1966 (9) TMI 123 - HC - VAT and Sales Tax

Sales Tax Assessments: Material, Not Assumptions. Judicial Review Principles Upheld.

The Court clarified that Sales Tax Officers must base best judgment assessments on material, not unfounded assumptions. Assessments relying on conjectures ... - Issues:1. Powers of Sales Tax Officer to make best judgment assessment under section 12(2)(b) of the General Sales Tax Act, 1125.2. Validity of an assessment imposing sales tax based on conjectures and surmises.3. Jurisdiction of the Court to interfere under Article 226 when principles of natural justice are violated in assessments.Analysis:1. The judgment addresses the powers of the Sales Tax Officer to make a best judgment assessment under section 12(2)(b) of the General Sales Tax Act, 1125. It is acknowledged that such assessments involve an element of guesswork, but they must be based on material and not mere suspicion. The Court cites the Supreme Court's ruling that the assessing officer must make an estimate related to evidence or material, not pure suspicion, and must consider various factors to arrive at a fair assessment.2. The Court examines the validity of an assessment imposing sales tax based on conjectures and surmises. In this case, the Sales Tax Officer arbitrarily assumed that goods were carried every week of the year based on only two instances, leading to an inflated turnover calculation. The Court emphasizes that assessments must be based on honest guesses supported by material, not unfounded assumptions. The judgment highlights that assessments made purely on conjectures violate principles of natural justice and can be subject to judicial review under Article 226.3. The judgment delves into the jurisdiction of the Court to interfere under Article 226 when principles of natural justice are violated in assessments. Despite arguments that challenging assessments should be through appeals rather than Article 226, the Court reiterates that it can intervene if natural justice principles are disregarded. In this case, the Court quashes the assessment order based on arbitrary conjectures and allows the writ application, emphasizing that assessments made without material basis are unacceptable.In conclusion, the judgment clarifies the parameters within which Sales Tax Officers can make best judgment assessments, emphasizing the need for assessments to be based on material rather than unfounded assumptions. It also underscores the Court's authority to intervene under Article 226 when assessments violate principles of natural justice, ensuring fair and lawful tax assessments.