Best judgment assessment needs specific statutory notice; vague notice and derivative penalty could not survive.

Best judgment purchase tax assessment under section 11(5) required a specific statutory notice in the prescribed form and a reasonable opportunity of hearing before proceedings could validly begin. Notices that merely asked for account books and threatened ex parte assessment, without stating that best judgment assessment was being undertaken, were insufficient; because the assessment was also framed beyond the statutory period, it was invalid and without jurisdiction. Penalty based on that assessment could not be sustained, as it depended on a valid tax determination, and the delayed initiation of penalty proceedings was also found unreasonable in the circumstances.

---

---

Issues: (i) whether the best judgment assessment for purchase tax was validly initiated and sustained in the absence of a specific statutory notice under section 11(5) of the Punjab General Sales Tax Act, 1948 within the prescribed period; (ii) whether the penalty levied on the basis of such assessment could be sustained, including on the ground of delay in initiation.

Issue (i): whether the best judgment assessment for purchase tax was validly initiated and sustained in the absence of a specific statutory notice under section 11(5) of the Punjab General Sales Tax Act, 1948 within the prescribed period.

Analysis: The statutory scheme required a conscious initiation of best judgment proceedings by a proper notice in the prescribed form, coupled with a reasonable opportunity of hearing, before the authority could proceed under section 11(5). The notices sent to the dealer only called upon it to produce account books and threatened ex parte assessment, but did not clearly state that the authority was proceeding to assess to the best of its judgment. Such notices were treated as no substitute for the prescribed notice, and a vague notice leaving options open was insufficient to validly commence proceedings. Since the assessment was also framed beyond the statutory period, the proceedings were not lawfully initiated.

Conclusion: The best judgment assessment on purchase tax was invalid and without jurisdiction, and the orders sustaining it could not stand.

Issue (ii): whether the penalty levied on the basis of such assessment could be sustained, including on the ground of delay in initiation.

Analysis: Penalty was treated as dependent upon a valid assessment and quantification of the tax liability. Once the purchase tax assessment was quashed, there was no foundation for computing or sustaining penalty. Independently, the initiation of penalty proceedings after a long lapse of time was held to be unreasonable in the circumstances of the case.

Conclusion: The penalty could not be sustained.

Final Conclusion: The challenge succeeded, and the impugned orders were set aside insofar as they related to purchase tax and penalty.

Ratio Decidendi: Where the statute requires a specific notice to initiate best judgment assessment within the prescribed time, a vague or incomplete notice does not validly commence proceedings, and any penalty dependent on the invalid assessment cannot survive.

---