Limitation for best judgment assessment also controls connected penalty proceedings when the penalty power is tied to that assessment.

Where a penalty provision is expressly linked to a best judgment assessment, the limitation period for making that assessment also governs the initiation of the connected penalty proceedings. Section 14(1) required the assessment to be made within four years from the end of the relevant year, and section 14(2) allowed penalty only in the course of that assessment framework. The notice-and-inquiry requirement in the proviso did not break the statutory connection between assessment and penalty. Accordingly, penalty proceedings started after expiry of the four-year period were invalid.

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Issues: Whether penalty proceedings under section 14(2) of the Andhra Pradesh General Sales Tax Act could be initiated after more than four years from the expiry of the year to which the best judgment assessment under section 14(1) related.

Analysis: Section 14(1) required a best judgment assessment to be made within four years from the expiry of the relevant year. Section 14(2) permitted the assessing authority to direct payment of penalty only when making an assessment to the best of judgment under section 14(1), and the words used in the provision showed a direct linkage between the assessment and the penalty proceedings. The proviso requiring notice and inquiry did not make penalty simultaneous with assessment, but it did not sever the statutory connection between the two. The limitation prescribed for the assessment governed the commencement of the related penalty proceedings as well, because after the expiry of four years the assessment itself could not be made and the consequential penalty proceedings could not validly be started.

Conclusion: Penalty proceedings under section 14(2) had to be commenced within four years from the expiry of the year to which the best judgment assessment related, and proceedings initiated thereafter were invalid.

Ratio Decidendi: Where a penalty provision is expressly tied to the making of a best judgment assessment, the limitation period prescribed for that assessment also governs the commencement of the connected penalty proceedings.

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