1978 (10) TMI 141 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability of a dealer under section 3-D(2) of the U.P. Sales Tax Act for sales of foodgrains made on behalf of ex-U.P. principals.
2. Application of section 21 of the U.P. Sales Tax Act regarding the reopening of assessments.

Analysis:
1. The first issue addressed in the judgment pertains to the liability of a dealer under section 3-D(2) of the U.P. Sales Tax Act for sales of foodgrains made on behalf of ex-U.P. principals. The judgment refers to a previous decision in Commissioner of Sales Tax v. Hanuman Trading Company, where it was concluded that the dealer was indeed liable to tax under the specified section of the Act. This establishes the dealer's tax liability for the sales of foodgrains conducted on behalf of ex-U.P. principals.

2. Moving on to the second issue regarding the application of section 21 of the U.P. Sales Tax Act in reopening assessments, the judgment delves into the interpretation of the provision. It discusses a scenario where the Sales Tax Officer issued notices under section 21 based on a change of opinion without substantial grounds or material to support the reassessment. The judgment compares the provisions of section 21 with similar provisions in the Income-tax Act and examines relevant case laws to determine the scope of initiating proceedings under section 21.

3. The judgment references the case of Suwa Lal Pooran Mal v. Commissioner, Sales Tax, U.P., Lucknow, where it was established that section 21 allows for reopening assessments even in cases of inadvertent mistakes or errors, without the necessity of fresh information. However, subsequent cases highlighted the limitations of reopening assessments solely on the basis of a change of opinion by the assessing authority.

4. The judgment emphasizes that the phrase "reason to believe" in section 21 necessitates a reasonable belief supported by objective facts, rather than a subjective opinion. It draws parallels with decisions under the Income-tax Act to assert that a mere change of opinion without new objective material does not warrant the initiation of proceedings under section 21 for reassessment.

5. Ultimately, the judgment concludes that proceedings under section 21 cannot be initiated solely on the basis of a change of opinion by the Sales Tax Officer. It affirms the importance of a reasonable belief backed by objective facts for reopening assessments under the U.P. Sales Tax Act. As a result, the first question is answered affirmatively, confirming the dealer's tax liability, while the second question is answered negatively, indicating the inappropriateness of applying section 21 in the given circumstances.

6. The judgment concludes by awarding costs to the assessee and providing a definitive resolution to the issues raised, thereby settling the matter in favor of the party concerned.