TMI Blog2020 (6) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... ated on the basis of a change of opinion of the Revenue Authorities, this must first satisfy the jurisprudence foundation contained in sub-section (1) of Section 29 of the Act, which is that the Authority must have reasons to believe , that such an reassessment should be done. This can only be done when he gives a clear cut finding and reasons as to why reassessment is being done. If he has reason to believe then he can change his opinion. But reasons must come first. There is no rebuttal of the petitioner s claim at any level that the product which he is selling is only a part of telecommunication system and although it is a cooling fan, it cannot be used in any other way but for cooling a telecommunication system. It is hence a part of telecommunication system, though independently it may still be classified for other purposes as an electric good - The provision which the petitioner relies upon is Sl. No. 3 of Schedule II (B) of the Uttarakhand Value Added Tax Act, 2005, which relates to a telecommunication system and then it gives a break up of the same and finally adds and parts thereof . Being a part of a telecommunication system an instrument cooling fan has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry 1. . 2. . 3. All equipments for communications such as, Private Branch Exchange (P.B.X.) and Electronic Private Automatic Branch Exchange (E.P.A.B.X.) teleprinters wireless equipments and parts thereof 4.5 % Schedule-II(B)-3 (emphasis provided) 4. Sub-section 2 (b) (i) (d) of Section 4 of the VAT Act provides that in respect of all the goods which have not been mentioned in the Schedules, the rate of tax would be 13.5%. 5. There are two questions before this Court. One as to under which category the petitioner s goods in question, which is an Instrument Cooling Fan , is to be taxed, more particularly whether it has to be taxed under the heading Schedule-II(B)-3 taking it to be a part of larger equipment for communication, or under the residuary clause, taking it to be an electrical equipment. The second and the much larger question before this Court is as to the justification of the reassessment proceedings by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time within three years and nine months ending on 31st December after the expiry of assessment year for which assessment is to be made, provided that notice under this section has been served within a period of three years and six months ending on 30th September after the expiry of the assessment year for which assessment is to be made. (4) 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, he may authorise the Assessing Authority in that behalf, and then such assessment or reassessment may be made after the expiration of six years from the end of such assessment year, notwithstanding that such assessment or reassessment may involve a change of opinion. 7. The bare perusal of the aforesaid provision shows that Assessing Officer can initiate reassessment proceedings if he has reason to believe that the whole or any part of turnover of the dealer in respect of any tax period has (a) escaped assessment or (b) been under assessed or (c) been assessed at a rate lower than the rate at which it is assessable or (d) been wrongly allowed any exemption or deduction therefrom or (e) bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g order. 11. The case of the petitioner was that it was merely a change of opinion which is not sufficient for reassessment and therefore reasons have to be assigned as to why reassessment is being done. In view thereof, this Court had directed that in case the petitioner moves a representation within a period of three weeks, the authority concerned was directed to decide the representation of the petitioner by passing a speaking order 12. The Assessing Authority had therefore to give reasons as to why reassessment proceedings are being initiated. All the same, vide order dated 25.07.2018 reassessment has been justified by assigning the same reasons as given earlier which is that instrument cooling fan , was considered as a part of telecommunication equipment, as that is how it was presented by the assessee, but after further examination it has been found that the excise code given to the petitioner was 84145990, which is relating to electrical goods and therefore tax has to be charged under the residuary clause. Apart from this, no reasons have been assigned. These are the same reasons as were there earlier, nothing has been elaborated. 13. Learned Senior Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s open to challenge in a Court of law as held in S. Narayanappa v. Commissioner of Income Tax, (1967) 63 I.T.R. 219 (SC); Kantamani Venkata Narayana and Sons v. Additional Income Tax Officer, (1967) 63 I.T.R. 638 (SC); Madhya Pradesh Industries Ltd. v. Income Tax Officer, (1970) 77 I.T.R. 268 (SC); Sowdagar Ahmed Khan v. Income Tax Officer, (1968) 70 I.T.R. 79 (SC), Income Tax Officer v. Lakhmani Mewal Das, (1976) 103 I.T.R. 437 (SC); Income Tax Officer v. Nawab Mir Barkat Ali Khan Bahadur, (1974) 97 I.T.R. 239 (SC); Commissioner of Sales Tax v. Bhagwan Industries (P) Ltd., (1973) 31 S.T.C. 293 (SC) and State of Punjab v. Balvir Singh, (1994) S.C.C. 2999. 