2010 (4) TMI 1012 - HC - VAT and Sales Tax

Approval under the proviso to section 21(2) of the U.P. Trade Tax Act 1948 to initiate the proceeding beyond the normal period and the notices dated August 30 2007 issued in pursuance thereof challenged Held that - We are not impressed by the argument that the instant case is a case of change of opinion. The change of opinion necessarily postulates that the assessing authority had an occasion to consider the material earlier and on the same set of facts another opinion was sought to be formed. The question of change of opinion cannot arise where there has been no previous proceeding of assessment in respect of a turnover in dispute. In the facts and circumstances we are of the view that the orders passed under section 21(2) of the Act are not sustainable and are liable to be set aside inasmuch the notices under section 21 of the Act are based on no relevant material. In the result the writ petition is allowed. The order dated August 18 2007 passed by the Additional Commissioner Grade-I Trade Tax Ghaziabad Zone Ghaziabad and the notices issued under section 21(1) of the Act for the assessment year 2001-02 both under the U.P. Trade Tax Act and under the Central Sales Tax Act are quashed.

Issues Involved:
1. Validity of the approval granted under the proviso to section 21(2) of the U.P. Trade Tax Act, 1948.
2. Validity of the notices issued under section 21(1) of the U.P. Trade Tax Act, 1948.
3. Reopening of assessment based on materials found during a survey conducted after the original assessment period.
4. Change of opinion as a basis for reopening assessment.

Issue-wise Detailed Analysis:

1. Validity of the approval granted under the proviso to section 21(2) of the U.P. Trade Tax Act, 1948:
The petitioner challenged the approval granted by the Additional Commissioner, Grade I, Trade Tax, Ghaziabad Zone, Ghaziabad, to reopen the proceedings beyond the normal period of limitation. The court observed that the original assessment order dated March 15, 2004, had already examined the stock transfer in detail through stock transfer invoices, GRs, and other documents. The court found that no material relating to the year under consideration was found during the survey conducted on September 10, 2004. The court emphasized that the material should relate specifically to the year for which the assessment is sought to be reopened. The approval granted was based on no relevant material for the year under consideration, making it unsustainable.

2. Validity of the notices issued under section 21(1) of the U.P. Trade Tax Act, 1948:
The notices issued under section 21(1) of the Act for the assessment year 2001-02 were based on the approval granted under section 21(2). Since the court found the approval to be invalid due to the lack of relevant material, the notices issued under section 21(1) were also deemed invalid. The court held that the initiation of proceedings based on no specific material relating to the escaped assessment was impermissible and amounted to a mere change of opinion.

3. Reopening of assessment based on materials found during a survey conducted after the original assessment period:
The court examined whether the materials found during the survey conducted on September 10, 2004, at the premises of Asian Paints India Limited (Kasna) could justify reopening the assessment for the year 2001-02. The court noted that the alleged loose parchas found during the survey did not relate to the year under consideration. It reiterated that unless the materials specifically relate to the year for which the assessment is being reopened, no adverse inference can be drawn. The court concluded that there was no relevant material to form the belief of escaped assessment for the year 2001-02.

4. Change of opinion as a basis for reopening assessment:
The court emphasized that reopening of assessment based on a mere change of opinion is not permissible. It referred to several judgments, including those of the Supreme Court, which held that the belief of escaped assessment must be reasonable, based on relevant reasons, and not arbitrary or irrational. The court reiterated that the material should have a rational connection and relevant bearing on the formation of the belief. In the absence of specific material for the year under consideration, the court found that the initiation of proceedings was based on a change of opinion, which is not allowed under section 21(1) of the Act.

Conclusion:
The court allowed the writ petition, quashing the order dated August 18, 2007, passed by the Additional Commissioner Grade-I, Trade Tax, Ghaziabad Zone, Ghaziabad, and the notices issued under section 21(1) of the Act for the assessment year 2001-02. The court held that the proceedings were initiated on no relevant material and amounted to a change of opinion, which is impermissible under the U.P. Trade Tax Act and the Central Sales Tax Act.

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