Reassessment on superior authority's direction upheld where the dealer was party to prior proceedings and limitation challenge failed

Section 21(7) of the U.P. Sales Tax Act, 1948 was challenged as violating Article 14 on the ground that it treated dealers proceeded against on a superior authority's direction differently from dealers assessed under section 21(2), because no limitation period was prescribed for the former. The Court rejected the discrimination argument, relying on the fact that the person proceeded against had been a party to the earlier appellate proceedings and the notice was issued pursuant to that order. It also rejected the limitation objection, holding that the notice under section 21(7) was not barred on that ground. The writ petition was dismissed and the impugned proceedings were sustained.

---

---

Issues: (i) Whether section 21(7) of the U.P. Sales Tax Act, 1948 was invalid as violative of Article 14 of the Constitution of India on the ground of hostile discrimination between dealers covered by section 21(2) and those proceeded against under section 21(7); (ii) Whether the notice issued under section 21(7) for the relevant assessment year was barred by limitation and liable to be quashed.

Issue (i): Whether section 21(7) of the U.P. Sales Tax Act, 1948 was invalid as violative of Article 14 of the Constitution of India on the ground of hostile discrimination between dealers covered by section 21(2) and those proceeded against under section 21(7).

Analysis: The challenge was founded on the contention that dealers whose escaped turnover is assessed under section 21(2) and dealers who are assessed or reassessed under section 21(7) pursuant to a direction of a superior authority belong to the same class and, therefore, a limitation for one class and no limitation for the other offends the equality clause. The Court examined the decision in S.C. Prashar and held that the majority view did not declare the corresponding proviso unconstitutional against assessees who were parties to the proceedings, but only against strangers or third parties. Since the petitioner had been a party to the appellate proceedings and the notice under section 21(7) was issued on the basis of that appellate order, the petitioner could not invoke that line of reasoning.

Conclusion: Section 21(7) was held not to be unconstitutional under Article 14 on the facts of the case, and the challenge failed.

Issue (ii): Whether the notice issued under section 21(7) for the relevant assessment year was barred by limitation and liable to be quashed.

Analysis: The petitioner urged that the proceedings were time-barred and that no escaped turnover could be brought to tax after the prescribed period. The Court rejected this contention in view of the nature of the notice under section 21(7), which had been issued pursuant to the appellate authority's direction and against the same petitioner who had participated in the earlier proceedings. The reliance placed on the limitation principle drawn from the cited income-tax decision was held to be misplaced.

Conclusion: The notice under section 21(7) was not quashed on the ground of limitation.

Final Conclusion: The writ petition was dismissed and the impugned proceedings were upheld, with parties left to bear their own costs.

Ratio Decidendi: A provision permitting reassessment pursuant to a superior authority's direction is not invalid under Article 14 merely because it does not prescribe a limitation period, where the person proceeded against was a party to the prior proceedings on which the direction was based.

---