TMI Blog2010 (4) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999-2000 and 2000-01 both under the U.P. Trade Tax Act and under the Central Sales Tax Act and consequential proceedings in pursuance thereof are quashed. - Civil Misc. Writ Petition No. 619 of 2006 - - - Dated:- 15-4-2010 - RAJES KUMAR AND PANKAJ MITHAL , JJ. The judgment of the court was delivered by RAJES KUMAR J. In the present writ petition, the petitioner seeks the following reliefs: (i) that a suitable writ, order or direction in the nature of mandamus or prohibition be issued restraining or prohibiting the respondent No. 3 from taking any reassessment proceedings under section 21 of the U.P. Trade Tax Act, 1948 for the assessment years 1999-2000 and 2000-01; (ii) that a suitable writ, order or direction in the nature of writ of certiorari be issued quashing the notices dated March 22, 2006 issued by the Deputy Commissioner (Assessment), Trade Tax, Rampur, respondent No. 3 for the assessment years 1999-2000 and 2000-01 (enclosed as annexures 14, 15, 16 and 17, respectively, to this writ petition); (iii) that a suitable writ, order or direction in the nature of certiorari be issued quashing the orders of permission dated March 21, 2006 passed by resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Zone, Moradabad for the approval under the proviso to section 21(2) of the Act to initiate the proceeding beyond the normal period of limitation for the assessment years 1999-2000 and 2000-01 both under the U.P. Trade Tax Act and under the Central Sales Tax Act. On the proposal of the assessing authority, the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad had issued the notices under section 21(2) of the Act to the petitioner for the assessment years 1999-2000 and 2000-01 both under the U.P. Trade Tax Act and under the Central Sales Tax Act to provide opportunity before granting approval. The petitioner filed reply and thereafter on a consideration of the reply and the proposal, the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad had granted the approval under the proviso to section 21(2) of the Act vide order dated March 21, 2006. Thereafter, the assessing authority issued notices under section 21 of the Act on March 22, 2006 for the assessment years 1999-2000 and 2000-01 both under the U.P. Trade Tax Act and under the Central Sales Tax Act. Under the U.P. Trade Tax Act for both the aforesaid years, the notices have been issued on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not the part of the turnover. He submitted that no case has been made out that the freight has not been separately charged. It is not the case of the Revenue that the sale was f.o.r. destination and, therefore, the decision of this court in the case of Modi Industries Limited v. Commissioner of Trade Tax [2000] UPTC 149 is not applicable to the present case which was relating to the cement controlled under the Cement Control Order and under the Cement Control Order the prices fixed were f. o. r. destination. He further submitted that the petitioner has not charged any amount towards advertisement charges and sale promotion which is apparent from the bills annexed along with the writ petition which has not been disputed. He submitted that the petitioner has incurred the expenditure towards advertisement and sale promotion on own account which is clear from the profit and loss account. In any view of the matter, no material has been brought on record to show that the petitioner has charged any amount from the customers towards advertisement and sale promotion and, therefore, the question of their inclusion in the turnover does not arise and the decision in the case of Modi Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the query being made that in the counter-affidavit, the date of information has not been given and it is not clear that when such information has been received, the learned standing counsel sought time on March 9, 2010 to produce the record. Sri S.P. Kesarwani, learned Additional Chief Standing Counsel has produced the assessment record for both years on March 15, 2010 and we have perused the same. We have considered the rival submissions of the parties and perused the record. Section 21(1) and (2) of the Act read as follows: 21. Assessment of tax on the turnover not assessed during the year. (1) If the assessing authority has reason to believe that the whole or any part of the turnover of the dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under-assessed or has been assessed to tax at the rate lower than that at which it is assessable under this Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary, assess or reassess the dealer or tax according to law: Provided that the tax shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such year. The proviso to section 21(2) of the Act provides that if the Commissioner on his own or on the basis of reasons recorded by the assessing authority, is satisfied that it is just and expedient so to do authorises the assessing authority to make the assessment or reassessment after the expiration of the period provided under section 21(2) of the Act. The Division Benches of this court in the case of S.K. Traders, Modinagar, Ghaziabad v. Additional Commissioner, Grade I, Trade Tax, Zone, Ghaziabad reported in [2009] 26 VST 601; [2008] UPTC 392 and Manaktala Chemicals Pvt. Limited v. State of U.P. reported in [2007] 5 VST 284; [2006] UPTC 1128 have held that before granting the approval under the proviso to section 21(2) of the Act the opportunity should be given to the assessee. We are of the view that under the proviso the Commissioner does not exercise the judicial power in strict sense. He is not suppose to adjudicate the issue. He has to satisfy on the basis of the reasons recorded by the assessing authority that it is just and expedient to authorise the assessing authority to make the assessment or reassessment beyond the period of limitation prescribed under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t onward freights have been charged separately in the bills and accordingly held that it would not be the part of the turnover. We have perused the assessment records. Some of the copies of the bills are available on record. The bills relating to the supply of Canteen Stores Department of Government of India are also available on record. This shows that while passing the original assessment orders, the bills relating to Canteen Stores Department of Government of India have also been examined. There is nothing in the bills to show that the sales were f.o.r. destination. In any view of the matter, the bills relating to the sales