Best judgment sales tax assessment requires proved nexus to the assessment year; inspection material cannot be projected without relevance.

A best judgment assessment under the Odisha Sales Tax Act cannot stand unless the Revenue first shows proved material linking liability to the period assessed and gives a reasonable opportunity of hearing. Mere stock, cash, a weighing machine, or an uncorroborated statement was insufficient to prove suppression of sales, and the assessments based on presumption were unsustainable. Material found in an August 2004 inspection also could not be projected to earlier assessment years without proof of its relevance to each year. The appellate affirmation was held legally erroneous, the assessments and orders were quashed, and the matter was remitted for fresh assessment in accordance with law and natural justice.

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Issues: (i) Whether the assessments under the Odisha Sales Tax Act, 1947 were sustainable when made without adequate evidentiary basis and without affording a reasonable opportunity of hearing. (ii) Whether material detected in the course of an inspection in one period could be projected to fasten tax liability for earlier assessment years without proof of relevance to those years.

Issue (i): Whether the assessments under the Odisha Sales Tax Act, 1947 were sustainable when made without adequate evidentiary basis and without affording a reasonable opportunity of hearing.

Analysis: Liability to tax under Section 4 arises only when the statutory conditions are shown to exist, and an assessment under Section 12(5) must be preceded by material showing liability and by a reasonable opportunity of hearing. The record did not disclose evidence of sale, purchase bills, sale bills, or any proved turnover for the disputed years. Mere presence of stock, cash, a weighing machine, or an uncorroborated statement could not, by itself, establish suppression of sales or justify a best judgment assessment. The finding recorded by the authorities was therefore based on presumption rather than legally admissible material.

Conclusion: The assessments were not sustainable on this ground and the objection succeeded in favour of the assessee.

Issue (ii): Whether material detected in the course of an inspection in one period could be projected to fasten tax liability for earlier assessment years without proof of relevance to those years.

Analysis: The inspection took place in August 2004, but the demand was extended to assessment years 2001-02 to 2004-05 without establishing how the detected material related to each separate period. The Court held that backward or forward projection of discovered material is impermissible unless the assessing authority proves its relevance to the particular year under assessment. Since the earlier liability for 2000-01 had already been annulled and had attained finality, the same material could not automatically sustain assessments for subsequent years. The Tribunal's affirmation of the assessments was therefore legally erroneous.

Conclusion: The projected use of the inspection material for the earlier years was invalid and the assessee succeeded on this issue as well.

Final Conclusion: The assessments and the appellate orders were quashed, the matter was remitted for fresh assessment in accordance with law and natural justice, and the revision was allowed in favour of the assessee.

Ratio Decidendi: A best judgment sales tax assessment must rest on proved material having a rational nexus with the period assessed, and material found during inspection cannot be used for other assessment years unless its relevance to those years is established by the Revenue.

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