2014 (2) TMI 251 - HC - VAT and Sales Tax

Validity of notices issued under Section 21 (2) of the UP Trade Tax Act - Benefit of Section 8 (2A) of the Central Sales Tax - Adjustment of the State tax paid on paddy in the Central Sales Tax - Jurisdiction of Commissioner of Trade Tax - Held that - notices under Section 21 (2) are by way of show cause notices as to why limitation be not enlarged for proceeding of re-assessment to tax to deny the adjustment of state tax given on the purchase of paddy in the central sales tax on inter-state sales - directions are merely by way of guidance and do not amount to quashing the Circular nor there was any valid ground on which the Circular letter dated 29.3.2007, could be quashed. In the present case also we do not find any good ground to entertain the challenge inasmuch as the circular is only by way of clarification and does not take away the jurisdiction of assessing authority of re-assessment - Additional Commissioner Grade-I/respondent no. 2 has committed no error in exercise of power under Section 21(2) of the Act in granting the impugned permission permitting the Assessing Officer to initiate the proceeding for reassessment by the order dated 22.02.2008 as contained in annexure-4 of the writ petition. The consequent notice for reassessment under Section 21(2) given by the Assessing Authority dated 11th March, 2008, annexure-6 to the writ petition is also valid. The Assessing Officer has, thus, wrongly given adjustment of ₹ 1,22,245.00. Realizing the mistake, the Assessing Officer wants to correct it. Whether a writ court can prevent the Assessing Officer to correct the mistake when law envisages such correction under Section 21 of the Act. The answer is obviously No . No writ can be issued to prohibit a person to correct a legal mistake. A writ jurisdiction is meant for doing justice and not to perpetuate injustice or technicalities - show cause notices proposing re-assessment of the escaped turnover issued under Section 21 (2) of the U.P. Trade Tax Act are held to be valid - Decided against assessee.

Summary

Issues Involved:
1. Legality of the notices issued under Section 21 (2) of the UP Trade Tax Act.
2. Jurisdiction of the Commissioner of Trade Tax to issue the Circular dated 29.3.2007.
3. Validity of the reassessment proceedings initiated based on the Circular.

Issue-wise Detailed Analysis:

1. Legality of the notices issued under Section 21 (2) of the UP Trade Tax Act:
The petitioners challenged the notices issued under Section 21 (2) of the UP Trade Tax Act, arguing that these notices were based on a change of opinion rather than any new material evidence. The court referred to the previous judgment in M/s Aryaverth Chawal Udyog and others vs. State of UP and others, where it was held that the initiation of proceedings under Section 21 (1) of the Act on account of a change of opinion is not permissible. The court reiterated that the notices issued lacked fresh material to justify reopening the assessments and were based solely on a change of opinion, which is not a valid ground for reassessment under Section 21 (1).

2. Jurisdiction of the Commissioner of Trade Tax to issue the Circular dated 29.3.2007:
The petitioners contended that the Commissioner of Trade Tax had no jurisdiction to issue the Circular dated 29.3.2007, which influenced the assessing authorities. The court acknowledged this argument but clarified that while the Commissioner of Trade Tax should refrain from issuing directions that interfere with the judicial functions of subordinate officers, the circular itself, being a clarification of the law, does not constitute material for reopening cases. The court upheld the view that the circular was merely clarificatory and did not interfere with the quasi-judicial functions of the assessing authorities.

3. Validity of the reassessment proceedings initiated based on the Circular:
The court examined whether the reassessment proceedings initiated based on the Circular were valid. It referred to the subsequent judgment in S/s Gaya Deen Kailash Chand vs. State of UP & others, which distinguished the earlier judgment and held that the circular was clarificatory in nature and did not amount to interference in the quasi-judicial function of the authorities. The court found that the reassessment proceedings were based on the correct exposition of law as clarified by the circular, and thus, the initiation of reassessment was valid. The court emphasized that the grounds for reassessment must have a nexus with the formation of opinion regarding escaped assessment, and the sufficiency of these grounds is not a justiciable issue.

Conclusion:
The court dismissed all the writ petitions, holding that the show cause notices proposing reassessment of the escaped turnover issued under Section 21 (2) of the UP Trade Tax Act were valid. The court upheld the validity of the circular and the reassessment proceedings initiated based on it, emphasizing that the reassessment was justified to correct any legal mistakes made in the original assessments.