TaxTMI 
TaxTMI 
2010 (4) TMI 974
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....roceedings for imposition of tax on poly pouches for the assessment years 1997-98 to 2000-01 under the U.P. Trade Tax Act. (iv) To issue any other suitable writ, order or direction as this honourable court may deem fit and proper in the circumstances of the case in favour of the petitioner against the respondents. (v) To award the costs of the petition to the petitioner throughout." The petitioner is a public limited company incorporated under the Indian Companies Act, 1956 and is registered both under the U.P. Trade Tax Act, 1948 as well as under the Central Sales Tax Act, 1956. The petitioner has its sugar factory as well as its distillery at Shamli in the district of Muzaffar Nagar and has got another distillery known as Pilkhani Distillery in the district of Saharanpur. The petitioner is engaged in the manufacturing and selling of country liquor. The country liquor is exempted from tax under the notification issued in exercise of power under section 4 of the U.P. Trade Tax Act, 1948 (hereinafter referred to as, "the Act"). The petitioner had sold the country liquor in packed form, in bottles or poly pouches. Admittedly, the prices of country liquor and prices of bottle....
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....exempted from tax, in view of section 3AB of the Act. He submitted that for the assessment year 1997-98, the notice under section 21 of the Act has been vacated and, therefore, a fresh notice issued for the same cause is not justified. Learned counsel for the petitioner, however, fairly admitted that for the assessment years 1999-2000 and 2000-01 in the assessment orders, this issue has not been considered and examined and there is no finding in this regard. On these facts, he submitted that reopening of the proceedings on account of change of opinion is not justified. He further submitted that vide circular dated April 28, 2000 it has been clarified by the Government that even if the prices of country liquor and packing materials were separately charged, the value of packing material was not liable to tax. He submitted that the subsequent circular dated September 30, 2003 issued by the Commissioner of Trade Tax, U.P., Lucknow, which is annexure 12 to the writ petition, in which it has been opined that in case if the separate sales are made for the country liquor and poly pouches, etc., the benefit of section 3AB is not available; and the benefit of section 3AB is only available in....
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.... anxious consideration to the rival submissions. The question on the merit, namely, where the prices for the country liquor and packing materials are separately charged whether the provision of section 3AB applies or not is squarely covered by the Division Bench decision of this court in the case of Majhola Distillery & Chemical Works, Majhola, District Pilibhit v. State of U.P. Writ Petition No. 317 of 2004, decided on October 4, 2007 See [2010] 34 VST 292 (All) [App]. wherein it has been held that where the prices of the goods and the packing materials are separately charged, section 3AB does not apply and accordingly it has been held that if the prices for the country liquor and the packing materials are separately charged, the value of the packing materials would not be exempted under section 3AB of the Act. The Division Bench of this court has considered in details the decisions of the apex court in the case of Premier Breweries v. State of Kerala reported in [1998] 108 STC 598; [1998] 1 SCC 641, Associated Cement Companies Ltd. v. Government of Andhra Pradesh reported in [2006] 144 STC 342; [2006] 1 JT 107 (SC), Raj Sheel v. State of Andhra Pradesh reported in [1989] 74 ST....
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.... 21(1) and (2) of the Act reads as follows: "Section 21. Assessment of tax on the turnover not assessed during the year.-(1) If the assessing authority has reason to believe that the whole or any part of the turnover of dealer, for any assessment year or part thereof, has escaped assessment to tax or has been underassessed 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 reassess the dealer or tax according to law: Provided 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. Explanation I.-Nothing in this sub-section shall be deemed to prevent the assessing authority from making an assessment or full assessment to the best of its judgment. Explanation II.-For the purposes of this section and of section 22, 'assessing authority' means the officer or authority who passed the earlier assessment order, if any, and....
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....relevant. It must be in good faith and not in mere pretence, should have a rational connection and relevant bearing on the formation of the belief, and should not be extraneous or irrelevant. The material should be relating to the particular year for which the assessment is sought to be reopened. It is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of income. Perusal of section 21(2) of the Act reveals that the proceedings can only be initiated if there is reason to believe that there is escaped assessment. The word "reason to believe" came up for consideration before the apex court and various High Courts in several decisions. The apex court held that the belief must be formed on the basis of the material, which has a nexus to the escaped turnover. In Joti Parshad v. State of Haryana [1992] 6 JT 94 (SC) the honourable Supreme Court while dealing with the meaning of expression "reason to believe" in section 26 of the Indian Penal Code held that the reason to believe is not the same as suspicion and a person must have reason to believe if the circumstances a....
