TaxTMI 
TaxTMI 
2015 (1) TMI 1138
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....the books and have received the price of the books from these authorities. For the purpose of selling the books, the petitioner was required to print these books for which purpose the petitioner has purchased ink and chemicals from outside the State. For the assessment year 2003-04 and 2004-05, the Deputy Commissioner, Commercial Tax, Agra, respondent no.3, after considering the matter in detail, passed an assessment order granting exemption from payment of trade tax on the sale of books made by the petitioner in view of the Notification No.TT-2-63/XI-9(116)/94-U.P. Act-15/48-Order-95 dated 16th January, 1995 whereby sale of books was exempted from payment of trade tax. Subsequently, respondent no.2, namely, the Additional Commissioner, Grade-I, Commercial Tax, Agra issued a notice under Section 21(2) of the U.P. Trade Tax Act (hereinafter referred to as the Act) for the assessment year 2003-04 and 2004-05 directing the petitioner to show cause as to why reassessment should not be made on the ground that on inquiry it was found that the petitioner had purchased ink from outside the State of Uttar Pradesh amounting to Rs. 6,23,096/- for the purpose of publication of the books ....
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....ssued by the Assessing Officer. We have heard Sri Aloke Kumar, the learned counsel for the petitioner and Sri C.B. Tripathi, the learned Special Counsel for the State. The contention of the petitioner is, that the reply of the petitioner was not considered nor any cogent or valid reason has been given by the authority while granting approval to the Assessing Officer to reopen the assessment proceedings under Section 21 of the Act. The order granting permission has been passed without any application of mind and, consequently, the notice issued under Section 21 of the Act was liable to be quashed. It was urged that there was no material before the authority to come to a conclusion that income had escaped assessment and, in the absence of any material, proceedings under Section 21 of the Act could not be initiated. The learned counsel contended that since there was no fresh material, the satisfaction of the authority that income had escaped assessment was nothing else but a change of opinion. On the other hand, Sri C.B. Tripathi, the learned Special Counsel appearing for the State contended that assessment proceedings can be reopened if one finds that there was a case of ....
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....s "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 challenge in a Court of law as held in S. Narayanappa v. Commissioner of Income Tax, (1967) 63 ITR 219 (SC); Kantamani Venkata Narayana and Sons Vs. Additional Income Tax Officer, (1967) 63 ITR 638 (SC), Madhya Pradesh Industries Ltd. v. Income Tax Officer, (1970) 77 ITR 268 (SC); Sowdagar Ahmed Khan v. ....
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....rt of the Assessing Officer. It means that the belief must be held on good faith. Further, the formation of the opinion and belief is a condition precedent without which the Assessing Officer will not have jurisdiction to initiate proceedings for reassessment. The reasons for the formation of the belief must have a rational connection, which is germane to the issue and must have a direct nexus. Normally, there must be some fresh material, which would give rise to the formation of the belief that income had escaped assessment and, therefore, the fresh material, which comes to the notice of the Assessing Officer has to have a direct nexus or a live link with the formation of the belief that there has been an escapement of income. The foundational requirement of sub-section (1) of Section 21 of the Act for reopening 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." From the aforesaid, it is clear that the foundational requirement of sub-section (1) of Section 21 of the Act for reopening the assessment is,....
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.... a contract for the publication of books. The reasons given by the authority in the authorization order is, that since there exists a contract between the petitioner and the State Government, therefore, it is presumed that it is a works contract. On such presumption, notices under Section 21(2) of the Act cannot be issued nor can authorization be granted for reassessment. The petitioner has filed a copy of the contract, which is annexure 1 to the writ petition. A perusal of the terms and conditions mentioned in the contract indicates that the petitioner is required to publish and sell the books at his own cost and risk and that the petitioner would pay royalty to the State Government on the sale of each book as they have the copyright. The contract further indicates that sale made by the government and to its departments would be at a discounted rate. The contract does not indicate that the petitioner has entered into a works contract. Necessary ingredients as defined under the definition Section 2(m) of the Act is lacking. The contract clearly indicates that it relates to printing and supply of printed material and is not a works contract. Works contract is normally done on ....