Statutory returns must be examined before escaped assessment or best judgment powers can be invoked under entertainments tax law.

Statutory returns filed under the Tamil Nadu Entertainments Tax Act must first be examined and finalised before escaped assessment powers can be used, because escaped assessment presupposes a completed assessment process. The Madras HC held that section 7-B was invoked prematurely where the weekly returns were still on record and had not been scrutinised. It also held that best judgment assessment under section 7-A(3) was unavailable unless the authority first found the filed returns to be incorrect or incomplete after due examination. The impugned orders were set aside, and the authorities were directed to assess the returns in accordance with the statutory procedure.

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Issues: (i) Whether section 7-B of the Tamil Nadu Entertainments Tax Act, 1939 could be invoked before the filed weekly returns were examined and finalised; (ii) whether best judgment assessment under section 7-A(3) was permissible when returns had been filed but not found to be incorrect or incomplete.

Issue (i): Whether section 7-B of the Tamil Nadu Entertainments Tax Act, 1939 could be invoked before the filed weekly returns were examined and finalised.

Analysis: The scheme of the Act contemplates assessment on the basis of returns where returns are filed within the prescribed time. Escaped assessment presupposes that there has already been an assessment or at least a completed process in which tax has escaped assessment. Where the weekly returns were on record and had not yet been scrutinised and finalised, resort to the escaped assessment provision was premature.

Conclusion: Section 7-B could not be invoked at that stage, and the action taken under it was unsustainable.

Issue (ii): Whether best judgment assessment under section 7-A(3) was permissible when returns had been filed but not found to be incorrect or incomplete.

Analysis: Under section 7-A, once returns are filed, the prescribed authority must first satisfy itself whether the returns are correct and complete. Best judgment assessment becomes available only if no return is filed, or if the return appears to be incorrect or incomplete after due examination and opportunity. Since the returns were filed and had not been adjudged incorrect or incomplete, the jurisdictional basis for best judgment assessment had not arisen.

Conclusion: Best judgment assessment under section 7-A(3) was not validly undertaken on the facts of the case.

Final Conclusion: The impugned orders were set aside, and the authorities were directed to examine the returns in accordance with the statutory procedure before proceeding further.

Ratio Decidendi: Where statutory returns have been filed, the authority must first determine their correctness and completeness under the return-assessment provision before invoking escaped assessment or best judgment powers.

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