TMI Blog2010 (4) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... , Trade Tax, Ghaziabad Zone, Ghaziabad and the notices issued under section 21(1) of the Act for the assessment year 2001-02 both under the U.P. Trade Tax Act and under the Central Sales Tax Act are quashed. - 1409 of 2007 - - - Dated:- 29-4-2010 - RAJES KUMAR AND PANKAJ MITHAL , JJ. By means of the present writ petition, the petitioner is challenging the orders dated August 18, 2007 passed by the Additional Commissioner, Grade I, Trade Tax, Ghaziabad Zone, Ghaziabad, by which he has granted approval under the proviso to section 21(2) of the U.P. Trade Tax Act, 1948 (hereinafter referred to as the Act ) to initiate the proceeding beyond the normal period and the notices dated August 30, 2007 issued in pursuance thereof under section 21(1) of the Act by the assessing authority for the assessment year 2001-02 both under the U.P. Trade Tax Act, 1948 and under the Central Sales Tax Act, 1956. The brief facts of the case are that the petitioner is a company incorporated under the Companies Act, 1956 and is carrying on the business of manufacture and sale of paints. The petitioner was getting the paints manufactured through Asian Paints India Limited (Kasna). The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of survey dated September 10, 2004 made at the premises of the Asian Paints India Limited, no material relating to the year under consideration was found. The alleged parchas were not related to the year under consideration. Before the Additional Commissioner Grade I, Trade Tax, Ghaziabad Zone, Ghaziabad, in reply to the show-cause notice it was specifically contended that there was no material for the year under consideration and, therefore, on the basis of survey dated September 10, 2004 the proceeding under section 21(1) of the Act cannot be initiated. But despite no material relating to the year under consideration, the approval has been granted and without any material for the year under consideration on the basis of which the belief of escaped assessment could be formed, the notices under section 21(1) of the Act were issued by the Deputy Commissioner (Assessment) 4, Trade Tax, Ghaziabad. The learned standing counsel submitted that the material available on record is the parchas found at the time of survey dated September 10, 2004 at the premises of the Asian Paints India Limited (Kasna). He submitted that the modus operandi adopted in the year 2004 has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be charged at the rate at which it would have been charged, had the turnover not escaped assessment, or full assessment as the case may be. Explanation I. Nothing in this sub-section shall be deemed to prevent the assessing authority from making an assessment or full assessment to the best of its judgment. Explanation II. For the purposes of this section and of section 22, 'assessing authority' means the officer or authority who passed the earlier assessment order, if any, and includes the officer or authority having jurisdiction for the time being to assess the dealer. Explanation III. Notwithstanding the issuance of notice under this sub-section, where an order of assessment or reassessment is in existence from before the issuance of such notice it shall continue to be effective as such, until varied by an order of assessment or reassessment made under this section in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrant the formation of the belief relating to escapement of income. 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 Prashad v. State of Haryana [1992] 6 JT 94 (SC), 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. It is settled principle of law that in a writ jurisdiction under article 226 of the Constitution of India, this court cannot look into the sufficiency of the material on the basis of which a belief has been formed and notice under section 21 of the Act has been issued. This court c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inescapable that the assessing officer could not have reason to belief. In such a case, the notice issued by him would be liable to be struck down as invalid as held in the case of Ganga Saran and Sons P. Ltd. v. Income-tax Officer [1981] 130 ITR 1 (SC). In the case of Indra Prastha Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal 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 farfetched, 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 of the U.P. Trade Tax Act in Commissioner of Sales Tax v. Bhagwan Industries (P) Ltd. [1973] 31 STC 293 in which it was held that reasonable grounds necessarily postulate that they must be germane to the formation of the belief regarding escaped assessment. If the grounds are of an extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith 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 out by one of us after reviewing a large number of decided cases, both by this court and by the Supreme Court, in Commissioner of Sales Tax, U.P. v. Madhu Chemical Works, Bareilly [1988] 71 STC 421 (All); [1988] UPTC 230. It was held that in a case where a particular point has been considered on merits, and a view is taken, it would not be a case of inadv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71] 82 ITR 367 (SC), 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 in the case of the Incometax Officer v. Nawab Mir Barkat Ali Khan Bahadur reported in [1974] 97 ITR 239 (SC); AIR 1975 SC 703, the same view has been taken. Having second thought on the same material does not warrant initiation of proceedings under section 147 of the Income-tax Act. In the case of Harbans Lal Malhotra v. Assistant ..... 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