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....e Supreme Court further observed that though it is true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment yet at the same time we have to bear in mind that it is not any and every material, however, vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The question whether the assessing officer had reasons to believe is a question of jurisdiction, a vital thing, which can always be investigated by the court under article 226 of the Constitution as held in Daulatram Rawatmal v. Income-tax Officer [1960] 38 ITR 301 (Cal), Jamna Lal Kabra v. Income-tax Officer [1968] 69 ITR 461 (All), Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 (SC), C. M. Rajgharia v. Income-tax Officer [1975] 98 ITR 486 (Patna) and Madhya Pradesh Industries Ltd. v. Income-tax Officer [1965] 57 ITR 637 (SC). If there is no rational and intelligible nexus between the reasons and the belief, so t....
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....elieve if the circumstances are such that a reasonable man would, by probabale reasoning conclude or infer regarding the nature of the thing concerned. In Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437, the honourable Supreme Court held that the reasons for the formation of the belief contemplated by section 147(a) of the Incometax Act, 1961, for the reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of this belief. The honourable Supreme Court further observed that though it is true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment yet at the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee ....
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....ly and truly all material facts necessary for the assessment for that year, income chargeable to tax has escaped assessment for that year. The escapement envisaged by section 21 of the Act for the purposes of reassessment need not necessarily spring from a source extraneous to the original record. However, a second thought or a mere change of opinion, by the assessing authority on the same set of facts and the material on the record would not clothe the assessing authority with a valid jurisdiction. . . . . We are not impressed by the argument that the instant case is a case of change of opinion. The change of opinion necessarily postulates that the assessing authority had an occasion to consider the material earlier, and on the same set of facts another opinion was sought to be formed. The question of change of opinion cannot arise where there has been no previous proceeding of assessment in respect of a turnover in dispute. As pointed out by the Calcutta High Court in Income-tax Officer v. Mahadeo Lal Tulsyan [1978] 111 ITR 25, a change of opinion by the assessing officer contemplates, formation of two different opinions or to make two different inferences at two stages on ....
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....Income-tax v. Bhanji Lavji [1971] 79 ITR 582, which is quoted as under (at page 583 of ITR): "When the primary facts necessary for assessment are fully and truly disclosed to the Income-tax Officer at the stage of the original assessment proceedings, he is not entitled, on a change of opinion, to commence proceedings for reassessment under section 34(1)(a)." To the similar effect is also the decision in Commissioner of Income-tax v. Dinesh Chandra H. Shah reported in [1971] 82 ITR 367 (SC) wherein it is held that (at page 371 of ITR): ". . . It appears that the Income-tax Officer clearly sought to justify the reopening of the assessment under section 34(1)(b) merely on the ground of change of opinion. It is well-settled by now, and Mr. Desai quite rightly does not dispute the proposition, that mere change of opinion could not be a valid ground for reopening the assessment under section 34(1)(b) of the Act. We would accordingly uphold the answer returned by the High Court on the short ground that the reassessment for the year in question was sought to be reopened for the reason that the successor of the Income-tax Officer who had made the original assessment had changed his....
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....s not justified. Coming to the cases cited by the learned Additional Chief Standing Counsel in the case of Smt. Sarla Devi v. Controller of Estate Duty, U.P. reported in [1975] UPTC 178 the Division Bench of this court has held that the correct position of law coming to the notice of the authority as a result of research into law subsequent to the original assessment constitutes the information for reassessment purposes. In the case of Maharaj Kumar Kamal Singh v. Commissioner of Incometax, Bihar and Orissa reported in [1959] 35 ITR 1 (SC); AIR 1959 SC 257 the apex court has held that the word "information" includes information as to the facts as well as information as to the state of the law as contemplated under section 34(1)(b) of the Income-tax Act. In the case of Indian & Eastern Newspapers Society, New Delhi v. Commissioner of Income-tax, New Delhi [1979] 119 ITR 996; AIR 1979 SC 1960 the apex court has held that the information under section 147(b) of the Act contemplates information as to the law created by the formal source. The opinion of the internal audit report has been held as not an information as contemplated under this section as the audit party is not com....