TaxTMI 
TaxTMI 
2014 (6) TMI 654
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....ies are: The petitioner is a Civil Works Contractor. Under Section 7-D of the U.P. Trade Tax Act, 1948 (hereinafter called the "Act, 1948") the State Government has issued a compounding scheme for civil works contractor vide its letter dated 23/7/1996. In the said scheme it was provided that the Civil Works Contractors who opt for admission to the benefit of the scheme shall be admitted the benefit of the aforesaid compounding scheme. On 10/8/2000, the State Government issued fresh directions under Section 7-D of the Act, 1948 in respect of the composition money to be accepted by the Assessing Authorities on civil works contracts. One of the change which was brought by the compounding scheme dated 10/8/2000 was that in a case a contractor uses 5% more raw materials from outside the State of U.P., the contract would fall outside the compounding scheme. A circular dated 24/8/2000 was issued by the Commissioner of Trade Tax providing that the compounding scheme for Annual Year 2000-01 would not apply to such contracts where tender had been submitted up to 31/3/2000, though the contract may have been awarded later. It provided that the new scheme shall apply only to the cases where the....
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....ed the benefit of compounding scheme under Section 7-D of the Act, 1948, it is not open for the respondents to initiate reassessment proceedings under Section 21(2) of the Act, 1948. He submits that Section 7-D of the Act, 1948 overrides other provisions of the Act, 1948 and when the tax has been assessed under the compounding scheme, reassessment proceedings cannot be undertaken. (2) That while accepting the application of the petitioner for compounding for the Assessment Year 2001-02, the Assessing Authority has scrutinized all the contracts and has specifically applied his mind towards the applicability of the new compounding scheme and the condition of limit of 5% for importing the raw materials purchased from outside the State of U.P. He submits that the tax liability has been computed under the compounding scheme and no new materials or documents have been referred to in the permission granted by the Additional Commissioner for initiating reassessment proceedings, hence the condition precedent for initiating reassessment proceedings were not satisfied. It is submitted that there was no material to form an opinion that the turnover of a dealer has escaped assessment, hence th....
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....ompounding scheme which was prevalent till a new compounding scheme was issued on 10/8/2000. The Assessing Authority also noted the fact that under the new compounding scheme, condition of import of raw material beyond 5% disentitles the benefit of the compounding scheme. The 12 contracts were held by the Assessing Officer to be covered by the old scheme which was prevalent prior to 2000-01. With regard to the contracts on which the condition of import of material not more than 5% was applicable were also examined and it was held that the material imported by the petitioner in those contracts were not beyond 5% ceiling. Learned counsel for the petitioner firstly submitted that the provisions of Section 21(2) of the Act, 1948 are not applicable with regard to any order passed accepting the compounding scheme under Section 7-D of the Act, 1948. Secondly, the condition precedent for exercising the power under Section 21-D of the Act, wherein there was no sufficient material to form any objective opinion for initiating any reassessment proceedings. We take up the second submission first. The law with regard to initiation of the reassessment proceedings is well settled. Sections 21 ....
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....angalore, (1967) 63 ITR 209, in context of the Income Tax Act, 1922 laid down following in paragraph 4 which is to the following effect: "The expression 'reason to believe' in Section 34 does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith; it cannot be merely a pretence. It is open to that court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceeding under Section 34 of the Act is open to challenge in a court of law." A Division Bench of this Court in Kalpana Kala Kendra, Kanpur Vs. Sales Tax Officer, Circle 20, Kanpur 1989 U.P.T.C 597, laid down following in paragraphs 5,12,13,14,16 and 17: "5. Now, the belief of the assessing authority cannot be purely subjective and it must be held upon relevant material, however meagre. The reason for belief must have a rational connection or live link between the material coming in possession of the assessing authority and the escapement of the....
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....ut anything more does not ipso facto take away the jurisdiction of the assessing authority to take action under Section 21 of the Act. 14. In Commissioner of Income Tax, Gujarat v. A Raman and Co., (1968) 67 ITR 11, the Supreme Court while dealing with a matter under Section 147 (b) of the Income Tax Act, 1961 pointed as under : "Jurisdiction of the Income-tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information must, it is true, have come into the possession of the Income Tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the material on record, or the facts disclosed thereby, or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected." Although the above decision was given with reference to Section 147 (b) of the Income Tax Act, but so far the issue with which we are concerned, the said Section, as already noted, is in pari materia with Section 21 of the ....
