1999 (2) TMI 682 - HC - VAT and Sales Tax

Change of opinion not valid for reassessment: Court cites Trade Tax Act, emphasizes Circular

The court held that reassessment solely based on a change of opinion is impermissible under Section 21 of the U. P. Trade Tax Act, citing precedent. It ... - Issues:1. Validity of reassessment proceedings under Section 21 of the U. P. Trade Tax Act, 1948.2. Compliance with principles of natural justice in reassessment proceedings.3. Binding nature of circulars issued by the Department on tax authorities.Analysis:1. The petitioner, engaged in the sale of petroleum products, challenged a reassessment order under the U. P. Trade Tax Act for the Assessment Year 1986-87. The petitioner contended that the reassessment was based on a mere change of opinion, which is impermissible under Section 21. The Court cited the case law of C.I.T. v. Bhanji Lavji to emphasize that reassessment cannot be solely on the basis of a change of opinion. Additionally, the Court held that the Circular issued on 17th July, 1992, requiring a hearing for actions based on a change of opinion, is binding on assessing authorities. The Court's decision was influenced by the Supreme Court's ruling in Ranadey Micronutrients v. Collector of Central Excise, emphasizing the binding nature of departmental circulars on tax authorities.2. The Court further addressed the issue of compliance with principles of natural justice in reassessment proceedings. It noted that the assessing authority must provide a hearing to the assessee before passing any reassessment order, as mandated by the Circular issued on 17th July, 1992. The Court highlighted that the order of the Assistant Commissioner (Assessment) was passed hastily without affording the petitioner an opportunity to object against the notice dated 28th March, 1995. The Court found that the notice and subsequent order were issued without jurisdiction and in violation of natural justice principles. However, since an appeal had been filed by the assessee before the Tribunal, which remanded the matter back to the assessing authority, the Court did not make any decision on the petition.3. The Court also discussed the binding nature of departmental circulars on tax authorities. It emphasized that the assessing authority, being junior to the approving authority, cannot overlook the circulars issued by the Department. The Court highlighted that representations to the assessing authority would be futile if the higher authority's approval order is already in place. Therefore, the tax authorities were directed to pass a speaking order on the matter, allowing the petitioner to raise all relevant questions regarding the assumption of jurisdiction by the tax authorities and subsequent proceedings under Section 21.In conclusion, the Court disposed of the writ petition with observations on the validity of reassessment proceedings, compliance with natural justice principles, and the binding nature of departmental circulars on tax authorities.