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M/s Rajiv Metals Versus Addl. Commissioner Trade Tax, And Another, State of U.P. And Others

2015 (8) TMI 1185 - ALLAHABAD HIGH COURT

Re-assessment of turnover escaping assessment – Production as per SIB standards – Books of accounts of petitioner were duly audited and assessment order was passed –Thereafter, AO seek permission of Additional Commissioner under Section 21(2) of U.P. Trade Tax Act to make reassessment on reason of report received from SIB authorities after assessment order, which was permitted and subsequent notices were issued to petitioner – Held that:- As per section 21 reassessment proceedings can be initiat .....

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assessing authority is patently perverse and against figures shown in assessment order and/or balance sheet – Balance sheet indicates that out of total brass scrap, finished goods have been produced and that there was only melting loss of approximately 4% that is to say, there was production of 96% – Standards indicated in confidential report of SIB authorities that there should be production figure of 94% – Very basis for making ground for reassessment and for having reason to believe that som .....

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is being taken into consideration. The petitioner is engaged in the business of purchase and sale of non-pheros metals and is also engaged in the business of manufacturing brass ingots. For the aforesaid purpose of manufacturing brass ingots, the petitioner was importing brass scraps after paying customs duty for the assessment year 2000-01 under U.P. Trade Tax Act. The books of accounts were duly audited and produced before the assessing authority wherein the sales and purchases were checked, v .....

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n the basis of a report received from SIB authorities after the assessment order was passed. In the proposal letter, it was indicated that the SIB authorities had indicated that the production of brass ingots disclosed by the petitioner was less then the production of other manufacturers, and that, as per the general norms, the production should be 94% from the brass scrap. The proposal indicated that less production was shown by the petitioner to the tune of 54% and, therefore, there was a huge .....

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sment. The petitioner, being aggrieved by the order of the Additional Commissioner granting permission as well as the consequential notice issued by the Assessing Officer, has filed the present writ petition for its quashing. We have heard Sri N.R. Kumar, the learned counsel along with Sri Vishwajit, the learned counsel for the petitioner and Sri C.B. Tripathi, the learned Special Counsel for the State. The learned counsel for the petitioner submitted that the foundational requirement for initia .....

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ned. The learned counsel, in the alternative submitted that, in any case, the production of brass ingots and brass slag was more than 94% and that the assessing authority had misread the production figures and the figures of melting loss from the books of accounts or from the audited balance sheet to come to a conclusion that the production figures were less than 94%. It was further contended that the objections of the petitioner was not considered wherein the petitioner had explained that the p .....

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complete details of the raw materials and books of accounts were furnished, which were duly verified and that the assessing authority had passed the assessment order after examining the books of accounts. The learned counsel submitted that there was no material on record to suggest that there was escaped assessment and, therefore, the approval granted by the Additional Commissioner to reinitiate assessment proceedings was wholly unjustified and was liable to be quashed since such reassessment p .....

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tified. Having heard the learned counsel for the parties, the principle of law for reinitiating proceedings under Section 21 of the Act is well settled. Reassessment proceedings can be initiated only on the basis of the material on which a belief can be formed that some turnover has escaped assessment. The question, whether the assessing officer had reasons to believe is a question of jurisdiction, which can be considered and investigated by a Court under Article 226 of the Constitution of India .....

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g officer is a condition precedent. Without such formation, the assessing officer will have no jurisdiction to initiate proceedings under Section 21 of the Act. The aforesaid view was also held by a Division Bench of this Court after considering various judgements of the Supreme Court in M/s S. K. Traders, Modi Nagar, Ghaziabad vs. Additional Commissioner, Grade-I, Trade Tax, Zone Ghaziabad and another, 2008 UPTC 392. Similar view was reiterated by another Division Bench in Anand Prakash Agarwal .....

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d Gate Hathras vs. The Additional Commissioner Grade-I, Commercial Tax , Aligarh Zone, Aligarh and another, decided on 15.3.2014, in Writ Petition No.1045 of 2009, the Division Bench of this Court, after analysing various decisions of the Supreme Court, held- "On a plain and simple reading of Section 21, it is crystal clear that where a dealer has been assessed to tax at lower, then, it is a case of escape assessment. Rider is that such Assessing Authority should have reason to believe that .....

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from assessment in a particular year. To put it differently, the Assessing Authority must form opinion objectionably on reasonable ground that the turnover has escaped assessment." In Commissioner of Sales Tax vs. Bhagwan Industries (P) Ltd. (1973)31 STC 293 (SC), it has been held as follows: "The words "reason to believe" in s. 21 of the U.P. Sales Tax Act convey that there must be some rational basis for the assessing authority to form the believe that the whole or any par .....

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iation of proceedings under the above 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 the section. Whether the ground are adequate or not is not a matter which would be gone into by the High Court or the Supreme Court, for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. What can be challe .....

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assessment. Such reason or reasonable ground to believe that the whole or any part of the turnover had escaped assessment must be germane to the formation of the believe regarding escaped assessment. Such reasons or grounds must have a nexus with the formation of the belief. The approach has to be practical and not pedantic. In the light of the aforesaid proposition of law and upon perusal of the reasons to believe, which is depicted in the proposal letter of the Assessing Officer. We have no he .....

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4%, whereas the petitioner has indicated lesser production. According to the assessing authority, production of brass ingots was around 54%. The formation of belief was based on the fact that total purchase of raw material i.e., brass scrap was 1,22,252 kgs. and that only 65,989 kgs. of brass ingots were manufactured and that there was a melting loss of 58,363 kgs. of scrap. Such high percentage of melting loss indicates lesser production leading to believe that some turnover had escaped assessm .....

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ence on the record. We are of the opinion that the assessing authority has wrongly arrived at the figure of 58,363 kgs., and has wrongly included the production of brass slag, steel and iron brass mix as melting loss. These are not melting loss but are finished goods shown by the petitioner and which has been considered in the assessment proceedings, inasmuch as these goods known as brass slag, steel and iron brass mix have been sold and such sale has been assessed in the assessment order. The b .....

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