2017 (12) TMI 690 - HC - VAT and Sales Tax

Reassessment of tax - extended period of limitation - Section 29 (7) of the U.P. V.A.T. Act, 2008 - Change of opinion - Held that - there is no quarrel with the proposition that the reassessment proceedings may be initiated and reassessment order may be passed only after the assessing officer has recorded his reason to believe that any turn over has escaped assessment. The objection of the State in the present case appears to be that the stage of applying the aforesaid principle has not arisen inasmuch as at present, neither the Additional Commissioner had granted the sanction to the petitioner s assessing authority to initiate assessment proceedings in the extended period of limitation nor the assessing authority has yet issued any notice to initiate reassessment proceedings. The objection raised by the petitioner assumes significance inasmuch as the said issue was admittedly extensively and squarely dealt with by the assessing officer in the original assessment order dated 19.12.2013 - To allow the revenue to obtain sanction in absence of any reason to believe (as to escapement to tax of any turn over), would be to allow the revenue authorities to find new way to harass the assessee. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to notice under Section 29 (7) of U.P. V.A.T. Act, 2008 for reassessment for A.Y. 2010-11 (U.P.)

Analysis:
The petitioner, a company executing works contract, received a sub-contract for a road project. The assessing officer previously raised queries regarding tax on the received amount, but no tax was imposed after assessing the petitioner. Later, the petitioner claimed refunds and the assessing authority proposed reassessment for A.Y. 2010-11 based on an amount allegedly escaping assessment for transfer of property and goods. The petitioner challenged the notice, arguing that the assessing officer had already formed an opinion in the original assessment proceedings, making it impermissible to change that opinion without new material. The petitioner relied on a division bench decision to support this argument.

The State contended that the Additional Commissioner can grant sanction for reassessment even if a change of opinion is involved, citing a Supreme Court judgment. The court noted that reassessment can only proceed after the assessing officer has a 'reason to believe' that turnover escaped assessment. The State's objection was that the sanction had not been granted yet, and the petitioner's objection was significant as the issue had been thoroughly addressed in the original assessment order. The court emphasized that a change of opinion without new material is impermissible for reassessment, and no new material existed to justify reassessment in this case.

The court concluded that the revenue's objection was purely academic, as the reassessment was sought solely on a change of opinion without new material. It emphasized that reassessment cannot be initiated on a mere change of opinion, and the sanction must be based on a 'reason to believe' for reassessment. Granting sanction without such a reason would allow revenue authorities to harass assessees without valid grounds. The court quashed the order for reassessment, highlighting the necessity of a valid 'reason to believe' before proceeding with reassessment.