2010 (5) TMI 778 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to initiation of proceedings under section 21 for assessment year 1995-96.

Analysis:
The petitioner, engaged in the business of purchasing and selling mustard oil, contested the initiation of proceedings under section 21 for the assessment year 1995-96. The petitioner claimed exemption on the sales of mustard oil, asserting that the purchases were made within the State of U.P. and the petitioner was neither a manufacturer nor an importer. The assessing authority initially granted exemption on the sales of mustard oil after examining the books of account and purchase list. However, proceedings under section 21 were later initiated based on the assumption that since certain purchases were found non-verifiable in the assessment year 1997-98, the purchases for the year under consideration were also not verifiable. The petitioner's counsel argued that there was no material for the year under consideration to support the claim that the purchases were not verifiable.

Upon review, the court found that the initiation of proceedings under section 21 lacked any substantial material for the assessment year 1995-96. The court emphasized that each assessment year should be treated independently, and unless there was specific material for the year under consideration indicating non-verifiability of purchases, drawing inferences from a different assessment year was unjustified. The court noted that the belief forming the basis for initiating proceedings was unfounded and lacked a valid rationale.

Consequently, the court allowed the writ petition, quashing the proceedings under section 21 for the assessment year 1995-96. The court did not impose any costs in this matter.