Best judgment limitation and ultra vires rules: accepted returns stand, but rule-based assessment is quashed.

The eighteen-month limitation under section 11(1) applied only when the Assessing Authority had to make a best judgment assessment after non-filing, or after finding returns incorrect or incomplete; where returns and tax deposits were accepted, no such time bar operated and the limitation plea failed. An assessment based on rule 28 of the Delhi Sales Tax Rules, 1951 could not stand because that rule had already been held ultra vires; the third-quarter assessment was therefore quashed, with liberty to make a fresh assessment only to the extent permitted by law. The earlier acceptance of returns was sustained.

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Issues: (i) Whether the limitation of eighteen months under section 11(1) applied where the Assessing Authority accepted the returns and tax deposited by the dealer instead of making a best judgment assessment; (ii) whether the assessment for the third quarter could stand when it was made by recourse to rule 28 of the Delhi Sales Tax Rules, 1951.

Issue (i): Whether the limitation of eighteen months under section 11(1) applied where the Assessing Authority accepted the returns and tax deposited by the dealer instead of making a best judgment assessment.

Analysis: Section 10 required a registered dealer to furnish returns and pay the tax due according to those returns. The eighteen-month limit under section 11(1) operated only when the authority had to proceed to a best judgment assessment after a failure to furnish returns or when the returns were found incorrect or incomplete. Where the authority did not resort to best judgment assessment and instead accepted the returns and the tax deposited, no step was required to be taken within eighteen months.

Conclusion: The limitation plea failed and the order accepting the returns and tax deposited was upheld.

Issue (ii): Whether the assessment for the third quarter could stand when it was made by recourse to rule 28 of the Delhi Sales Tax Rules, 1951.

Analysis: The assessment order showed that rule 28 was used for determining the taxable turnover. Since rule 28 had already been declared ultra vires, the assessment resting on that rule could not be sustained. The authority was left at liberty to make a fresh assessment only to the extent permitted by law.

Conclusion: The assessment for the third quarter was quashed.

Final Conclusion: The petition succeeded in part, with the acceptance of the earlier quarterly returns sustained and the later assessment annulled.

Ratio Decidendi: The statutory limitation for best judgment assessment applies only where the authority is required to assess under the relevant provision, and an assessment founded on an ultra vires rule cannot be sustained.

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