Statutory assessment procedure controls tax demands: demands were quashed for failure to complete final and provisional assessments.

A tax demand based only on filed returns could not be sustained where the assessing authority had not completed the final assessment required under section 17(3) read with rule 18 after rejecting the returns; the demand notices for 1996-97 to 1998-99 were quashed. For the period April to October 1999, where the returns were not acceptable, the authority was first required to make a provisional assessment under rule 21(9) before raising demand; as that was not done, the demand was quashed. The court set aside the impugned demands for non-compliance with the statutory assessment procedure, while leaving the respondents free to proceed according to law.

---

---

Issues: (i) Whether demand notices issued for the assessment years 1996-97 to 1998-99 could stand without completion of final assessment under the Kerala General Sales Tax Act, 1963; (ii) Whether the demand for the months April to October 1999 could stand without a provisional assessment under the Kerala General Sales Tax Rules, 1963.

Issue (i): Whether demand notices issued for the assessment years 1996-97 to 1998-99 could stand without completion of final assessment under the Kerala General Sales Tax Act, 1963.

Analysis: The petitioner had filed annual returns and remitted tax as calculated in those returns. Where the assessing authority did not accept the return, the statutory course was to complete assessment in accordance with section 17(3) of the Act read with rule 18 of the Rules. As that procedure had not been followed, the demand notices based only on the returns could not be sustained.

Conclusion: The demand notices for the assessment years 1996-97 to 1998-99 were quashed.

Issue (ii): Whether the demand for the months April to October 1999 could stand without a provisional assessment under the Kerala General Sales Tax Rules, 1963.

Analysis: If the returns were not acceptable, the assessing authority was required to first make a provisional assessment under rule 21(9) of the Rules and then raise the demand. No such provisional assessment had been made, so the demand could not be sustained.

Conclusion: The demand for April to October 1999 was quashed.

Final Conclusion: The impugned demands were set aside for want of compliance with the statutory assessment procedure, while leaving the respondents free to proceed in accordance with law.

Ratio Decidendi: A tax demand cannot be sustained unless the assessing authority first follows the assessment procedure prescribed by the statute and rules, including final assessment where required and provisional assessment where applicable.

---