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2017 (11) TMI 1088
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....ying on the business of purchase and sale of different kinds of Tyres and Tubes used in different kinds of automobile vehicles and Flaps etc. The petitioner has filed the return for the assessment years 2010-11, 2011-12 and 2012-13. The assessing authority has passed the assessment orders under Section 28(2) of the VAT Act dated 28.9.2013 (assessment years 2010-2011), dated 24.12.2014 (assessment year 2011-12) and dated 18.1.2015 (assessment year 2012-13). The assessing authority has accepted the books of accounts of the petitioner and has passed the detailed assessment orders. It is noticed that during the course of original assessment proceedings, the assessing authority of the petitioner had required the explanation of the petitioner with regard to certain queries, which are mentioned in the notices and in the orders passed under Section 28(2) of the Act. The petitioner has participated in the proceedings and has placed all the relevant and required documents/records, which have been duly examined and verified by the assessing authority and after due verification the claim of the petitioner has been accepted. The instant writ petitions have been filed by the petitioner by ....
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....ontended that even from the perusal of the records, it is clearly verified that while examining the books of accounts at the original assessment stage the assessing authority has carefully scrutinized and examined the issue and has recorded a categorical finding in its assessment orders. For the perusal, we are mentioning the relevant contents mentioned in the notice and the findings recorded by the assessing authority in its original/regular assessment proceedings and order dated 28.9.2013, which are quoted here-in-below: Learned counsel for the petitioner has, therefore, submitted that once the specific categorical finding has been recorded by the assessing authority in its regular assessment orders on the issue, which has been raised in the show cause notices, issued under Section 28 read with Section 29 of the VAT Act, there is no justification at the hands of the respondents to re-open the case or issue again without any fresh material. Learned counsel for the petitioner has submitted that in fact on the facts, which are duly examined and considered, the assessing authority should not have referred the matter under sub-section (7) of Section 29 of the VAT Act for re-o....
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....cate that the sale price is lesser than purchase price for the reasons that the seller company has issued the credit notes for discount, which has been extended by the petitioner-company to the purchasers, which is duly indicated in all the tax/sale invoice. These tax/sale invoices are duly examined and verified and, therefore, the proceedings impugned under Section 29(7) are wholly illegal and arbitrary, as such there is nothing to provide a fresh opportunity or inning to the department, to unnecessary continue the proceedings a fresh. It is also submitted that it is nothing but clearly an harassment to the petitioner at the behest of the higher authority. In support of his submission the counsel for the petitioner has also placed/relied the relevant portion of para-9 of the aforesaid judgment in the case of M/s. Bharat Heavy Electricals Limited (supra), which is quoted here-in-below: "9. ........credit notes and books of account were produced before the Assessing Authority at the time of making the original assessment order. Statement to the contrary in the proposal for reassessment made by the petitioner's assessing authority is factually incorrect and jurisdicti....
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....y proceed under sub-section (1) of Section 29. Learned counsel for the petitioner, therefore, has submitted that none of the above conditions exist in the present case, therefore, no re-assessment proceedings can be initiated on the same material by the same authority, if there is no valid reason for doing so. Learned counsel for the petitioner has also relied upon the judgment of this Court in the case of M/s. Vikrant Tyres Limited Vs. State of U.P. and others, reported in 2005 UPTC-501 and the decision of the Hon'ble Supreme Court in the case of State of U.P. and others Vs. M/s Aryawart Chawal Udyog and others reported in 2017 UPTC262. Learned counsel for the petitioner has emphasized and heavily relied upon by the observations of the Hon'ble Apex Court in the case of M/s Aryawart Chawal Udyog (supra) particularly paragraph-30 of the said judgment, which is quoted here-in-below. "30.In case of there being a change of opinion, there must be necessarily be a nexus that requires to be established between the "change of opinion and the material present before the Assessing Authority. Discovery of an inadvertent mistake or non-application of mind during asses....
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....ction. Whether the ground are adequate or not is not a matter which would be gone into by the High Court or the Supreme Court, for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. What can be challenged is the existence of the belief but not the sufficiency or reasons for the belief. At the same time, the belief must be held in good faith and should not be a mere pretence." 15. Applying the above principle, this court, in the case of Rathi Industries Limited Vs. State of U.P. and another has further elaborated - " From a perusal of the aforesaid, it is apparently clear that the words "reason to believe" in Section 21 of the U.P. Trade Tax Act conveys that there must be some rational basis for the assessing authority to form a belief that the whole or any party of the turnover of a dealer has for any reasons escaped assessment. Such reason or reasonable ground to believe that the whole or any part of the turnover had escaped assessment must be germane to the formation of the believe regarding escaped assessment. Such reasons or grounds must have a nexus with the formation of the belief. The approach has to be p....
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....oceedings are wholly legal in nature, as such are valid. He has submitted that the Additional Commissioner has rightly granted the permission upon his satisfaction while relying on the material on record and has further submitted that in the present case, the record clearly establishes the relevant fact that the value on which the petitioner has made, the sale was lesser to the value of the purchase price as shown by the petitioner, hence the petitioner was not entitled to claim input tax credit in view of Section 13(1)(f) of the VAT Act read with Rule 22 of the U.P.VAT Rules. He has submitted that the petitioner is, therefore, liable to reverse input tax credit, which has rightly been proposed by the assessing authority, as such, is the subject matter of re-assessment proceedings. We are surprised to note/see the contents of paragraphs 8 and 13 of the counter affidavit. Learned counsel for the petitioner has pointed out in his rejoinder reply that it was surprising to see the contents of para-8 of the counter affidavit which clearly indicates that there was no occasion nor there was any fresh material, which would entitle the authorities to initiate the re-assessment proceed....
