2010 (2) TMI 1065 - HC - VAT and Sales Tax

Order under section 21(2) of the Act and notice under section 21(1) of the Act are being challenged - Held that - As it is a case of change of opinion of the assessing officer on the same material which was in existence at the time of original assessment. The proposal does not reveal any fresh material on the basis of which belief was formed that the claim has been wrongly allowed and the same is liable to tax. The order under section 21(2) of the Act also does not reveal that there was any fresh material on the basis of which a belief has been formed. It appears that the Additional Commissioner has wrongly applied rule 44(b) of the Rules. It is doubtful that the present is a case of goods returned but it is the case of return of the used tyres during the warranty period wherein the loss of rubber and the value of rubber available on the used tyres had been assessed and new tyres were supplied after taking the value of loss of rubber on which tax was admitted and paid. In the facts and circumstances we are of the view that the order passed under section 21(2) of the Act is not sustainable and is liable to be set aside inasmuch the notice under section 21 of the Act is based on no material. W.P. allowed.

Summary

Issues Involved:
1. Validity of the order dated October 1, 2003, passed by the Additional Commissioner, Grade I, Trade Tax, Meerut.
2. Validity of the reassessment notice dated February 10, 2004, issued by the Deputy Commissioner (Assessment) V, Meerut for the assessment year 1998-99.
3. Whether the reassessment proceedings were initiated based on a mere change of opinion.

Detailed Analysis:

1. Validity of the Order Dated October 1, 2003:
The petitioner challenged the order passed by the Additional Commissioner, Grade I, Trade Tax, Meerut, which allowed reassessment beyond the prescribed four-year period under section 21(2) of the U.P. Trade Tax Act, 1948. The petitioner argued that the initial assessment was thoroughly examined, and the loss claim of Rs. 4,28,27,644 was allowed after detailed scrutiny. The Additional Commissioner granted approval for reassessment based on the application of rule 44(b) of the U.P. Trade Tax Rules, 1948, which mandates that goods should be returned within six months. However, the petitioner contended that this rule was inapplicable as it was not a case of goods returned but of defective tyres replaced under warranty.

2. Validity of the Reassessment Notice Dated February 10, 2004:
The reassessment notice issued by the Deputy Commissioner (Assessment) V, Meerut, was also challenged. The petitioner argued that the reassessment notice was based on the same material available during the original assessment, and no new material was presented to justify the reassessment. The petitioner claimed that the reassessment was initiated merely due to a change of opinion, which is not permissible under the law.

3. Whether the Reassessment Proceedings Were Initiated Based on a Mere Change of Opinion:
The court examined whether the reassessment proceedings were initiated based on a mere change of opinion. It was established that under section 21(1) of the U.P. Trade Tax Act, reassessment can only be initiated if the assessing authority "has reason to believe" that there is escaped assessment. The court referred to various judgments, including those of the Supreme Court, which held that the belief must be reasonable, based on relevant material, and not arbitrary or irrational. The court found that in this case, the belief was formed on the same material available during the original assessment, and there was no fresh material to justify the reassessment. The court emphasized that a mere change of opinion does not warrant reassessment.

Conclusion:
The court concluded that the order dated October 1, 2003, passed by the Additional Commissioner, and the reassessment notice dated February 10, 2004, were not sustainable as they were based on a mere change of opinion without any fresh material. The court quashed both the order and the reassessment notice, allowing the writ petition in favor of the petitioner.