Time Limit for Best Judgment Assessments Under Sales Tax Act Clarified by Supreme Court

Madan Lal Arora Versus The Excise and Taxation Officer, Amritsar  

Madan Lal Arora Versus The Excise and Taxation Officer, Amritsar   - [1961] 12 STC 387 (SC), 1961 AIR 1565, 1962 (1) SCR 823   Issues:
1. Validity of best judgment assessment under the Punjab General Sales Tax Act.
2. Interpretation of Section 11(4) regarding the time limit for best judgment assessment.
3. Computation of the three-year period for best judgment assessment.
4. Application of rules and prescribed periods for filing returns.

The Supreme Court of India addressed the issue of the validity of best judgment assessment under the Punjab General Sales Tax Act in a case where the petitioner, a registered dealer, challenged the authorities' right to make such an assessment. The petitioner had failed to comply with notices requiring the production of documents and evidence to support his returns. The Court examined Section 11 of the Act, which outlines the procedure for assessment. It was noted that if a registered dealer fails to comply with a notice to produce evidence, the assessing authority can proceed to make a best judgment assessment within three years after the expiry of the relevant period. The Court emphasized that the power for best judgment assessment must be exercised within the specified three-year period.

The Court delved into the interpretation of Section 11(4) regarding the time limit for best judgment assessment. The provision allows the assessing authority to proceed with an assessment based on their judgment if a dealer fails to provide evidence to support their returns. However, this power is constrained by the requirement that it must be done within three years from the expiry of the relevant period for which returns were filed. The Court clarified that the three-year period starts from the end of each quarter for which returns were submitted by the dealer.

Furthermore, the Court analyzed the computation of the three-year period for best judgment assessment. It was highlighted that the three years should be counted from the end of each quarter for which returns were filed by the dealer. In this case, the assessing authority could not make a best judgment assessment for the quarter ending on March 31, 1956, after March 31, 1959. The Court emphasized that the assessing officer's notices for best judgment assessments after the expiry of the three-year period were futile and not legally permissible.

Lastly, the Court discussed the application of rules and prescribed periods for filing returns under the Act. It was noted that the rules required registered dealers to furnish returns quarterly, with the 'return period' defined as the period for which returns are prescribed. The Court concluded by allowing the petition, restraining the respondent from conducting best judgment assessments for the relevant quarters, and awarding costs to the petitioner.