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....n the assessment order the claim of Input Tax Credit was wrongly allowed and accordingly he send the proposal to the respondent no.2 for grant of permission so that the reassessment proceeding can be initiated. Under these circumstances, it cannot be said that there was a change of opinion." We see that in Paragraph-27 of the judgment in the case of M/s. Bharat Heavy Electricals Limited (supra) this Court has dealt with the similar situation which is quoted here-in-below: "27.Nothing has been brought on record even by way of counter affidavit to show what had actually been produced by the petitioner in the course of the assessment proceedings (described as contract documents and books of account in the original assessment order) perusal whereof may have lead to another inference. Be that as it may, the unsubstantiated bald averments made in the counter affidavit, in complete absence of any material or information or belief as also reason to entertain a belief of escapement, is nothing but a self serving statement that cannot be accepted and is accordingly rejected." Learned counsel for the Department has relied upon the decision of this Court in the case of Moser Bae....
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....ed to form an opinion to the effect that the turnover has escaped from assessment on the ground of audit objection, which construed as an opinion with the meaning of State Act. This aspect has been considered in paragraphs 21 and 22 of the judgment of the Hon'ble Apex Court. We have considered the submissions of the learned counsel for the department and perused the aforesaid judgments and we find that the judgments which are relied upon by the learned counsel for the department, are not applicable in the present case as the issue involved in the present case is entirely different than the cases relied. On the other hand, learned counsel for the petitioner has placed a recent Division Bench judgment of this Court dated 2.5.2017 in Writ Tax No. 48 of 2017 (M/s. Shivalik Buildtech Pvt. Ltd. Vs. State of U.P. and others. In the case of the M/s Shivalik Buildtech Pvt. Ltd.(supra) the issue came up for consideration before a Division Bench of this Court was almost identical as of the issue in the present writ petitions. This Court, after considering the submission of the learned counsels and after perusal of relevant provisions of law as well as the perusal of material avai....
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.... otherwise. In every case where the statute provides for 'reason to believe', either the reason should appear on the face of the notice or they must be available on the material which have been placed before the authorities concerned. The expression 'reason to believe' does not mean a power subjecting assessment on part of the assessing authority on the basis of the material or fact available before it. The material on which the assessing authority forms its opinion must not be a vague distant or irrelevant material which must have some nexus and some rationale with the object sought to be achieved. In the absence of any material the action taken by the assessing authority can always be held to be arbitrary and bad in law. The relevant paragraph of the above decision of the Supreme Court is quoted below: "This court has consistently held that such material on which the assessing authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by the assessing authority in pursuance of such belief. In case of absence of such material, this Court in clear terms has held t....
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....n ( but not mere change of opinion on same material)." Learned counsel for the State has placed the provisions of Section 13 of the VAT Act. Section 13 provides the procedure of Input Tax Credit. Sub-section (1) of Section 13 provides as follows: "(1)Subject to provisions of this Act, dealers referred to in the following clauses and holding valid registration certificate under this Act, shall, in respect of taxable goods purchased from within the State and mentioned in such clauses, subject to conditions given therein and such other conditions and restrictions as may be prescribed, be allowed credit of an amount, as input tax credit, to the extent provided by or under the relevant clause:(For condition prescribed see Rule 24)." Sub clause(f) of Section 13(1) provides as follows: "(f) Notwithstanding anything to the contrary contained in this sub-section where goods purchased are resold or goods manufactured or processed by using or utilizing such purchased goods are sold, at the price which in lower than (i)purchase price of such goods in case of resale; or (ii) cost price in case of manufacture, the amount of input tax credit shal....
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.... or collateral to the merits if, the issue. If, at the inception of an inquiry by an inferior tribunal, a challenge is made to its jurisdiction, the tribunal has to make up its mind whether to act or not and can give a ruling on the preliminary or collateral issue; but that ruling it not conclusive." 76. The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction. 84. From the above decisions, it is clear that existence of "jurisdictional fact" is sine qua non for the exercise of power. If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of "jurisdictional fact", it can decide the "fact in issue" or "adjudicatory fact". A wrong decision on "fact in issue" or on "adjudicatory fact" would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present." 34.However, for initiation of reassessment proceedings thereafter the burden lies on the asses....
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....und germane to the formation of belief regarding escaped turnover. 37.To allow the respondents to reassess the petitioner in the present facts would allow the State to make an inquiry into the facts on which its authorities have not entertained a reason to believe inasmuch as the sanction order and the proposal containing the belief do not even remotely suggest that the Assessing Authority has any material or information that the petitioner had not shown separately the value of labour and services and amount of profit accrued on such labour and services." Thus, from the perusal of the record we find that in the assessment orders the assessing authority has properly examined the entire material and thereafter has allowed input tax credit on the sale price by accepting the credit notes, which are issued by the seller and once this aspect has been considered and examined, there was no occasion to the assessing authority to seek permission for re-assessment for re-opening the matter and in view of the aforesaid reasons the writ petitions stand allowed. The orders dated 30.3.2017 passed by the Additional Commissioner granting the permission to the assessing authority to re-a....
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