2014 (11) TMI 1095
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....f 2011 Civil Appeal No.6186 of 2013 Civil Appeal No.6187 of 2013 Civil Appeal No.7458 of 2013 Civil Appeal No.7459 of 2013 Civil Appeal No.660 of 2014 Civil Appeal No.9139 of 2014 Signature Not Verified Civil Appeal No.9140 of 2014 Civil Appeal No.9141 of 2014 Civil Appeal No.9142 of 2014 Civil Appeal No.9143 of 2014 Civil Appeal No.9144 of 2014 Civil Appeal No.9145 of 2014 Civil Appeal No.9146 of 2014 Civil Appeal No.9147 of 2014 Civil Appeal No.9148 of 2014 Civil Appeal No.9149 of 2014 Civil Appeal No.9150 of 2014 Civil Appeal No.9151 of 2014 Civil Appeal No.9152 of 2014 Civil Appeal No.9153 of 2014 Civil Appeal No.9154 of 2014 Civil Appeal No.9155 of 2014 Civil Appeal No.9156 of 2014 Civil Appeal No.9157 of 2014 Civil Appeal No.9158 of 2014 Civil Appeal No.9159 of 2014 Civil Appeal No.9160 of 2014 Civil Appeal No.9161 of 2014 Civil Appeal No.9162 of 2014 Civil Appeal No.9163 of 2014 Civil Appeal No.9164 of 2014 Civil Appeal No.9165 of 2014 Civil Appeal No.9166 of 2014 Civil Appeal No.9167 of 2014 Civil Appeal No.9168 of 2014 Civil Appeal No.9169 of 2014 Civil Appeal No.9170 of 2014 Civil Appeal No.9171 of 2014 Civil Appeal No.9172 of 2014 Civil Appeal No.9173 of 2014 Civil Appea....
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....5. Section 15(c) of the Act, 1956 provides for restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. Under Section 8 of the Act, 1956, the tax liability of a registered dealer is 4% on the inter-State sales of rice. The assessee claimed set-off under Section 15(c) of the Act, 1956 in respect of purchase tax already paid on the purchase of paddy within the State of Uttar Pradesh against the tax liability created under the Act, 1956. The assessing Authority allowed the aforesaid claim and deducted the tax deposited on the purchase of paddy within the State of Uttar Pradesh from the total tax liability of the assessee, by assessment order dated 31.12.2003. 6. Thereafter, the Commissioner of Trade Tax, Uttar Pradesh, Lucknow has issued Circular No.137 (Vidhi. 2(i)-Nyay-2006-07 of 2313), dated 29-30.03.2007 (for short, "the Circular") and clarified the position of law under Section 15(c) of the Act,1956 to the effect that the said provision does not contemplate set-off of tax liability on paddy purchased within the State of Uttar Pradesh with the tax liability on the inter-State sale of rice. Further, that no deduction in respect of t....
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....liable to be reduced by the amount of tax levied on the paddy under the Act; (b) whether the Circular No. 137, dated 29.03.2007 issued by the Commissioner of Trade Tax expressing his opinion that such reduction is not permissible is legally correct; and (c) whether the initiation of proceedings under Section 21 of the Act is merely based on change of opinion and therefore, bad in law. 13. The High Court, while rejecting the case of writ petitioner/assessee on the first two issues, has partly allowed the Writ Petition of the assessee in respect of the third issue. The High Court opined that the initiation of re-assessment proceedings by the assessing Authority is bad in law as change of opinion of an assessing Authority would not be a valid ground and justification to issue such orders for re-assessment under the Act and therefore, quashed the re-assessment proceedings so initiated by the assessing Authority. 14. The appellant-State, aggrieved by the aforesaid judgment and order of the High Court, is before us in this appeal. 15. We have heard learned counsel for the parties to the lis. 16. This appeal requires our consideration and de....
