Valid service through authorised agent does not save a best judgment assessment made without fair opportunity to contest deduction disallowance.

Service of assessment notice on an authorised agent was valid service on the firm because the person had filed the return and previously represented the partners before the sales tax authorities. The best judgment sales tax assessment, however, could not stand where the assessee was not given an effective opportunity to contest the proposed disallowance of a claimed deduction. Fair procedure required notice and a chance to meet the adverse material before the estimate was made, and the assessment order failed to disclose a proper basis for the inference drawn. The sales tax assessment was therefore set aside to that extent and remitted for fresh consideration after hearing the assessee.

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Issues: (i) Whether service of notice of assessment proceedings on Harishankar was valid service on the petitioner-firm; (ii) Whether the sales tax assessment made to the best of judgment could be sustained without giving the assessee an opportunity to show cause against disallowance of the claimed deduction.

Issue (i): Whether service of notice of assessment proceedings on Harishankar was valid service on the petitioner-firm.

Analysis: Harishankar had filed the return for the period under assessment and had earlier been acting before the sales tax authorities on behalf of the partners and representing the firm. On those facts, he answered the description of an agent within the meaning of rule 63 of the M.P. General Sales Tax Rules, 1959. Service on him was therefore treated as proper service on the firm.

Conclusion: The service of notice on Harishankar was held to be valid and the challenge to the assessment on that ground failed.

Issue (ii): Whether the sales tax assessment made to the best of judgment could be sustained without giving the assessee an opportunity to show cause against disallowance of the claimed deduction.

Analysis: The assessing authority accepted the gross turnover and, for turnover tax, allowed the deduction claimed for declared goods, but disallowed the same deduction while determining sales tax and then proceeded under section 18(4)(d) of the M.P. General Sales Tax Act, 1958. In these circumstances, the assessee was entitled to notice and an opportunity to meet the proposed disallowance before the best judgment assessment was made. The assessment order did not disclose the basis for the adverse inference or the application of mind required for a best judgment estimate consistent with fair procedure.

Conclusion: The best judgment assessment of sales tax was unsustainable for want of an effective opportunity of hearing.

Final Conclusion: The assessment was set aside to the extent it related to sales tax, and the matter was left for fresh consideration after giving the assessee an opportunity to be heard on the disputed deduction.

Ratio Decidendi: Even where notice initiating assessment is validly served through an authorised agent, a best judgment assessment cannot stand if the assessee is not given a fair opportunity to meet a proposed disallowance that forms the basis of the estimate.

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