TaxTMI 
TaxTMI 
2010 (4) TMI 978
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....h 21, 2006 passed by respondent No. 2 for assessment years 1999-2000 and 2000-2001 (enclosed as annexures 12 and 13 to the present writ petition); (iv) that any other suitable writ, order or direction which this honourable court may deem fit and proper in the circumstances of the case be also issued in favour of the petitioner." The petitioner is a public limited company incorporated under the Indian Companies Act, 1956 engaged in the manufacturing of Indian-made country liquor and alcoholic goods from its factory situated at Rampur. The petitioner is a registered dealer under the U.P. Trade Tax Act as well as under the Central Sales Tax Act. Apart from the sales of manufacturing goods, the petitioner had also sold waste polyfilm, waste broken glass, waste scraps and rejected PP seals, etc., which had been damaged in the course of transit, loading, unloading, etc. In the assessment years 1999-2000 and 2000-01, the petitioner had admitted the tax at the rate of five per cent on the sales of such goods. The assessing authority in the assessment order passed under the U.P. Trade Tax Act for both the assessment years 1999-2000 and 2000-01 had levied the tax at the rate of five per c....
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....en issued on the ground that in the original assessment orders, the turnover of P.V.C. garbage, etc., had been assessed to tax at the rate of five per cent while it should be taxed as an unclassified items at the rate of ten per cent. Further it has been stated that outward freight and the sale promotion amount would be the part of the turnover in view of the decision of the Allahabad High Court in the case of Modi Industries Limited v. Commissioner of Trade Tax [2000] UPTC 149. Therefore, there is an escaped assessment. Under the Central Sales Tax Act for both the assessment years, the notices have been issued on the ground that outward freight, advertisement charges and sale promotion charges would be the part of the turnover in view of the decision of the Allahabad High Court in the case of Modi Industries Limited v. Commissioner of Trade Tax [2000] UPTC 149. Therefore, there is an escaped assessment. Heard Sri Bharat Ji Agrawal, senior advocate appearing on behalf of the petitioner and Sri S.P. Kesarwani, learned Additional Chief Standing Counsel appearing on behalf of respondents. The learned counsel for the petitioner initially submitted that in pursuance of the notices und....
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.... Modi Industries Limited v. Commissioner of Trade Tax [2000] UPTC 149 is inapplicable. Sri S.P. Kesarwani, learned Additional Chief Standing Counsel, submitted that under the proviso to section 21(2) of the Act, the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad, does not exercise the judicial power in strict sense. Under the proviso to section 21(2) of the Act, the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad, has a power to grant approval on the basis of the reasons recorded by the assessing authority after being satisfied. Therefore, the order of the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad, under the proviso to section 21(2) of the Act can be examined only on the ground that whether opportunity has been given or not and whether there is an application of mind while granting the approval. The Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad, is not an adjudicating authority and, therefore, the detailed reasons are not required to be given for granting the approval. He submitted that in the present case, the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad, ....
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....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 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 includes the officer or authority having jurisdiction for the time being to assess the dealer. Explanation III.-Notwithstanding the issuance of notice under this sub-section, where an order of assessment or reassessment is in existence from before the issuance of such notice, it shall continue to be effective as such, until varied by an order of assessment or reassessment made under this section in pursuance of such notice. (2) Except as otherwise provided in this section, no order of assessment or reassessment under any provision of this Act any assessment year shall be made after the expiration of three years from the end of such year or March 31, 1996, whichever is later: Provided that if the Commissioner on his ....
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....he Act. Therefore, we are of the view that a detailed reasoning is not required to be given while granting the authorisation. What is required under the proviso is that there should be an application of mind to arrive at the satisfaction on the consideration of the reasons recorded and the submissions of the assessee. We have gone through the order passed by the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad under the proviso to section 21(2) of the Act. The order reveals that he has considered the reasons recorded by the assessing authority and also considered the reply and after being satisfied granted the approval. Therefore, the order cannot be said to be mechanical and without application of mind. The learned counsel for the petitioner has rightly withdrew his submission challenging the order under section 21(2) of the Act passed by the Additional Commissioner, Grade 1, Trade Tax, Moradabad Zone, Moradabad. Now coming to the next submission of the learned counsel for the petitioner that the initiation of the proceeding is only on account of change of opinion without any fresh material on the basis of which a belief of escaped assessment alleged to have....
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....he time of original assessment orders, merely on account of change of opinion formed a belief that outward freights would be the part of the turnover. It is not disputed that onward freights have been charged separately in the bills. Therefore, in view of the Explanation to section 21 of the Act which defines "turnover" the freights charged separately in the bills would not be a part of the turnover. Therefore, the belief formed by the assessing authority is based on no material and merely on account of change of opinion. The learned standing counsel is also not able to produce any material to substantiate that the petitioner has charged any amount from the customers towards advertisement charges and promotional charges. Some of the copies of the bills are available on record in which the advertisement charges and promotional charges have not been charged. Therefore, the opinion of the assessing authority that the advertisement charges and promotional charges are the part of the turnover is without any basis and material. In view of the above, we are of the view that the proceedings under section 21 of the Act have been initiated merely on account of change of opinion on the basis....