17. In other words, it is only when the Assessing Officer forms a definite opinion that condition exists for reassessment that it will have a jurisdiction to proceed under Section 147/148 of the Income Tax Act for reassessment and the failure to fulfill this condition would vitiate the entire proceeding, as held by the Hon ble Apex Court in the case of Johri Lal (H.U.F.), Agra v. the Commissioner of Income Tax reported in (1973) 88 I.T.R. 439 (SC). 18. As to the reasons to be recorded for opening reassessment proceedings, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to make a return of his income or to disclose fully and truly all material facts necessary for his assessment. 21. In paragraph no. 28 of the judgment, the Hon ble Apex Court has said as under: 28. This Court has consistently held that such material on which the assessing authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by the assessing authority in pursuance of such belief. In case of absence of such material, this Court in clear terms has held the action taken by assessing authority on such reason to believe as arbitrary and bad in law. In case of the same material being present before the assessing authority during both, the assessment proceedings and the issuance of notice for reassessment proceedings, it cannot be said by the assessing authority that reason to believe for initiating reassessment is an error discovered in the earlier view taken by it during original assessment proceedings. (See DCM v. State of Rajasthan [1980] 4 SCC 71. 22. Learned counsel for the State Mr. S.R Joshi while rebutting the arguments of the petitioner would submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in para 30:- 30. In case of there being a change of opinion, there must necessarily be a nexus that requires to be established between the change of opinion and the material present before the assessing authority. Discovery of an inadvertent mistake or non- application of mind during assessment would not be a justified ground to reinitiate proceedings under section 21(1) of the Act on the basis of change in subjective opinion (Commissioner of Income-tax v. Dinesh Chandra H. Shah (1972) 3 SCC 231 and Income-tax Officer v. Nawab Mir Barkat Ali Khan Bahadur (1975) 4 SCC 360. 26. The Statute here provides the rate of tax for the petitioner which at the relevant time was 4.5% as the goods in question according to the petitioner were part of the telecommunication system and he was charged for that for the assessment year 2010-2011. Now the reassessment proceedings have been opened up beyond a period of three years without assigning any reasons on the part of the Revenue Authorities, which may justify the reassessment proceedings. They are now taxing the goods on the basis of residuary clause, which is chargeable at the rate of 13.5%, for which no justifiable reason whatsoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s impugned before this Court, the Revenue has not dealt with this aspect as to why it is charging the petitioner at the rate of 13.5%, which is for the goods in the residuary clause, when there is a specific case of the petitioner that the goods in question manufactured and designed are to be sold only as a part of the telecommunication equipment. The only reasons assigned by the Revenue for charging this good under the residuary clause is that since in its invoice the excise number which is given pertains to electrical goods, it will be charged as an electrical good. 33. This is, however, not a sufficient reason as already held. In the present writ petition, the petitioner in paragraph no. 14 of the writ petition has stated that there is no other use of the goods supplied by the petitioner except as part of telecommunication equipment. Paragraph 14 of the writ petition reads as under:- 14. That the petitioner immediately filed its reply on 27/02/2017 to Addl. Commissioner Commercial Tax, where he requested to give personal hearing to explain about the fact. The petitioner also submitted that, the petitioner has closed its business at Rudrapur and intimation regarding closer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder one of the Schedules given in the fiscal law, where the rate of tax is to be determined, then it should not be relegated to the residuary clause. In this case the goods in question is categorically a part of telecommunication equipment and therefore it could have been charged only under entry no. 3 of Schedule II and not under the residuary clause. 40. An instrument cooling fan , strictly speaking may not be a telecommunication equipment in itself but it is definitely a part of it ( parts thereof ). Therefore, the instrument cooling fan , has a claim to be classified under an enumerated item in the taxing statute and not to be relegated to the residuary clause. 41. In Dunlop India Ltd. v. Union of India others reported in (1976) 2 SCC 241, the Hon ble Apex Court has said as under:- When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause. The question of competition between two rival classifications will, however, stand on a different footing. 42. This decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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