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2021 (2) TMI 200 - HC - VAT and Sales TaxValidity of initiation of reassessment proceedings - rate of tax on Multi Function Digital (MFD) - Change of opinion - reason to belief - Whether the Tribunal erred in law in upholding the validity of initiation of reassessment proceedings, when the same was based on belief which was totally irrelevant and also amounts to change of opinion? - HELD THAT:- The principle that has to ever remain clear is - the assessee may be subjected to reassessment proceeding only when the jurisdictional fact is first found to exist. That fact is the existence of a valid "reason to believe" that any turnover has "escaped assessment to tax". In the facts of the present case, the submission advanced by Sri Mishra as to change of opinion cannot be accepted since the original assessment order dated 17.03.2010 is completely silent as to the reason why the assessing authority chose to tax on MFD @ 4%. No basis or other reason was recorded by the Assessing Officer to tax the commodity MFD @ 4%. In absence of any opinion being formed and expressed at that stage, no change of opinion may arise or be alleged when at a subsequent stage, the assessing authority forms any opinion. At the same time, merely because no opinion had been formed by the Assessing Officer at the stage of original assessment, it would not automatically lead to the conclusion, either that any turnover had escaped assessment or that the Assessing Officer had absolute discretion to initiate reassessment proceedings as has been suggested by the learned Standing Counsel relying on a decision of the Division Bench of this Court in KALPANA KALA KENDRA VERSUS SALES TAX OFFICER, CIRCLE-20, KANPUR [1988 (12) TMI 318 - ALLAHABAD HIGH COURT]. In that case also, the original assessment order was silent as to the enquiry, if any, to accept the returned turnover. However, at the stage of the initiation of the reassessment proceedings under Section 21 of the Uttar Pradesh Sales Tax Act, 1948, three factual basis existed on the record that gave rise to the “reason to believe” that tax had escaped assessment. These were (i) wide discrepancy noted with respect to value of purchases of the assessee, (ii) escapement of tax on the closing stock and (iii) also non-verification of the information received on assessment record. In the instant case, there is no recital in the "reason to believe" of any factual basis or of any information received or of material existing on record on the assessment file of the assessee as may have given rise to any "reason to believe”. The notice issued by the Additional Commissioner dated 15.05.2012, which is stated to contain the “reason to believe” only refers to the fact that MFD had been subjected to tax @ 4% in the original assessment order treating the same to be computer peripherals whereas that commodity was not computer peripheral and, therefore, liable to be taxed as an unclassified commodity. In the first place, the "reason to believe" suffers from a factual fallacy. There was no entry available under the Act to tax "computer peripherals". That entry first appeared only by virtue of Entry no.22 of Part B of Schedule II of the VAT Act - there was no question of introducing that entry in the assessment proceedings under the Act or to examine that entry for the purpose of either making an assessment under the Act or to re-open any assessment under that Act. That fact was plainly or completely extraneous to the assessment made under the Act. The existence of a valid reason to believe must be established as a fact, by the revenue, before a valid reassessment proceeding may arise. Recording of a "reason to believe" is a conscious act by the assessing authority. It is the result of an application of mind made by the assessing officer to all relevant material before him. Unless he first initiates this exercise and consequently records his "reason to believe" that any part of turnover of an assessee has escaped assessment to tax, the consequential exercise of reassessment would remain without jurisdiction. The material and reasons arising therefrom create the objective skeleton on which the subjective flesh of belief may stand - even if the conclusion ultimately drawn by the Tribunal, may appear to be correct in the given facts that the commodity was taxable not as computer hardware but as other electronic goods, that reasoning would not validate and otherwise invalid reassessment proceeding. It is found that neither there exists any material nor any valid "reason to believe" was recorded by the assessing officer as to any part of the turnover of MFD having escaped assessment from tax - there was a jurisdictional error on part of the assessing officer in initiating the assessment proceeding. The question of law is answered in the negative i.e. in favour of the assessee and against the revenue - Revision allowed.
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