TMI Blog2014 (5) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd., Lucknow [1972 (10) TMI 90 - SUPREME COURT OF INDIA] the relevant consideration at the stage of issue of notice is whether there is some relevant material giving rise to prima facie inference that some turnover has escaped assessment - Whether that material is sufficient for making assessment or re-assessment u/s 21 would be gone into after notice is issued to the dealer and he has been heard in the matter or given an opportunity for that purpose. Effect of Repeal of U.P. Trade Tax Act on proceedings – Held that:- Learned counsel for Assessee in all fairness did not pursue the said argument when it was pointed out by learned Addl. Chief Standing Counsel that the issue stands settled against the petitioner by a Division Bench decision of this Court based on Supreme Court's decision – Therefore, there is relevant material on record to form a honest belief that the turnover of the petitioner has escaped taxation so as to justify the initiation of proceedings u/s 21 – There is no illegality or infirmity in the impugned order granting permission to the Assessing Authority to initiate re-assessment proceedings - The writ petition is dismissed – Decided against assessee. - C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner submits that for initiation of proceedings under Section 21 of the Act, formation of reason to believe by the Assessing Authority is mandatory. Elaborating the argument, he submits that the Assessing Authority in the present case has acted merely on the information furnished by the Deputy Accountant General, U.P. The said information is not germane and it is not possible thereupon to form a belief that turnover of the petitioner has escaped assessment. It was also contended that it is not a case of escapement of turnover as the explanation given by the petitioner has been accepted ultimately by the Central Excise Department. A distinction between reason to believe and reason to suspect was sought to be drawn by him. Reliance was placed on certain precedents which will be considered at appropriate stage. In reply, Shri S.P. Kesharwani, learned Additional Chief Standing Counsel submits that by the impugned order granting permission, the rights of the petitioner is not affected at all. The order granting permission to reassess is in the nature of an administrative order. The information is sufficient to form a belief that the turnover has escaped assessment. The said inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ''the Tribunal') by the Central Excise Department and the cross objection was filed by the petitioner. The Tribunal dismissed the appeal of the Central Excise Department but reduced the penalty from ₹ 1,12,246/- to ₹ 25,000/- vide order dated 27th January, 2011, Annexure-4 to the writ petition. At the very outset, it may be stated that the present writ petition as mentioned herein above is directed against the order passed under the proviso to Section 21(2) of the Act authorizing the Assessing Officer to initiate reassessment proceedings. The Assessing Officer armed with the authorization, has issued reassessment notice dated 1st March, 2012. At that stage, the present writ petition has been filed. The main thrust of the petitioner's argument is that there is no material to form reason to believe that the whole or any part of the turnover of the petitioner has escaped assessment to tax. In this regard, strong reliance was place on para-11 of the judgment of the Apex Court in the case of The Commissioner of Sales Tax, U.P. versus M/s Bhagwan Industries (P) Ltd., Lucknow (1973) 3 SCCC 265, wherein the import of phrase reason to believe has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt 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 assessment. 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. The fact that the words definite information which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in section 147 of the Act of 1961 would not lead to the conclusion that action cannot be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gue 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 Hon'ble Supreme Court while dealing with the provisions of Section 21 of the U.P. Trade Tax Act in Commissioner of Sales Tax vs. Bhagwan Industries (P) Ltd. (1973) 31 S.T.C. 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 extraneous character, the same would not warrant initiation of proceedings under this section. If however, the grounds are relevant and have a nexus with the formation of belief regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under this Section. It may be placed on record that the department also placed reliance upon the aforesaid para-11 of M/s Bhagwan Industries (P) Ltd. (supra) as also paras-12 13 thereof. The proposition of law as culled out from the above decisions is that the words reason to believe show that there must be some rational basis for the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax, New Delhi (1979) 4 SCC 248, para-13 in particular, a case under Section 147(b) of the Income Tax Act. We see hardly its any application to the present case. There the Apex Court was called upon to interpret the word information as had occurred in Section 147(b) of the Income Tax Act (as it then stood). In that connection, the Apex Court held that that part alone of the note of an audit party which mentions the law which escaped the notice of the Income Tax Officer constitutes information within the meaning of Section 147(b); the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the Income Tax Officer. Suffice it to say that in Section 21 of the Act, the word information has not been used. The only phrase mentioned therein is that reason to believe . This being so, the aforesaid decision is not of any help to the petitioner as it was rendered in different factual and legal matrix. In any view of the matter, it is too much to say that on the information with regard to excess stock of raw-material and finished goods a belief that the turnover has escaped assessment can ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
