2013 (3) TMI 425 - HC - VAT and Sales Tax

Court upholds reassessment order under U.P. Trade Tax Act, affirms validity of circular

S/S Gaya Deen Kailash Chand Versus State of UP. & Others

The court upheld the legality of the authorization order for reassessment under Section 21(2) of the U.P. Trade Tax Act, finding it justified due to the ... Reassessment - Adjustment of tax paid on purchase of paddy - it was contended that the authorities below was not justified in initiating the proceedings under Section 21 of the Act, even if there is an escapement of turnover. The authorities should have invoked jurisdiction under Section 10-B of U.P. Trade Tax Act i.e. revisional jurisdiction of the Act. The counsel of petitioner through the decision of [M/s Aryaverth Chawal Udyog & others versus State of U.P2008 (5) TMI 602 - ALLAHABAD HIGH COURT] submitted that the Commissioner of Trade Tax has exceeded in its jurisdiction. Held that:- It is a case where the Assessing Authority has wrongly allowed deduction of tax paid on purchase of paddy while computing the payment of sales tax liability of central sales tax. The assessment order would show that the Assessing Officer did not satisfactorily deal with the point whether such deductions are permissible or not within the meaning of Section 15(c) of the Central Sales Tax Act. Section 21(2) under which the permission has been granted for opening of the assessment, provides that permission can be granted even in the case where there is change of opinion. In M/s S.K. Traders, Modi Nagar, Ghaziabad versus Additional Commissioner Grade-I, Trade Tax, Zone Ghaziabad and another,[2007 (7) TMI 573 - ALLAHABAD HIGH COURT] it has been held that the change of opinion may arise even if some material has been brought on record after assessment has been completed or it may be because of result of lack of care or inadvertence on the part of the Assessing Officer. - Decided in favor of revenue. Issues Involved:1. Legality of the authorization order for reassessment under Section 21(2) of the U.P. Trade Tax Act.2. Validity of the circular issued by the Commissioner of Trade Tax.3. Justification for initiating reassessment proceedings under Section 21 instead of Section 10-B of the U.P. Trade Tax Act.4. Allegation of change of opinion by the Assessing Officer.Detailed Analysis:1. Legality of the Authorization Order for Reassessment:The petitioner challenged the authorization order dated 22.2.2008/25.2.2008, which granted permission for reassessment for the assessment year 2001-2002 under Section 21(2) of the U.P. Trade Tax Act. The petitioner argued that the permission was arbitrary and based on a change of opinion, which is not permissible under law. The court noted that the reassessment was initiated because the petitioner was not entitled to an adjustment of tax on inter-state sales of rice by an amount already paid on purchases of paddy under Section 15(c) of the Central Sales Tax Act. The court held that the reassessment was justified as the original assessment order did not apply the relevant statutory provision correctly.2. Validity of the Circular Issued by the Commissioner of Trade Tax:The petitioner contended that the circular issued by the Commissioner of Trade Tax interfered with the quasi-judicial function of the Assessing Authority. The court examined previous judgments, including M/s Aryaverth Chawal Udyog & others versus State of U.P & others, which upheld the validity of the circular. The court concluded that the circular merely provided the correct exposition of law and did not amount to interference in the quasi-judicial function. The circular was found to be in conformity with Section 15(c) of the Central Sales Tax Act.3. Justification for Initiating Reassessment Proceedings Under Section 21 Instead of Section 10-B:The petitioner argued that the authorities should have invoked jurisdiction under Section 10-B (revisional jurisdiction) instead of Section 21. The court noted that this argument was not set out in the writ petition and that the decision in M/s United Tractors, Gorakhpur was distinguishable. The court held that the initiation of reassessment proceedings under Section 21 was valid, as it dealt with the issue of escaped assessment due to a wrong adjustment of tax.4. Allegation of Change of Opinion by the Assessing Officer:The petitioner claimed that the reassessment notice was based on a change of opinion. The court highlighted that the original assessment order lacked discussion on the applicability of Section 15(c) of the Central Sales Tax Act. The reassessment was initiated due to the realization of this mistake. The court cited previous judgments, including Commissioner of Sales Tax versus Bhagwan Industries (P) Ltd., which stated that the reason to believe must have a rational connection with the material coming to the Assessing Authority's possession. The court concluded that the reassessment was not merely a change of opinion but a correction of an error, thereby making the reassessment notice valid.Conclusion:The court dismissed the writ petition, finding no merit in the arguments presented by the petitioner. The reassessment proceedings and the circular issued by the Commissioner of Trade Tax were upheld as valid. The court emphasized that the reassessment was necessary to correct the mistake in the original assessment order and ensure the correct application of the law.