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....alf, such assessment or reassessment may be made after the expiration of the period aforesaid but not after the expiration of four years, from the end of such year notwithstanding that such assessment or reassessment may involve a change of opinion." 18. Section 21(1) of Act provides, that, if the assessing Authority has reason to believe that the whole or any part of the turnover of a dealer, from any assessment year or part thereof, had escaped assessment of tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under the 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 considers necessary, assess or reassess the dealer to tax according to law. 19. Section 21(2) provides for period of limitation for such order of assessment or re-assessment under the Act. The proviso to this section empowers the Commissioner on his own or on the basis of the reasons recorded by the assessing Authority to re-open an assessment notwithstanding that such assessment or re-assessment may involve a change ....
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....ns for the belief. At the same time, it is necessary to observe that the belief must be held in good faith and should not be a mere pretence. 12. It may also be mentioned that at the stage of the issue of notice the consideration which has to weigh is whether there is some relevant material giving rise to prima facie inference that some turnover has escaped assessment. The question as to whether that material is sufficient for making assessment or reassessment under Section 21 of the Act would be gone into after notice is issued to the dealer and he has been heard in the matter or given an opportunity for that purpose. The assessing Authority would then decide the matter in the light of material already in its possession as well as fresh material procured as a result of the enquiry which may be considered necessary." (emphasis supplied) 22. In CIT v. Kelvinator of India Ltd., (2010) 2 SCC 723, a three judge bench of this Court has considered the meaning of expression "reason to believe" in the context of change of language in Section 147 of the Income Tax Act, 1961 (for short, "the IT Act"). The said provision provides for income that has escaped assessment and lay....
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....d "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the assessing officer." (emphasis supplied) 23. This Court in Aslam Mohd. Merchant case (supra) has reaffirmed the earlier view taken in Phool Chand Bajrang Lal v. ITO, (1993) 4 SCC 77 where, this Court, after a detailed analysis of the import of the words "reason to believe" in the phraseology of Section 147 of the IT Act, has observed thus: "25. From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under Section 147(a) read with Section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proce....
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....an income had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers." 25. The import of the words "reason to believe" has also been examined by this Court in cases arising out of proceedings under Section 34 of the Indian Income Tax Act, 1922 which also has the same phraseology. It deals with income escaping assessment and confers jurisdiction on the income tax officer to make assessment or re-assessment if he had reason to believe that income, profits or gains chargeable to income tax had been under-assessed and that such under-assessment had occurred by reason of either omission or failure on the part of the assessee to make a return of his income or to disclose fully and truly all material facts necessary for his assessment. Since other provisions of the said Section 34 are not relevant for present discussion, we would not saddle the judgment by elaborating on them. 26. Dealing with the said provision, this ....
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.... by it during original assessment proceedings. (See: DCM v. State of Rajasthan, (1980) 4 SCC 71). 29. The standard of reason exercised by the assessing Authority is laid down as that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion. The necessary sequitur is that a mere change of opinion while perusing the same material cannot be a "reason to believe" that a case of escaped assessment exists requiring assessment proceedings to be reopened. (See: Binani Industries Ltd., Kerala vs. Respondent: Assistant Commissioner of Commercial Taxes, VI Circle, Bangalore and Ors., (2007) 15 SCC 435; A.L.A. Firm v. CIT, (1991) 2 SCC 558). If a conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making the assessment and again a different or divergent view is reached, it would tantamount to "change of opinion". If an assessing Authority forms an opinion during the original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for re-assessment. Thus, reason to believe cannot be said ....
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....t both the Authorities have only noticed and reiterated the contents of the Circular. The assessing Authority has substantiated its "reason to believe" by placing reliance on the change in position of law under Section 15(c) of the Act, as contained in the Circular and thus, issued the show cause notice. It is trite that subsequent change in law according to which the assessment proceedings were conducted, cannot constitute "change in opinion" of the assessing Authority so as to initiate re-assessment proceedings. In fact, the same is impermissible if the Act does not specify the operation of law as retrospective. 35. It would be relevant here to notice the observations of Constitution Bench of this Court in S.C. Prashar v. Vasantsen Dwarkadas, (1964) 1 SCR 29. Kapur, J., in a separate judgment, quoting Privy Council in Delhi Cloth & General Mills Co. Ltd. v. ITC, 54 IA 421, has brought home the point that if after change in law, the period of time prescribed for action by the tax authorities has already expired, then subsequent change in the law does not make it so retrospective in its effect as to revive the power of the tax authority to take action under the new law. &n....