2025 (10) TMI 606 - HC - VAT / Sales Tax

Reassessment under UP VAT Act (Section 29 read with Section 28(2)) valid for AY 2013-14; reopening despite change of opinion

The Commissioner, Commercial Tax, U.P. Versus M/s Gems Electronics.

HC set aside the Tribunal's decision and allowed the revision, holding that reassessment under the UP VAT Act (section 29 read with section 28(2)) for AY ... Assessment of tax of turnover escaped from assessment - initiation of assessment proceedings on mere change of opinion - HELD THAT:- Once an order of Additional Commissioner, Grade – 1, Commercial Tax, Kanpur Zone – II, Kanpur is on record, the finding of the Tribunal that there was no permission/sanction for reopening the assessment is perverse, without any basis and against the material on record. On this count, the impugned order cannot be sustained. Bare perusal of the section 29 of the UP VAT Act clearly shows that if the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under this Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary, assess or re-assess the dealer to tax according to law. It further provides that the tax shall be charged at the rate at which it would have been charged had the turnover not escaped assessment or full assessment as the case may be. Once the provisions of the Act empowers for making reassessment, which may involve change of opinion, the Tribunal was not justified in holding that the reassessment proceedings have been initiated, which involved change of opinion and set aside the assessment order. Thus, the impugned order cannot be sustained in the eyes of law. The impugned order for the Assessment Year 2013-14 under section 29, read with section 28(2) of the UP VAT Act is hereby set aside - Revision allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether reassessment under section 29 of the UP VAT Act can be validly initiated and completed where it 'may involve a change of opinion', particularly in light of section 29(7) which empowers reassessment within eight years. 2. Whether reassessment was vitiated by absence of permission/sanction from the competent authority (Commissioner/Additional Commissioner) and whether the Tribunal's finding that no such permission existed is sustainable on the material on record. 3. Whether decisions/jurisprudence relating to change of opinion under different statutory provisions (e.g., trade/sales tax provisions such as section 21(2)) are applicable to or control reassessment under section 29(7) of the UP VAT Act. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of reassessment under section 29(7) even if it involves change of opinion Legal framework: Section 29(1) empowers the assessing authority, on having reason to believe turnover has escaped assessment, to assess/re-assess after notice and inquiry; Explanation II defines 'assessing authority'; Explanation III preserves existing assessment until varied. Section 29(7) authorises reassessment within eight years where the Commissioner, on his own or on reasons recorded by the assessing authority, is satisfied it is just and expedient to authorise reassessment 'notwithstanding such assessment or re-assessment may involve a change of opinion' and contains a proviso that it shall not be necessary for the Commissioner to hear the dealer before authorising the assessing authority. Precedent treatment: The Tribunal relied on earlier judgments addressing reassessment/change of opinion under trade/sales tax provisions (section 21(2) or equivalent). The Court noted those authorities but distinguished them on statutory basis from section 29(7). Interpretation and reasoning: A plain reading of section 29(7) shows express statutory recognition that reassessment is permissible even if it involves a change of opinion, provided the Commissioner is satisfied and authorises the assessing authority within the eight-year window. The statutory proviso dispenses with the need for the Commissioner to hear the dealer prior to authorisation. Given this explicit legislative mandate, the Tribunal was not justified in treating change of opinion as a bar to reassessment under section 29(7). The Court emphasised that where the Act itself empowers reassessment despite change of opinion, prior authorities holding change of opinion fatal under different statutory schemes cannot displace the clear statutory provision here. Ratio vs. Obiter: Ratio - Section 29(7) permits reassessment notwithstanding change of opinion and does not require the Commissioner's hearing of the dealer before authorising reassessment. Distinguishing precedents on separate statutory provisions is part of the ratio to the extent they conflict with the express terms of section 29(7). Conclusions: Reassessment under section 29(7) is legally permissible even when it involves a change of opinion, and the Tribunal erred in setting aside reassessment on the ground that a change of opinion occurred. Issue 2: Existence and effect of permission/sanction from the competent authority for reopening assessment Legal framework: Section 29(7) requires authorisation by the Commissioner (on his own or on reasons recorded by the assessing authority) to enable reassessment within eight years; procedural steps include issuance of notice to the dealer and making such inquiry as considered necessary by the assessing authority (per section 29(1)). Precedent treatment: The Tribunal found there was no permission/sanction to reopen the completed assessment and relied on judgments to invalidate reassessment in absence of sanction. The Court examined the original records to test that factual/record-based finding. Interpretation and reasoning: The Court summoned and perused original assessment records and the Additional Commissioner's file. An order dated 13.05.2019 by the Additional Commissioner (Grade-1) authorising reassessment was found on record (also annexed in the revision). The Additional Commissioner's record showed relevant notices were issued prior to granting permission; the dealer did not file any reply nor attend on the date fixed for passing the permission order. Given the presence of the permission order on record, the Tribunal's factual finding that no sanction existed was perverse and against material on record. Consequently, the impugned order could not be sustained on that ground. Ratio vs. Obiter: Ratio - A reassessment authorised by the competent authority in accordance with section 29(7) cannot be invalidated on the basis that no permission existed where the record positively shows such permission was granted; a Tribunal's contrary factual finding must yield to documentary evidence. Conclusions: The record contained the requisite permission of the Additional Commissioner authorising reassessment; the Tribunal's contrary conclusion was perverse and the impugned order fails on that factual basis. Issue 3: Applicability of authorities on change of opinion from other statutory schemes to section 29(7) Legal framework: Statutory text controls; section 29(7) explicitly contemplates reassessment 'notwithstanding such assessment or re-assessment may involve a change of opinion.' Other statutes (e.g., trade/sales tax provisions) may contain different wording and judicial interpretations arising therefrom are therefore context-specific. Precedent treatment: The Tribunal relied upon decisions dealing with change of opinion under provisions different from section 29(7). The Court reviewed those authorities and held them inapplicable to the present statutory scheme. Interpretation and reasoning: Where a later or different statutory provision expressly permits reassessment despite change of opinion, judicial rulings construing differently worded provisions from other statutes cannot be mechanically applied. The Court distinguished authorities invoked by the Tribunal as being on trade/sales tax provisions (section 21(2) or equivalent) and therefore not controlling where section 29(7) expressly allows reassessment notwithstanding change of opinion. Ratio vs. Obiter: Ratio - Precedents under different statutory provisions that disallow reassessment on the ground of change of opinion are distinguishable and not applicable to the construction of section 29(7), which contains an express contrary mandate. Conclusions: The Tribunal erred in applying authorities from different statutory contexts to invalidate reassessment under section 29(7); such authorities are distinguishable and do not govern the present issue. Overall Conclusion and Disposition The impugned Tribunal order setting aside reassessment was set aside because (a) the statutory scheme in section 29(7) authorises reassessment even where it involves change of opinion, and (b) the record contained the requisite permission of the competent authority authorising reassessment, contrary to the Tribunal's finding. The revision was allowed and the questions of law were decided in favour of the State and against the assessee (i.e., the party resisting reassessment).