2013 (9) TMI 293 - HC - VAT and Sales Tax

Escaped Assessment on Freight - Extended Period of Limitation for Reassessment Held that - The material discovered by the department from the returns filed by the petitioner in Central Excise Department for levy of service tax the railway receipts and the non-production of the document bill books and challans before the assessing authority clearly established that the assesse company did not produce the relevant material to claim that the entire freight was charged separately - The Addl. Commissioner did not commit any error on fact or in law in recording the turn over on account of freight had escaped from assessment. - Decided against assesse.

Summary

Issues Involved:
1. Validity of the reassessment order under Section 21(2) of the U.P. Trade Tax Act.
2. Inclusion of freight charges in the turnover for tax purposes.
3. Compliance with procedural requirements for claiming tax exemption on freight charges.

Issue-wise Detailed Analysis:

1. Validity of the Reassessment Order under Section 21(2) of the U.P. Trade Tax Act:
The petitioner challenged the order dated 19th September 2011, passed by the Addl. Commissioner, Commercial Tax, Jhansi, which extended the period of limitation for reassessment. The petitioner argued that Section 21(1) of the U.P. Trade Tax Act requires the assessing authority to have a "reason to believe" that there is escaped assessment, similar to Section 147 of the Income Tax Act. The petitioner relied on the case of Commissioner of Income Tax v. Kelvinater India Ltd., (2010) 2 SCC 723, which established that a review of the original proceedings cannot be made under the guise of reassessment. The petitioner contended that the belief must be reasonable, based on relevant reasons, and not arbitrary or irrational. The court, however, found that the Addl. Commissioner had not committed any error in finding fresh material that justified the belief that the turnover of freight had escaped assessment.

2. Inclusion of Freight Charges in the Turnover for Tax Purposes:
The original assessment for the year 2005-06 accepted the books of account and disclosed turnover but included the entire amount of freight (Rs.21,39,96,022/-) in the taxable turnover, denying the claim of exemption. The petitioner's appeal was initially allowed by the Joint Commissioner (Appeals), who remanded the case for fresh assessment. The Tribunal later held that no tax could be legally imposed on the amount of freight, as it was separately charged. However, the Addl. Commissioner observed discrepancies in the petitioner's disclosures to the Central Excise and Service Tax departments, where only Rs.3,78,09,696/- was shown as freight, contrasting with the commercial tax assessment disclosure of Rs.21,39,96,022/-. The court agreed with the Addl. Commissioner's findings that the petitioner did not produce sufficient evidence to verify the separate charging of freight and that the entire amount of freight should be part of the turnover.

3. Compliance with Procedural Requirements for Claiming Tax Exemption on Freight Charges:
The petitioner claimed that the entire account books were produced during the assessment, but the Addl. Commissioner noted that the petitioner failed to produce delivery challans, invoices, and account books detailing the freight charges. The appellate authority had remanded the matter due to doubts about the manner and method of charging freight. The Tribunal's casual approach, which accepted the petitioner's claim without proper verification, was criticized by the court. The court emphasized that under Section 2(i) of the Act, the cost of freight or delivery cost is not to be included as part of the turnover if it has been separately charged. However, the petitioner failed to provide adequate proof of separately charged freight, leading to the conclusion that the petitioner was not entitled to the exemption claimed.

Conclusion:
The court dismissed the writ petition, upholding the reassessment order under Section 21(2) of the U.P. Trade Tax Act. The court found that the petitioner did not produce sufficient evidence to support the claim of separately charged freight and that the turnover on account of freight had indeed escaped assessment. The court also criticized the Tribunal for its casual approach and failure to verify the petitioner's claims adequately.