at all,
no assessment could have been made by the sales-tax officer. In our
opinion, the High Court was in error in taking this view. Section 7A
**runs** **thus:-**
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(1) "The State Government may require any dealer to
submit return of his turn-over of a portion of the assessment
year, and the assessing authority may, with.out prejudice to
the provisions of section 7 may provisional assessment in
respect of such portion of the assessment year in accordance
with the j)rovisic;ns of this Act in so far as they may be
made applicable 1f the turn-over of the dealer as determined
by the assessing authority for such portion of the amount
if any, specified in· or notified under sub-section (2) of
Section 3 or sub·sectii>u (2) of Section 3-D, as ·the case may
be, as the ·period under assessment years to twelve months.
19-L9?5SCI/75
778 SUPREME COURT REPORTS (1976] 1 s.c.R.
(2) Where the assessing authority has made a provisional assessment under sub-section ( 1), it shall not, by
reason of such assessment,, be precluded from redetermining
in the turn-over and making the assessment for the whole
**year .. "**
This section clearly authorizes the assessing authority to make a
provisional assessment in respect of the assessment year to the best
of his judgment, and does not contain any pre-conditions at all. On
the other hand, it applies the provisions of the Act which includes the
provisions of section 7 ( 3), which is the provision that confers power
on the assessing authority to make an assessment to the best of his
judgment. The High Court was rather carried away by the language
of rule 41(3) which runs thus:
"(3) If no return is submitted in respect of any quarter
or month, as the case may be, within the period or if the
return is submitted without the payment of tax in the manner
prescribed in Rule 48, the Sales Tax Officer shall, after
**1naking** **such enquiries** **as** **he considers necessary, determine**
the turnover to the best of his judgment, provisionaily
assess the tax payable for the quarter or the month, as the
case_ may be and serve upon the dealer a notice in Form
XI and the dealer shall pay the sum demanded within the
time and in the manner specified in the notice."
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It is no doubt true that sub-rule ( 3) contains a provision that the
provisional assessment to the best of the judgment can be made where
no return is submitted, but this rule has to be read as supplemental to
the provisions of the parent Act. We cannot interpret the rule in a
way so as to come into conflict with the parent Act, in which case
the Act will prevail. What this rule implies is that whether the return
is filed by the assessee or not, the assessing authority will have the
power to make a provisional assessment. In these . circumstances,
therefore, we are not able to see any real inconsistency between section
7A and rule 41(3) of the Rules framed under the Act. For these
reasons, we are clearly of the opinion that the sales tax authority,
namely, the sales-tax officer in the circumstances was fully justified
in making the provisional assessment under the provisions of section
. 7 A of the Act and the High Court was wrong in quashing this order.
We feel that if the interpretation given by the Hgh Court is accepted,
it will amount to giving a licence to the assessee to escape final assess- · G
ment by filing wrong quarterly retums and deflating the profits earned
by them. The result is that both the appeals are allowed. The judgments and orders of the High Court are set aside, but in the circumstances we leave the parties to bear their costs throughout. The order
passed by this Court, however, will not preclude the assessee !lrom
challenging the correctness of levy of penalty before the statutory
authorities in accordance with law, if he is in time. **H**
V.M.K. _Appeals allowed._
