Assessment-year basis upheld where dealer started business during the year; rule proviso valid under the sales tax scheme.

The proviso to rule 39(1) of the U.P. Sales Tax Rules was treated as valid because it operated consistently with the U.P. Sales Tax Act, 1948 and filled a gap for dealers who had not carried on business throughout the previous year. The Act permitted assessment on either the previous year's turnover or, under the alternative scheme, the assessment year's turnover, and the rule implemented that choice for dealers commencing business during the relevant period. On that basis, assessment of such an assessee on the assessment-year turnover was held permissible and valid.

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Issues: (i) Whether the proviso to rule 39(1) of the U.P. Sales Tax Rules was ultra vires the U.P. Sales Tax Act, 1948; (ii) Whether the assessee's assessment on the basis of the assessment year was legally valid where it had not carried on business during the whole of the previous year.

Issue (i): Whether the proviso to rule 39(1) of the U.P. Sales Tax Rules was ultra vires the U.P. Sales Tax Act, 1948.

Analysis: The statutory scheme charged tax on the turnover of the previous year, while section 3(2) authorised an alternative mode of assessment on the turnover of the assessment year. Section 7(1) required returns of either the previous year or the assessment year, and rule 39(1) permitted election of the assessment-year basis. The proviso, which required a dealer who had not carried on business during the whole of the previous year to submit returns of the assessment year, was treated as operating in a situation not otherwise covered by the Act. It did not conflict with the statutory provisions and was intended to meet the case of a dealer who commenced business during the relevant period.

Conclusion: The proviso to rule 39(1) was not ultra vires and was valid.

Issue (ii): Whether the assessee's assessment on the basis of the assessment year was legally valid where it had not carried on business during the whole of the previous year.

Analysis: Since the proviso validly required such a dealer to elect the assessment-year basis, and the assessee had commenced business during the relevant year, assessment on the turnover of the assessment year was permissible. The special provisions relating to dealers commencing business during the year, including section 18(3) and section 18(4), supported the conclusion that the assessment-year basis was appropriate in this category of cases.

Conclusion: The assessment on the basis of the assessment year was valid.

Final Conclusion: The reference was answered in favour of the Revenue, and both questions were answered in the affirmative, upholding the assessment-year basis of assessment and the validity of the proviso to rule 39(1).

Ratio Decidendi: A proviso to the assessment rules is valid where it regulates a situation not occupied by the Act and gives effect to the statutory scheme for alternative assessment on the assessment-year basis.

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