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....Mere change of opinion on same material cannot cloth the Assessing Officer to proceed with the reassessment proceedings. In this context a Division Bench of this Court in M/s Kothari Contract Interiors, New Delhi Vs. Trade Tax Officer, Modinagar, Ghaziabad, 2006 U.PT.C 74, relied on by the learned counsel for the petitioner is relevant to be noted which fully supports the submission raised by the learned counsel for the petitioner. In M/s Kothari's case (supra) the petitioner was a Contractor who moved an application under Section 7-D of the Act, 1948 for lump sum payment in lieu of Tax. By order dated 07/2/1994, the application of the petitioner was accepted. Subsequently a notice under Section 22 of the Act,1948 was issued on 06/2/1997 cancelling the earlier order dated 07/2/1994. The said order was challenged in this Court in Writ Petition No.338 of 1997 which was ultimately set-aside by the High Court. The Department thereafter issued a notice dated 04/11/1999 under Section 21(2) of the Act, 1948 for reassessment which was challenged by the petitioner in this Court. The Division Bench of this Court in the said case held that it was not the case of the department that the p....
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....s not the case of the department that the petitioner did not truly and correctly disclosed the nature of the contract work undertaken by him. It has come on record that the Deputy Commissioner (Executive), Trade Tax examined the contract awarded to the petitioner. After examination of the two contracts he accepted the application for compounding with his wide open eyes. There is not even a slightest whisper either in the impugned notice or in the counter-affidavit that the petitioner is guilty of concealing any material fact or has not truly and correctly disclosed the contract work undertaken by him. There is no allegation that the petitioner by playing fraud obtained the order dated 7th February, 1994 by which the application under Section 7-D of the petitioner was accepted. This Court in the case of M/s. Ram Prakash Vijay Kumar Pvt. Ltd., Saharanpur v. Deputy Commissioner (Executive), 1996 U.P.T.C. 998 has held that Deputy Commissioner (Executive) cannot review its order unless the dealer has misrepresented any fact or suppressed any information. The legal effect of the order dated 7th February, 1994 is that the petitioner is liable to pay lump sum i.e. one per cent of the sum r....
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....rder binding on a junior officer and he has to obey it. The Apex Court in the case of Authorised Officer (Land Reforms) v. M.M. Krishnamurty Chatty, 1998 (9) S.C.C. 138, has held that it is well settled that even order which may not be strictly legal become final and are binding between the parties if they are not challenged before the superior Court. This may instantly cause some prejudice to the Revenue but the remedy is to take appropriate steps within the frame work of the State. It may be recalled here that an attempt was made by the Deputy Commissioner (Executive) to rectify the order dated 7th February, 1994 by order dated 6th February, 1997. The order dated 6th February, 1997 has been quashed by this Court. The relevant portion of the judgment reads as follows: "The impugned order shows that there was no allegation of misrepresentation or suppression of fact by the petitioner while making the application under Section 7-D of the Act. It appears that the said order was passed on change of opinion by the Assessing Authority. In that view of the matter we do not think that the order dated 6th February, 1997 can be sustained. We accordingly quash the order dated 6th February, ....
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....rming a belief, but if there is no material which is referred to for forming a belief the initiation of reassessment proceedings is arbitrary and falls beyond the Sections 21 (1) and (2) of the Act, 1948. The Division Bench judgment in M/s Kothari Contract Interiors (supra) fully supports the submission raised by the learned counsel for the petitioner and we are satisfied that the present is not a case for initiating reassessment proceedings. Learned counsel for the petitioner has further relied on a Division Bench judgment of this Court in M/s Systematic Conscom Limited Vs. State of U.P. & Ors, 2009 NTN (39) 245. In the said case, the issue before the Division Bench was whether the payment of State Development Tax under Section 3-H of the Act, 1948 is applicable on dealers having annual turnover of more than Rs. 50 lakh who have opted for composition under Section 7-D of the Act, 1948. The Division Bench in the said case held that Composition Scheme can be nullified only under composition scheme and it cannot be revised otherwise. The aforesaid Division Bench judgment of this Court was also affirmed by the Apex Court vide its judgment and order dated 26/2/2013 in Civil Appeal N....