Court quashes reassessment order lacking reasons, grants relief under Article 14

The court held that the reassessment order issued by the Additional Commissioner lacked sufficient reasons and detailed analysis, violating the petitioner's rights under Article 14 of the Constitution. As a result, the court allowed the writ petition, quashing the impugned order and granting consequential benefits to the petitioner. The respondents were permitted to conduct a fresh assessment with a proper opportunity for a hearing. No costs were awarded in the matter.

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Issues Involved:
1. Imposition of tax on rice bran, rice polish, and kinkee.
2. Reassessment under Section 21(2) of the U.P. Trade Tax Act, 1948.

Detailed Analysis:

1. Imposition of Tax on Rice Bran, Rice Polish, and Kinkee
The petitioner, a registered dealer under the U.P. Trade Tax Act, 1948, engaged in the purchase of paddy under the price support scheme and supplied it to rice millers for processing. According to the agreement, the millers were allowed to retain the by-products such as rice bran, rice polish, and kinkee. The petitioner contended that since these by-products were not taken back from the millers, no tax could be imposed on them.

The assessing officer originally affirmed the petitioner's tax payments, but the Additional Commissioner later issued a notice for reassessment, arguing that tax should be imposed on these by-products because the petitioner did not provide form 3 Ga(1) to the millers. The petitioner responded, reiterating that the by-products were retained by the millers as per the agreement. The Additional Commissioner, however, did not provide a detailed reason for why the original assessment was considered faulty or why the petitioner was liable for the tax on the by-products.

2. Reassessment under Section 21(2) of the U.P. Trade Tax Act, 1948
The petitioner argued that the power conferred by sub-section (2) of section 21 could not be invoked on the same facts and circumstances that were already considered by the assessing authority. Section 21 allows reassessment if the assessing authority has "reason to believe" that part of the turnover has escaped assessment. The term "reason to believe" requires the authority to have a good faith belief based on material evidence, not merely subjective satisfaction.

The court referenced several Supreme Court judgments to emphasize that the reasons for the belief must be recorded in writing and must be based on material evidence. The Additional Commissioner failed to record his satisfaction or provide a detailed analysis of the petitioner's reply and other evidence on record. The court noted that the Additional Commissioner did not explain how the original assessment was flawed or why the petitioner was liable for the escaped tax.

The court highlighted that Article 14 of the Constitution mandates that reasons must be assigned by any administrative or quasi-judicial authority affecting civil rights. The provision in section 21 of the Trade Tax Act requires the competent authority to discuss the material on record and provide reasons for reassessment.

Conclusion
The court concluded that the impugned order by the Additional Commissioner did not survive due to the lack of recorded reasons and detailed analysis. The writ petition was allowed, and a writ of certiorari was issued quashing the impugned order dated November 25, 2009, with consequential benefits to the petitioner. However, the respondents were given the liberty to proceed afresh and pass a new order after providing a due opportunity for a hearing to the parties involved. The writ petition was allowed with no order as to costs.

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