TMI Blog2015 (1) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... re exists a contract between the petitioner and the State Government, therefore, it is presumed that it is a works contract - On such presumption, notices under Section 21(2) of the Act cannot be issued nor can authorization be granted for reassessment. The contract clearly indicates that it relates to printing and supply of printed material and is not a works contract - works contract is normally done on the basis of specification of printing given by the buyer, which in the instant case is lacking - there is nothing on record to indicate that the petitioner is executing the printing of the books as a works contract for a buyer - the foundational requirement of sub-section (1) of Section 21 of the Act for reopening the assessment is lacking - The reason to believe that income had escaped assessment is not based on any tangible material and the reasons to believe that has been formed that some income had escaped assessment is not based on any relevant material nor there is a live link between the formation of the belief and the material available before the authority - in the absence of a vital link having not being established between the reasons and the evidence before the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the petitioner had purchased ink from outside the State of Uttar Pradesh amounting to ₹ 6,23,096/- for the purpose of publication of the books and, therefore, such purchase of ink was used for the purpose of execution of a works contract, which was liable to tax under Section 3F of the Act. The petitioner submitted his reply to the notice specifically contending that he is not involved in the execution of any works contract but is involved only in the publishing and sale of books for which purpose ink was purchased as a raw material. Inspite of giving a specific reply, respondent no.2 passed an order dated 7th March, 2008 authorizing the Assessing Officer to make reassessment for the assessment year 2003-04 and 2004-05. The petitioner, being aggrieved by the order dated 7th March, 2008 filed Writ Petition No.1222 of 2009, which was allowed in part by judgment dated 8th May, 2009. The writ Court held that the Additional Commissioner had neither given any reasons nor dealt with the objections raised by the petitioner and, consequently, in view of the decision laid down in case of M/s S.K. Traders Vs. Additional Commissioner, Ghaziabad, 2008 UPTC 392, the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Tripathi, the learned Special Counsel appearing for the State contended that assessment proceedings can be reopened if one finds that there was a case of under assessment or escaped assessment or that there was sufficient reasons to believe that the tax was not assessed in accordance with law. In the instant case, the learned counsel for the State submitted that upon inquiry it was found that the petitioner had purchased ink for the purpose of printing, which by itself was sufficient to indicate that the petitioner was engaged in a works contract, which was exigible to trade tax under Section 3F of the Act. Since this essential fact had escaped in the assessment order, notice under Section 21 of the Act was rightly issued. The learned counsel submitted that respondent no.2 had validly issued the authorization order contending that in view of the conditions mentioned in the agreement executed between the petitioner and the State Government, it was clear that the petitioner had concealed material facts as he was engaged in the execution of a works contract and, was therefore, liable for reassessment. The learned counsel submitted that in view of the amended definition of work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional Income Tax Officer, (1967) 63 ITR 638 (SC), Madhya Pradesh Industries Ltd. v. Income Tax Officer, (1970) 77 ITR 268 (SC); Sowdagar Ahmed Khan v. Income Tax Officer, (1968) 70 ITR 79 (SC), Income Tax Officer v. Lakhmani Mewal Das, (1976) 103 ITR 437 (SC); Income Tax Officer v. Nawab Mir Barkat Ali Khan Bahadur, (1974) 97 ITR 239 (SC); Commissioner of Sales Tax v. Bhagwan Industries (P) Ltd., (1973) 31 STC 293 (SC) and State of Punjab v. Balbir Singh (1994) 3 SCC 2999. The formation of the required opinion and belief by the Assessing Officer is a condition precedent. Without such formation, he will not have jurisdiction to initiate proceedings under Section 147. The fulfillment of this condition is not a mere formality but it is mandatory. The failure to fulfill that condition would vitiate the entire proceedings as held by the Apex Court in the case of Johrilal v. Commissioner of Income Tax, (1973) 88 ITR 439 (SC) and Sheo Nath Singh v. Appellate Assistant Commissioner, (1971) 82 ITR 147 (SC) . The reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of belief. Rational connection postulates that there must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. From the aforesaid, it is clear that the foundational requirement of sub-section (1) of Section 21 of the Act for reopening the assessment is, that there must be a reason to believe that income had escaped assessment and such reason to believe must be formed on some tangible material. The reason for the formation of the belief must have a rational connection, which is based on relevant material. The rational connection postulates that there must be a direct nexus or a live link between the material coming to the notice of the authority and the formation of his belief that there had been an escapement of income of the assessee from assessment in a particular year. If there is no rational or intelligible nexus between the reasons and the belief, the conclusion would be inescapable that the Assessing Officer could not have reasons to believe and, consequently, the notice would be liable to be held as invalid as held by the Supreme Court in the case of Ganga Saran Sons P. Ltd. Vs. Income Tax Officer, (1981) 130 ITR 1 (SC). In the light of the aforesaid, the show cause notice initially issued to the petitioner for invoking Section 21 of the Act indicates one of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The contract clearly indicates that it relates to printing and supply of printed material and is not a works contract. Works contract is normally done on the basis of specification of printing given by the buyer, which in the instant case is lacking. There is nothing on record to indicate that the petitioner is executing the printing of the books as a works contract for a buyer. In the light of the aforesaid, we are of the opinion that the foundational requirement of sub-section (1) of Section 21 of the Act for reopening the assessment is lacking. The reason to believe that income had escaped assessment is not based on any tangible material and the reasons to believe that has been formed that some income had escaped assessment is not based on any relevant material nor there is a live link between the formation of the belief and the material available before the authority. In the absence of a vital link having not being established between the reasons and the evidence before the authority, we are of the opinion that the reason to believe for reopening the assessment was not given in good faith but was based on extraneous or irrelevant consideration. The reasons recorded is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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