Recorded reasons and prior notice are essential for staying sales tax assessments and extending limitation

A stay of sales tax assessment proceedings is valid only where the Commissioner records specific reasons, shows extraordinary or supervening circumstances, and complies with natural justice by issuing prior notice. Mere pendency of assessment proceedings, or an assumed consent, is insufficient to justify stay or extend limitation. Because the impugned stay orders contained no real reasons and were passed without the required notice, they were invalid. As a result, the stay did not suspend the limitation period, and assessment notices issued for time-barred years were unsustainable and set aside.

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Issues: Whether the stay orders issued under the sales tax law were valid and whether the impugned assessment notices for the relevant years were barred by limitation.

Analysis: The statutory scheme required assessment orders to be made within the prescribed limitation period, unless proceedings were validly stayed under the proviso to section 42. Rule 37-A required the Commissioner to record in writing the reasons and circumstances necessitating stay, and the power could be exercised only in extraordinary circumstances and for supervening reasons not attributable to the assessing authority's default. The requirement of a prior show cause notice was part of the rule of natural justice. On the record, the stay orders contained no real reasons, rested on a bare assumption of consent, and were passed without issuing the required notice. Mere pendency of assessment proceedings was not a sufficient ground for stay.

Conclusion: The stay orders were invalid and did not extend limitation. The assessment notices for the periods that had become time-barred were unsustainable and were set aside.

Final Conclusion: The assessee succeeded in challenging the unlawful stay orders and the consequential time-barred assessment notices, and the proceedings were quashed for the affected years.

Ratio Decidendi: A stay of assessment proceedings under the sales tax rules can be made only for recorded reasons, in extraordinary circumstances, and after complying with the requirement of notice and natural justice; a bare pendency of proceedings or an assumed consent is insufficient to extend limitation.

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