TaxTMI 
TaxTMI 
2014 (8) TMI 922
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....show cause as to why reassessment proceedings under Section 21 of the Act should not be reopened on the ground that enzymes was not a chemical since it only acts as a catalyst and, therefore, is taxable at the rate of 10% as an unclassified item. The notice alleged that it was a case of under assessment and, therefore, required the petitioner to show cause as to why proceedings should not be reopened. The petitioner submitted his reply contending that enzymes is nothing else but a kind of chemical and, therefore, is covered under Notification No.1084, which requires that chemicals of all kinds would be taxable at the rate of 4%. It was also brought to the knowledge of the authority that for the assessment year 2006-07, the Assessing Officer had not treated enzymes as a chemical in the assessment order but in appeal the appellate authority held that enzymes was a chemical and was liable to be taxed at the rate of 4%. The petitioner also enclosed a certificate issued from Micro Small and Medium Enterprises, which is a Government of India concern certifying that enzymes sold by the petitioner falls under the category of chemicals. Inspite of this reply being given, the competent au....
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....further submitted that for the assessment year 2004-05 and 2005-06 under the Central Sales Tax Act, the notice indicated that delivery of enzymes had been taken by the petitioner himself, hence exemption under Section 6(2) of the Central Sales Tax Act had wrongly been granted. The learned counsel submitted that at the time of the original assessment, detailed scrutiny of Form-C and corresponding Form-E1 along with other documents such as GR/RR indicating transfer of documents of title during movement of goods from one State or other was examined by the Assessing Officer and only after being satisfied that the Assessing Officer had granted exemption. Consequently, initiation of reassessment proceedings for the aforesaid assessment years under the Central Sales Tax Act was wholly illegal and was liable to be quashed. In Writ Petition No.706 of 2010, the learned counsel submitted that the Assessing Officer treated enzymes as a unclassified item and taxed the same at the rate of 10% for the assessment year 2006-07 under the U.P. Trade Tax Act. The petitioner preferred an appeal, which was allowed and the matter was remanded back to the Assessing Officer for fresh assessment. During ....
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....eopening the assessment proceedings has to be recorded and if reasons are not recorded the order sanctioning would be wholly illegal. In M/s S.K. Traders, Modi Nagar, Ghaziabad Vs. Additional Commissioner, Grade-I, Trade Tax, Zone Ghaziabad and another, 2008 UPTC 392 a Division Bench held: "The words "has reason to believe" are stronger than the words "is satisfied". The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable or, in other words, it must be based on reasons which are relevant and material as held by the Apex Court in Ganga Saran & Sons P. Ltd. v. Income Tax Officer, (1981) 130 ITR 1 (SC) . The expression "reason to believe" in Section 147 does not mean purely subjective satisfaction on the pan of the Assessing Officer The belief must be held in good faith; it cannot be merely a pretence. It f open to the 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 Assessing Officer in starting proceedings under Section 147 is open to....
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....ies Pvt. Ltd. Vs. State of U.P. and others, 2014 UPTC 789 a Division Bench of this Court held:- "Under sub-section (1) of Section 21, a power of reassessment is conferred upon the Assessing Authority it if has reason to believe that the whole or any part of the turnover of the dealer, from any assessment year or part thereof, had escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than at which it is assessable or a deduction or exemption has been wrongly allowed. The foundational requirement of sub-section (1) is that there must be reason to believe......................................................................... However, the section equally does not authorize reassessment proceedings on the basis of a mere change in opinion. There has to be some tangible material before the Commissioner on the basis of which he makes an authorization in terms of the proviso. The nature of tangible material must be such as would warrant an inference that the turnover of the dealer has escaped the assessment to tax or that it has been under assessed or has been assessed at a lower rate or that deductions or exemptions have been wrongly allo....
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....ing the assessment is, that there must be a reason to believe that income had escaped assessment. There has to be some tangible material on the basis of which a reason to belief can be formed that some income had escaped assessment. The contention that no reassessment proceedings can be made on the same material is incorrect. Reassessment on the same material can be permitted for valid reasons. In the instant case, we find that in the original assessment proceedings there has been no discussion nor any finding has been given as to whether enzyme is a chemical or not. Unless and until a discussion is made or a finding is given by the Assessing Officer that enzyme is a chemical, only then, it could be taxed under the entry "chemical of all kinds". In the absence of any finding being recorded by the Assessing Officer on this aspect, we are of the opinion that the respondents were justified in reopening the assessment so that a conclusive finding is given as to whether enzyme is a chemical or not and, consequently, whether it is liable to be taxed at the rate of 4% or as an unclassified item at the rate of 10%. In M/s Elpee Electricals Vidya Peeth Road, Varanasi Vs. State of U.P.....
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.... no opinion has been formed. We are of the view that in the instant case, it does not fall within the purview of change of opinion. In Commissioner of Sales Tax, U.P. Vs. Bhagwan Industries (P) Ltd., Lucknow, AIR 1973 SC 370 a Full Bench of the Supreme Court held:- "....... Question in the circumstances arises as to what is, the import of the words "reason to believe", as used in the section. In our opinion, these words convey that there, must be some rational basis for the assessing authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If such a basis exists, the assessing authority can proceed in the manner laid down in the section. To put it differently, if there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of the turnover of a dealer has escaped assessment, it can take action under the section. 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....