2009 (8) TMI 1230 - HC - VAT and Sales Tax

Court partially allows writ petitions quashing 1999-2000 reassessment notices, emphasizes independent authority under U.P. Act

M/s Jagan Nath Dudadher Shah Versus State of U.P. and others and M/s Khaitan Oil Traders Versus State of U.P. and Others

M/s Jagan Nath Dudadher Shah Versus State of U.P. and others and M/s Khaitan Oil Traders Versus State of U.P. and Others - TMI Issues Involved:1. Quashing of the notice dated 24-2-2006 for the assessment year 1999-2000 (U.P./Central).2. Restraining the respondent from proceeding with reassessment under section 21 of the U.P. Trade Tax Act for the assessment year 1999-2000 (U.P./Central).Summary:Issue 1: Quashing of the Notice Dated 24-2-2006The petitioners, registered dealers under the U.P. Trade Tax Act and CST Act, sought to quash the notice dated 24-2-2006 for the assessment year 1999-2000. They disclosed interstate sales against Form-C, which were initially accepted by the assessing authority. However, an investigation in 2004 revealed that several Form-C submitted by the petitioners were unverifiable and allegedly fictitious. Consequently, the respondent initiated proceedings u/s 21 of the Act, issuing a show cause notice to the petitioners. The petitioners contended that their books of account and statutory forms were scrutinized and accepted during the original assessment, and there was no material to believe that any turnover had escaped assessment. The court found that the proceedings u/s 21 of the Act were justified as the investigation revealed fraudulent use of Form-C, leading to a significant evasion of tax. The court upheld the notices for reassessment under the CST Act but quashed the notices for reassessment under the U.P. Act due to a lack of material evidence.Issue 2: Restraining the Respondent from Proceeding with ReassessmentThe petitioners argued that the reassessment proceedings u/s 21 of the U.P. Trade Tax Act were initiated without sufficient grounds and that the onus was on the department to prove that the exemption allowed was wrong. The respondents contended that the notices contained sufficient information and relevant particulars for initiating proceedings u/s 21 of the Act. The court held that the existence of reasons to believe, rather than the sufficiency of those reasons, was the key consideration. The court found that there were reasonable grounds for the assessing authority to believe that turnover had escaped assessment, justifying the initiation of proceedings u/s 21 of the Act. However, the court quashed the notices for reassessment under the U.P. Act due to a lack of material evidence but upheld the notices under the CST Act.Conclusion:The writ petitions were partly allowed. The notices for reassessment dated 24-2-2006 issued by respondent no.3 for the assessment year 1999-2000 with regard to U.P. were quashed, while the notices issued for reassessment under the CST Act were upheld. The court clarified that the respondents should not be influenced by the observations made in the judgment and should independently exercise their authority to pass appropriate orders u/s 21 of the U.P. Act in accordance with the law.