Pre-assessment tax demand cannot be coerced when liability is disputed and assessment is still pending.

When tax liability is disputed and assessment remains incomplete, advance tax cannot be demanded or recovered coercively before the statutory assessment and computation of tax are finalised. The High Court held that the revenue must first complete assessment of the dealer's returns and determine the tax payable; a pre-assessment show-cause notice demanding advance tax was therefore impermissible. Coercive recovery initiated without completing assessment was likewise contrary to law, and the notice and recovery action were quashed. The matter was directed to proceed only through the proper assessment process, followed by demand if warranted.

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Issues: Whether a show-cause notice demanding advance tax and coercive recovery could be sustained before assessment when the dealer disputed liability and returns were yet to be assessed.

Analysis: The liability to pay advance tax was considered in the light of earlier decisions holding that, where the dealer disputes liability and returns are filed, the revenue must first complete assessment and compute the tax payable. A demand for payment before assessment was held impermissible, and coercive recovery without completing the assessment process was found to be contrary to law.

Conclusion: The impugned show-cause notice and recovery action were unsustainable and were quashed. The matter was directed to proceed in accordance with law by first undertaking assessment and thereafter issuing demand, if warranted.

Ratio Decidendi: When tax liability is disputed and assessment has not been completed, advance tax cannot be demanded or recovered coercively before the statutory assessment and computation of tax are finalized.

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