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PETITIONER: C.T.O. MORADABAD

       Vs.

RESPONDENT: H. FARID AHMED & SONS.

DATE OF JUDGMENT12/09/1975

BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA KRISHNAIYER, V.R.

CITATION:  1976 AIR  756            1976 SCR  (1) 776  1976 SCC  (1) 245

ACT:      U.P. Sales  Tax Act, Section 7A and 7(3) and rule 41(3) of the  Rules B‘  provisional best  Judgment assessment,  if could be made when assessee filed a I return

HEADNOTE:      By an  order dated  31st December,  1968, the sales-tax officer found  from the  turnover of  the respondent firm as revealed from  the quarterly  returns filed  by the assessee that is  disclosed   an assessable  income. He  proceeded to make a  provisional assessment  in respect of the portion of the assessment  year 1968  concerned purporting to act under section 7A  of’ the  U.P.  Sales  Tax  Act.  The  respondent challenged the  same before  the High Court praying 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  Allahabad   accepted the  contention and quashed the  order of  the sales-tax officer. The High Court hold 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 leave, ^      HELD:  Section  7A  clearly  authorises  the  assessing authority to  make  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. It is true that sub- rule  (3)   of  rule   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 power  to  make  provisional  assessment.  There  is  no inconsistency between section 7A and rule 41(3) of the Rules framed under the Act. [778-A-B, D-F]

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JUDGMENT:      CIVIL 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 o. P. Rana, for the Appellants.      Promod Swarup and S. Markendeya, for the Respondent. G.      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 7A 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 31st  December, 1968,  the sales-tax officer found from the 777 turn-over of the firm as revealed from the quarterly returns filed by the assessee that it disclose an assessable income. The  sales-tax  officer,  therefore,  proceeded  to  make  a provisional assessment  in respect  of the  portion  of  the assessment year  concerned, purporting  to act under section 7A 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 assessee 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 has contended that  the High Court has completely overlooked the purport ambit  of section  7A 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 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 enquiry 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." 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  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. In our opinion, the High Court was in error in taking this view. Section 7A runs thus:-           (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,

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    without prejudice  to the  provisions of  section 7 may      provisional assessment  in respect  of such  portion of      the assessment  year in  accordance with the provisions      of this Act in so far as they may be made applicable if      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-section  (2) of  Section 3-D,  as the      case may  be, as  the period  under assessment years to      twelve months. 19-L925SCI /75 778           (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  all 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  making  such  enquiries  as  he      considers necessary, determine the turnover Lo the best      of his  judgment, provisionally  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. 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   ill   the circumstances was  fully justified in making the provisional assessment under the provisions of section 7A of the Act and the High  Court was  wrong in  quashing this  order. We feel that if  the interpretation  given  by  the  High  Court  is accepted, it will amount to giving a license to the assessee to escape final assessment by filing wrong quarterly returns 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 from challenging the correctness of levy of penalty before the- statutory authorities in accordance with law, if

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he is in time V.M.K.                                      Appeals allowed, 779