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.... that in a writ jurisdiction under article 226 of the Constitution of India, this court cannot look into the sufficiency of the material on the basis of which a believe has been formed and notice under section 21 of the Act has been issued. This court can only examine whether there was any material and whether the material is relevant to form the belief of escaped income. (Vide Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), Indra Prastha Chemicals Pvt. Ltd. v. Commissioner of Income-tax reported in [2004] 271 ITR 113 (All); [2005] UPTC 53). In the case of Commissioner of Income-tax, Gujarat II v. Kurban Hussain Ibrahimji Mithiborwala reported in [1971] 82 ITR 821, the apex court has held that it is well-settled that the Income-tax Officer's jurisdiction to reopen an assessment under section 34 of the Income-tax Act, 1922, depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. In the case of Johri Lal (HUF) v. Commissioner of Income-tax, U.P. reported in [1973] 88 ITR 439, the apex court has held as follows (at page 439 of ITR): "The fo....
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....uld not have reason to believe. In such a case, the notice issued by him would be liable to be struck down as invalid as held in the case of Ganga Saran & Sons P. Ltd. v. Income-tax Officer [1981] 130 ITR 1 (SC). In the case of Indra Prastha Chemicals Pvt. Ltd. v. Commissioner of Income-tax reported in [2004] 271 ITR 113 (All); [2005] UPTC 53, this court held as follows (at page 119 of ITR): "Thus, it is well-settled that the 'reason to believe' under section 147 must be held in good faith and should have a rational connection and relevant bearing on the formation of the belief and should not be extraneous or irrelevant. Further, this court in proceedings under article 226 of the Constitution of India can scrutinize the reasons recorded by the assessing officer for initiating the proceedings under section 147/148 of the Act. The sufficiency of the material cannot be gone into but relevancy certainly be gone into." In the case of Royal Trading Co., Saharanpur v. Trade Tax Officer, Saharanpur reported in [2000] 16 NTN 290, the Division Bench of this court while considering section 21 of the U.P. Trade Tax Act held as follows: "Therefore, action under section 21 of the Act....
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....les Tax, U.P. v. Bhagwan Industries (P.) Ltd. [1973] 31 STC 293 in which it was held that reasonable grounds necessarily postulate that they must be germane to the formation of the belief regarding escaped assessment. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under this section. If however, the grounds are relevant and have a nexus with the formation of belief regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under this section." It is settled principle of law that the notice under section 21 of the Act cannot be issued on account of change of opinion once the issue is considered, examined and opinion is formed on the basis of material available on record. In the case of Kalpana Kala Kendra, Kanpur v. Sales Tax Officer, Circle 20, Kanpur reported in [1989] 75 STC 198 (All); [1989] UPTC 597, the Division Bench held as follows (at pages 203-205 of STC): "Section 21 of the Act is based upon the theory that the taxes must be paid by the assessee is correct sum and likewise it must be collected by the statutory machinery. The escapement from assessment whether it results on....
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....ses, both by this court and by the Supreme Court, in Commissioner of Sales Tax, U.P. v. Madhu Chemical Works, Bareilly [1988] 71 STC 421 (All); [1988] UPTC 230. It was held that in a case where a particular point has been considered on merits, and a view is taken, it would not be a case of inadvertent mistake or omission, if it is found that the view taken earlier was wrong. It would be a case of change of opinion, but if it is not so, then it would be a case of nonapplication of mind and an action would be justified under section 21 of the Act." In the case of Commissioner of Sales Tax v. Gopalji, Varanasi reported in [1974] UPTC 277, the Sales Tax Officer got second thought about the applicability or effect of the survey and hence notice under section 21 was issued. It was held that this would not constitute reason to believe within the meaning of section 21 of the said Act. Hence notice under section 21 was held invalid. In the case of Palco Lining Company v. Sales Tax Officer reported in [1983] 54 STC 255 (All): In this case assessment order recorded that the assessing authority has after elaborately considering the evidence taken the view what was being sold by the p....
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.... reported in [1974] 97 ITR 239 (SC); AIR 1975 SC 703, the same view has been taken. Having second thought on the same material does not warrant initiation of proceedings under section 147 of the Income-tax Act. In the case of Harbans Lal Malhotra v. Assistant Commissioner, Sales Tax, Ghaziabad reported in [1997] 107 STC 98; [1994] UPTC 1041, the Division Bench of this court held that the authority cannot issue any notice on account of change of opinion nor in the absence of any material for the year in question. It has been further held that the original assessment order disclosed a detailed scrutiny of all the documents of the petitioner including the agreement in question and the very basis of assessment was an arriving at the conclusion that the documents on record revealed that the transfer of the goods amounted to stock transfer. The notice under section 21 of the Act has been held amounts to re-examining the same matter again and to make fresh enquiry in the same matter, which is not permissible. In the case of Ratan Industries (Pvt.) Limited, Agra v. Additional Commissioner, Trade Tax, Agra reported in [2006] 148 STC 111 (All); [2004] 24 NTN 384, the Division Bench ....