Best judgment assessment and penalty must follow statutory sequence; premature pre-assessment penalty notice was set aside.

Section 22(4) of the Tamil Nadu Value Added Tax Act permits best judgment assessment only after the assessing authority completes assessment after a reasonable opportunity of hearing, and Section 22(5) permits penalty only after that assessment, either in the assessment order or by a separate order. A show cause notice proposing penalty before completion of assessment was therefore premature and contrary to the statutory sequence. The explanation to Section 22(5), including clause (iii), also recognises deduction where concessional-rate tax has been paid but declarations were furnished late, so that issue could not be foreclosed at the notice stage. The notice was set aside, while the authority was left free to proceed afresh in accordance with law.

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Issues: Whether the impugned show cause notice proposing best judgment assessment and penalty before completion of assessment was premature and premeditated, and whether the petitioner could claim deduction in respect of turnover covered by delayed concessional declarations under the statutory explanation to the penalty provision.

Analysis: Section 22(4) of the Tamil Nadu Value Added Tax Act, 2006 permits best judgment assessment only after the assessing authority completes the assessment following a reasonable opportunity of hearing. Section 22(5) authorises penalty only after assessment under sub-section (4), either in the assessment order or by a separate order thereafter. The notice, by proposing penalty at 150% before adjudication, was contrary to the statutory sequence and reflected pre-emptive action. The explanation to Section 22(5), particularly clause (iii), also recognises deduction where tax has been paid at a concessional rate but declarations were not furnished at the time of assessment, showing that the issue could not be foreclosed at the notice stage.

Conclusion: The show cause notice was held to be premature and premeditated and was set aside. The petitioner succeeded, and the authority was left free to proceed afresh in accordance with law.

Ratio Decidendi: Penalty under Section 22(5) of the Tamil Nadu Value Added Tax Act, 2006 cannot be proposed or imposed before assessment under Section 22(4) is completed, and the statutory explanation allowing deduction for delayed concessional declarations must be applied at the assessment stage.

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