Limitation and assessment deferment under sales tax law require valid reasons, notice, and timely communication to exclude time.

A deferment order under section 12(6)(b) of the Karnataka Sales Tax Act can exclude time from the section 12(5) limitation only if it is based on valid reasons, made within the running limitation period, and communicated to the assessee after notice. A unilateral or uncommunicated deferment order cannot defeat the assessee's accrued limitation defence, and administrative reasons alone are insufficient to invoke the power. On the stated facts, most deferment-based assessments and reassessments were time-barred, while one reassessment under section 12-A was upheld because the notice was issued within the applicable limitation period.

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Issues: (i) Whether an order deferring assessment under section 12(6)(b) of the Karnataka Sales Tax Act, 1957 can be relied upon to extend the limitation period under section 12(5) without notice to the assessee and communication of the order within the statutory period; (ii) Whether the orders of deferment and the consequent assessments/reassessments were sustainable where the reasons recorded did not disclose valid grounds for invoking the power under section 12(6)(b) or where the reassessment was otherwise within limitation.

Issue (i): Whether an order deferring assessment under section 12(6)(b) of the Karnataka Sales Tax Act, 1957 can be relied upon to extend the limitation period under section 12(5) without notice to the assessee and communication of the order within the statutory period.

Analysis: Section 12(5) extinguishes the Department's right to complete assessment after the prescribed period, subject only to the exclusions in section 12(6). The exclusion under section 12(6)(b) applies only where assessment has been deferred by a reasoned order. Since the deferment order deprives the assessee of the valuable defence of limitation, it must be made with notice, within the running limitation period, and communicated to the assessee in time. A unilateral, uncommunicated order cannot validly defeat a vested right accrued under section 12(5). The requirement of valid reasons and fair procedure is reinforced by the principles of natural justice and by the need to prevent arbitrary exercise of power.

Conclusion: The deferment order can save limitation only if it is made for valid reasons, within time, and with notice and communication to the assessee; otherwise the assessment is barred.

Issue (ii): Whether the orders of deferment and the consequent assessments/reassessments were sustainable where the reasons recorded did not disclose valid grounds for invoking the power under section 12(6)(b) or where the reassessment was otherwise within limitation.

Analysis: The reasons recorded for deferment in several matters were administrative in character and did not constitute the extraordinary circumstances required for exercise of the power. In petitions where the deferment order was not communicated within limitation or was made after the limitation had effectively run out, the exclusion under section 12(6)(b) was unavailable and the assessments were time-barred. In the reassessment matter under section 12-A, however, the notice was issued within the applicable extended limitation and that proceeding was not barred. In the separate best-judgment matter, the claimed extension based on deferment was unsupported by valid grounds and could not sustain the assessment beyond limitation.

Conclusion: The impugned deferment-based assessments were generally unsustainable and barred by time, except the reassessment proceeding under section 12-A, which was within limitation.

Final Conclusion: The challenge succeeded in substance on the limitation issue in the connected writ petitions, while one reassessment proceeding was upheld as being within time.

Ratio Decidendi: A deferment of assessment that is used to exclude time under the limitation provision must be based on valid reasons, made within the limitation period, and communicated to the assessee so that the accrued defence of limitation is not defeated by a unilateral, undisclosed order.

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