Case: S.T.O., Moradabad, and Others Vs. H. Farid Ahmed and Sons

The appeals involve a very short point, turning upon the interpretation of Section 7-A of the U.P. Sales Tax Act (hereinafter referred to as the Act). It appears that the respondent is a partnership-firm, carrying on business in the district of Moradabad. The assessment quarters in question are two quarters of 1968. By an order dated December 31, 1968, the Sales Tax Officer found from the turnover of the firm as revealed from the quarterly returns filed by the assessee that it disclosed an assessable income. The Sales Tax Officer, therefore, proceeded to make a provisional assessment in respect of the portion of the assessment year concerned, purporting to act under Section 7-A of the U.P. Sales Tax Act. The assessee being aggrieved by this order, instead of going in appeal against the order, challenged the same before the High Court praying that the Sales Tax Officer had no jurisdiction to make a provisional assessment, because the assessee had in fact filed a return. This argument appears to have found favour with the High Court which quashed the order of the Sales Tax Officer and held that the Sales Tax Officer could have made a provisional assessment to the best of his judgment only if no return had been filed by the assessee.

Court's reasoning:
3. The High Court was of the opinion that as conditions mentioned in section 7(3) did not apply to the facts of the present case inasmuch as it was not a case in which the assessee had not filed a return at all, no assessment could have been made by the Sales Tax Officer. In our opinion, the High Court was in error in taking this view.This section clearly authorizes the assessing authority to make a provisional assessment in respect of the assessment year to the best of his judgment, and does not contain any preconditions at all. On the other hand, it applies the provisions of the Act which includes the provisions of section 7 (3), which is the provision that confers power on the assessing authority to make an assessment to the best of his judgment.It is no doubt true that sub-rule (3) contains a provision that the provisional assessment to the best of the judgment can be made where no return is submitted, but this rule has to be read as supplemental to the provisions of the parent Act. We cannot interpret the rule in a way so as to come into conflict with the parent Act, in which case the Act will prevail. What this rule implies is that whether the return is filed by the assessee or not, the assessing authority will have the power to make a provisional assessment. In these circumstances, therefore, we are not able to see any real inconsistency between Section 7-A and Rule 41 (3) of the Rules framed under the Act. For these reasons, we are clearly of the opinion that the sales tax authority, namely, the Sales Tax Officer, in the circumstances was fully justified in making the provisional assessment under the provisions of Section 7-A of the Act and the High Court was wrong in quashing this order. We feel that if the interpretation given by the High Court is accepted, it will amount to giving a licence to the assessee to escape final assessment by filing wrong quarterly returns and deflating the profits earned by them.