2009 (7) TMI 1170 - HC - VAT and Sales Tax

Proceeding under section 21 of the U. P. Trade Tax Act 1948 against the petitioner - Held that - The petitioner has failed to show that during the period between 1999 and January 25 2005 he carried on the business of manufacture and sale of cloth. The survey dated March 23 2005 does not in way help the petitioner. At the stage of issuance of notice the considerations which has to weigh is whether there is some relevant material giving prima facie inference that some turnover has escaped assessment. The question as to whether material is sufficient for making reassessment under section 21 of the Act could not be gone into at the time of issuance of notice. The assessing authority while reassessing has to decide the matter in the light of material already in its possession as well as fresh material which was in possession procured as a result of inquiry which may be considered necessary. Respondent No. 1 while granting permission under section 21(2) of the Act has recorded his reasoning and no fault can be found in the order of respondent No. 1. Thus no illegality or infirmity in initiating the proceeding under section 21 of the Act against the petitioner. Appeal dismissed.

Summary

Issues:
Challenging order under section 21(2) of U.P. Trade Tax Act, 1948 and quashing notices for assessment years 1999-2000 to 2002-03.

Analysis:
The case involved writ petitions challenging an order under section 21(2) of the U.P. Trade Tax Act, 1948 and seeking to quash notices for assessment years 1999-2000 to 2002-03. The petitioner, a registered firm engaged in the manufacture and sale of cloth, claimed exemption from tax. However, a survey conducted in 2005 revealed discrepancies, leading to the issuance of notices for reassessment. The petitioner contended that the firm was closed in 2005, machinery sold, and tax deposited. The respondent argued that the petitioner continued selling yarn without manufacturing cloth, evading tax since 1999. The court examined the evidence, including survey reports and statements, to determine the legitimacy of the reassessment proceedings.

The court noted that the survey revealed no stock or machinery at the petitioner's premises, casting doubt on the petitioner's claims of closure and machinery sale. The petitioner's defense regarding the closure of another unit was deemed an afterthought to avoid tax liability. The court scrutinized the statements and evidence presented by both parties to assess the credibility of the petitioner's assertions. The petitioner's failure to demonstrate business operations between 1999 and 2005 undermined their case.

Referring to legal precedents, the court emphasized that the existence of a belief in tax evasion, not the sufficiency of reasons, justified initiating reassessment proceedings. The court highlighted the importance of relevant material supporting the prima facie inference of tax evasion. The assessing authority's decision to grant permission for reassessment under section 21(2) was found to be reasonable and in accordance with the law.

Ultimately, the court dismissed the writ petitions, concluding that there was no illegality in initiating reassessment proceedings under section 21 of the Act. The judgment emphasized that the concerned authority should independently decide on the matter in accordance with the law, unaffected by the court's observations.