2014 (11) TMI 1095 - SUPREME COURT

Levy of purchase tax - legality of the Circular No.137, dated 29-30.03.2007 issued by the Commissioner of Trade Tax - validity of re-assessment proceedings initiated under Section 21 of the U.P. Trade Tax Act, 1948 - Central Sales Tax Act, 1956 - manufacture of rice from paddy - declared goods - tax at the point of first purchase under the notification issued under Section 3-D(i) of the Act - period of limitation - permission for re-assessment - whether the High Court was justified in quashing the re-assessment proceedings initiated under Section 21(2) of the Act on grounds that it was merely based on change of opinion and therefore, bad in law? - Held that: - the import of the words "reason to believe" has also been examined by this Court in cases arising out of proceedings under Section 34 of the Indian Income Tax Act, 1922 which also has the same phraseology. It deals with income escaping assessment and confers jurisdiction on the income tax officer to make assessment or re-assessment.

While the approval under Section 21(2) of the Act could be granted on the subjective change of opinion, no proceeding under Section 21(1) of the Act can be initiated on the ground of change in opinion of the assessing Authority dehors any material on record which justifies such change requiring re-assessment. The requirement of "reason to believe" in Section 21(1) qualifies the phrase "change in opinion" as contained in Section 21(2).

Subsequent change in law according to which the assessment proceedings were conducted, cannot constitute "change in opinion" of the assessing Authority so as to initiate re-assessment proceedings. In fact, the same is impermissible if the Act does not specify the operation of law as retrospective. Reliance placed in the decision of the case S.C. Prashar v. Vasantsen Dwarkadas [1962 (12) TMI 53 - SUPREME COURT] held that if after change in law, the period of time prescribed for action by the tax authorities has already expired, then subsequent change in the law does not make it so retrospective in its effect as to revive the power of the tax authority to take action under the new law.

The material in existence remains the same during both, the assessment and the reassessment proceedings and no additional material or facts have been referred to explaining such "reason to believe" as per the mandate of Section 21(1) of the Act before initiating reassessment proceedings. In fact, the assessing Authority has not indicated any material at all that has given rise to such reason and thus, on the basis of mere "change of opinion" concluded that exemption on purchase tax has wrongly been allowed - action of High Court justified - purchase tax rightly levied - appeal rejected - decided against appellant.