Provisional best judgment assessment cannot be used to test a dealer's denial of tax liability

Rule 41(3) of the U.P. Sales Tax Rules permitted only a provisional best judgment assessment where no return was filed, or where a return was filed without payment of admitted tax in the prescribed manner; it did not authorise the Sales Tax Officer to test the legal correctness of a dealer's denial of tax liability. Section 7(3) of the U.P. Sales Tax Act was likewise treated as part of the regular assessment scheme, not a source of provisional assessment power. Where quarterly returns asserted no tax liability, the absence of treasury challans did not make the returns incomplete, and the proposed assessments were held without jurisdiction and liable to be quashed.

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Issues: Whether the Sales Tax Officer had jurisdiction to make a provisional best judgment assessment under rule 41(3) of the U.P. Sales Tax Rules, or to invoke section 7(3) of the U.P. Sales Tax Act, when the dealer filed quarterly returns asserting no tax liability and did not deposit tax.

Analysis: Rule 41(1) and (2) contemplated filing of quarterly returns and deposit of the tax admitted by the dealer to be due. Rule 41(3) was attracted only where no return was submitted, or where a return was filed without payment of tax in the prescribed manner, and it authorised only a provisional assessment designed to secure advance collection of admitted tax. It did not confer power to examine whether the dealer's denial of tax liability was legally correct. Section 7(3) likewise was read as part of the scheme of final or regular assessment under section 7, and not as a provision for provisional assessment. The omission to file treasury challans did not make the returns incomplete where the dealer did not admit any tax liability and therefore was not obliged to deposit admitted tax.

Conclusion: The impugned assessments and the proposed proceedings were without jurisdiction and liable to be quashed.

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