2013 (5) TMI 285 - HC - VAT and Sales Tax

Reassessment notice u/s 21 of the U.P. Trade Tax Act - allegation of concealed turnover of sale of M.S. Ingots for the period February, 2004 to June, 2007 - Held that - It is not disputed by the petitioner that the search took place on 10th July, 2007 at the various business places of assessee company and in that search operation, computer Hard-disk was seized containing the details of raw material as well as finished goods and those details show suppression of production of goods. Bare denial by the petitioner is not sufficient to hold that there is no material against it. It could not be denied by the the petitioner that statements of the Directors were recorded. Statements show that in M/S Parmarth Iron Pvt. Ltd., Raj Kamal Agrawal, Lalit Kumar Agrawal and Atul Kumar Agrawal Sons of Jitendra Mohan Agrawal and Vijay Kumar, Sanjay Kumar and Raj Kumar sons of late Ramesh Chandra are the directors while in M/s Parmarth Steel & Alloys Pvt. Ltd., Sri Raj Kamal Agrawal, Lalit Kumar Agrawal and Atul Kumar Agrawal are directors who are brothers. Thus, in M/S Parmarth Iron Pvt. Ltd. besides the aforesaid three brothers, Vijay Kumar, Sanjay Kumar and Raj Kumar are the directors. Statement of Lalit Kumar Agrawal, one of the directors in both i.e. in M/S Parmarth Iron Pvt. Ltd. and M/s Parmarth Steel & Alloys Pvt. Ltd. was also recorded, who has confirmed the statement given by Mohan Agrawal, Cashier. He has confirmed panchnama, seizer of computer s Hard-disk and other documents during search operation. He has further stated that the goods were sold by under billing or even without bills. Cash sales were also affected. Therefore, the argument of the petitioner that there is no material to form the belief that turnover has escaped assessment, is not correct. The seized material is relevant material. Thus the irresistible conclusion is that there is valid material to form a belief that the turnover of the petitioners has escaped assessments

Issues Involved:
1. Legality and validity of the permission to re-open assessments for the assessment years 2003-04 to 2006-07.
2. Legality of the reassessment notice under Section 21 of the U.P. Trade Tax Act for the assessment year 2007-08.
3. Adequacy of the material for forming a belief that turnover has escaped assessment.
4. Whether the statements obtained during the Excise Department's search were under duress and their subsequent retraction.
5. Applicability of judicial principles regarding "reason to believe" for escaped assessment.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Permission to Re-open Assessments (2003-04 to 2006-07):
The petitioners challenged the permission granted by the Additional Commissioner to re-open the assessments for the specified years, arguing that there was no material before the authority to justify such action. The court examined the nature of the order granting sanction under the proviso to Section 21(2) of the Act, which allows reassessment after the expiration of the usual period if the Commissioner is satisfied that it is just and expedient. The court referred to the Division Bench decision in M/s S.K. Traders, which held that reassessment could be initiated even on a change of opinion or due to lack of care or inadvertence by the Assessing Officer. The court concluded that the sanctioning authority had sufficient material to form a belief that turnover had escaped assessment and that the permission was not granted mechanically or without application of mind.

2. Legality of the Reassessment Notice under Section 21 for 2007-08:
The court noted that the reassessment proceedings had yet to take place and that the initiation of such proceedings was being questioned. The court reiterated that the order granting sanction need not contain detailed reasons but should show application of mind. It found that the sanctioning authority had considered the material and the petitioner's reply before granting permission, thus fulfilling the requirement of application of mind.

3. Adequacy of the Material for Forming Belief of Escaped Assessment:
The court examined whether there was relevant material to form a belief that turnover had escaped assessment. It was noted that during the search by the Excise Department, incriminating documents and a computer hard-disk containing details of raw materials and finished goods were seized, indicating suppression of production. Statements from directors confirmed the clandestine removal of goods. The court held that the material was sufficient to form a belief of escaped assessment and that the petitioner's denial was not enough to negate the existence of such material.

4. Statements Obtained Under Duress and Their Retraction:
The petitioners argued that the statements recorded during the Excise Department's search were obtained under duress and subsequently retracted. The court stated that whether the statements were obtained under duress would be considered during the reassessment proceedings. At this stage, the existence of the statements and the material seized during the search were sufficient to justify the belief of escaped assessment.

5. Applicability of Judicial Principles on "Reason to Believe":
The court referred to the Supreme Court's judgment in The Commissioner of Sales Tax, U.P. vs. M/s Bhagwan Industries (P) Ltd., which explained that "reason to believe" requires a rational basis for the belief that turnover has escaped assessment. The court emphasized that the sufficiency of the material is not a ground for interference by the court, but the relevancy of the material can be examined. The court found that the material in possession of the department was relevant and had a rational nexus with the belief of escaped assessment.

Conclusion:
The court dismissed the writ petitions, holding that there was valid material to form a belief that the turnover had escaped assessment. The permission granted by the Additional Commissioner was found to be justified and not mechanical. The court imposed a cost of Rs. 5000 on the petitioners.

← Previous Next →