were duly examined during the course of the assessment proceedings and on a consideration that the outward freights were charged separately in the bills it has been held that they were not the part of the turnover. The learned standing counsel is not able to show from the record that after passing the assessment orders, any fresh material or any kind of information has been received to show that the sales were f.o.r. destination. In this view of the matter, it is apparent that the assessing authority on the basis of the same material which were in existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation of the belief, and should not be extraneous or irrelevant. The material should be relating to the particular year for which the assessment is sought to be reopened. It is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of income. A perusal of section 21(2) of the Act reveals that the proceedings can only be initiated if there is reason to believe that there is escaped assessment. The word reason to believe came up for consideration before the apex court and various High Courts in several decisions. The apex court held that the belief must be formed on the basis of the material, which has a nexus to the escaped turnover. In Joti Parshad v. State of Haryana [1992] 6 JT 94 the honourable Supreme Court while dealing with the meaning of expression reason to believe in section 26 of the Indian Penal Code held that the reason to believe is not the same as suspicion and a person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment yet at the same time we have to bear in mind that it is not any and every material, however, vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The question whether the assessing officer had reasons to believe is a question of jurisdiction, a vital thing, which can always be investigated by the court under article 226 of the Constitution as held in Daulatram Rawatmal v. Income-tax Officer [1960] 38 ITR 301 (Cal), Jamna Lal Kabra v. Income-tax Officer [1968] 69 ITR 461 (All), Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 (SC), C.M. Rajgharia v. Income-tax Officer [1975] 98 ITR 486 (Patna) and Madhya Pradesh Industries Ltd. v. Income-tax Officer [1965] 57 ITR 637 (SC). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of the thing concerned. In Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 the honourable Supreme Court held that the reasons for the formation of the belief contemplated by section 147(a) of the Income-tax Act, 1961, for the reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of this belief. The honourable Supreme Court further observed that though it is true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment yet at the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. This view was reiterated by the honourable Supreme Court while dealing with the provisions of section 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that year. The escapement envisaged by section 21 of the Act for the purposes of reassessment need not necessarily spring from a source extraneous to the original record. However, a second thought or a mere change of opinion, by the assessing authority on the same set of facts and the material on the record would not clothe the assessing authority with a valid jurisdiction. . . . We are not impressed by the argument that the instant case is a case of change of opinion. The change of opinion necessarily postulates that the assessing authority had an occasion to consider the material earlier, and on the same set of facts another opinion was sought to be formed. The question of change of opinion cannot arise where there has been no previous proceeding of assessment in respect of a turnover in dispute. As pointed out by the Calcutta High Court in Income-tax Officer v. Mahadeo Lal Tulsyan [1978] 111 ITR 25, a change of opinion by the assessing officer contemplates, formation of two different opinions or to make two different inferences at two stages on the same set of primary facts. The distinction between an inadvertent mistake or omission and change of opinion was pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent are fully and truly disclosed to the Income-tax Officer at the stage of the original assessment proceedings, he is not entitled, on a change of opinion, to commence proceedings for reassessment under section 34(1)(a). To the similar effect is also the decision in Commissioner of Income-tax v. Dinesh Chandra H. Shah reported in [1971] 82 ITR 367, wherein it is held that (at page 371 of ITR): . . . It appears that the Income-tax Officer clearly sought to justify the reopening of the assessment under section 34(1)(b) merely on the ground of change of opinion. It is well-settled by now, and Mr. Desai quite rightly does not dispute the proposition, that mere change of opinion could not be a valid ground for reopening the assessment under section 34(1)(b) of the Act. We would accordingly uphold the answer returned by the High Court on the short ground that the reassessment for the year in question was sought to be reopened for the reason that the successor of the Income-tax Officer who had made the original assessment had changed his opinion which did not furnish a justifiable reason for taking action under section 34(1)(b). While considering section 147 of the said Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the case, referred hereinabove, we are of the view that it is the case of change of opinion of the assessing officer on the same material which was in existence and considered at the time of original assessments. The proposals do not reveal any fresh material on the basis of which belief was formed that the claims had been wrongly allowed and the same are liable to tax. The orders under section 21(2) of the Act also do not reveal that there was any fresh material on the basis of which belief has been formed. In the facts and circumstances, we are of the view that the orders passed under section 21(2) of the Act are not sustainable and are liable to be set aside, inasmuch the notices under section 21 of the Act have been issued merely on account of change of opinion without there being any fresh material of escaped assessment. In the result, the writ petition is allowed. The notices dated March 22, 2006 issued by the Deputy Commissioner (Assessment), Trade Tax, Rampur under section 21 of the Act for the assessment years 1999-2000 and 2000-01 both under the U.P. Trade Tax Act and under the Central Sales Tax Act and consequential proceedings in pursuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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