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TMI Blog2007 (7) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... sons for granting permission/sanction to proposal to reopen the assessment for the assessment year in question and to make the reassessment under the extended period of limitation, the order dated 1st June, 2001 cannot be sustained and is therefore set aside. Consequently all proceedings taken in pursuance of the said order also falls and are set aside. Where proceeding has been set aside by this Court in exercise if powers under Article 226 of the Constitution the period of limitation shall not apply while initiating proceeding thereafter We are therefore of the considered opinion that the period of imitation provided under the first proviso to Sub-section 2 of Section 21 or Sub-sectioni4 of Section 21 would not be attracted in the present case both for passing a fresh order of sanction and reassessment. However, it would not mean that they could be passed at any time at the sweet will of the authorities. They are to be passed within a reasonable period and; what be the reasonable period would depend upon the facts of each case. As already found that Additional Commissioner has not given any reason in his order for granting approval, the order dated 1st June 2001 cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax was at the point of manufacturer or importer and not at the point of the petitioner. Thereafter the respondent No. 2 sought permission from the Additional Commissioner, Grade-1, Trade Tax, Zone, Ghaziabad-respondent No. 1 for reopening the assessment under the provisions of Sub-section (2) of Section 21 of the Act. A notice dated 18th April, 2001 was issued by the respondent No. 1 calling upon the petitioner to show cause as to why permission be not granted. The permission was granted by the respondent No. 1 vide order dated 1st June, 2001. The respondent No. 2 issued notice dated 4th March, 2002 under Sub-section (2) of Section 21 of the Act proposing reopening of the assessment in view of the decisions of this Court in the case of Commissioner of Sales Tax, U.P. v. Kabar Khana, Turkmanpur 1985 A.L.J. 73 wherein it has been held that the goods purchased from the Kabaries is not exempt and liable to tax as old unserviceable goods and further as the name and address of the principals are not mentioned, the entire transaction is to be taxed at the hands of the petitioner in view of the definition of word "manufacture" given in Section 2(ee) of the Act. The order dated 1st Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the petitioner and Sri M.R. Jaiswal, learned standing Counsel for the respondents. 4. Learned Counsel for the petitioner submitted that the petitioner had disclosed the sale of broken glass for Rs. 1,30,27,655.45 purchased from unregistered dealer within the State of Uttar Pradesh in its commission agency account which was duly examined and verified by the respondent No. 2 in the course of assessment proceedings as would be clear from the assessment order dated 18th November, 1996, a copy of which has been filed as Annexure 1 to the writ petition. According to him the respondent No. 2 has categorically held that the aforesaid transactions is liable to tax on the point of manufacturer/importer and therefore, there is no liability of tax upon the petitioner. He, thus, submitted that the present proceedings under Section 21(2) of the Act have been initiated without application of mind and there was no material on the basis of which the respondent could have any reason to believe that the turnover had escaped assessment of tax. He further submitted that the respondent No. 1 had accorded sanction without any application of mind as in the order dated 1st June, 2002 no reason has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Trade Tax, Khand-2, Banda and Ors. 2004 U.P.T.C. 210; 6. State of U.P. and Anr. v. Anil Kumar Ramesh Chandra Glass Works and Ors. (2005) 11 SCC 451; 7. Trade Tax Officer, Saharanpur v. Royal Trading Co. (2005) 11 SCC 5 18. 6. In rejoinder Sri Kunwar Saxena, learned Counsel for the petitioner in rejoinder submitted that neither in the notice dated 18ltl April 2001 nor in the order dated lst June, 2001 any reason has been given, therefore both the notice and the order are liable to be set aside on this ground alone. DISCUSSION: 7. We have given our anxious consideration to the various pleas raised by the learned Counsel for the parties. ALTERNATIVE REMEDY: 8. Taking up the preliminary objection regarding the availability of altrnative remedy by way of showing cause and submitting of reply by the petitioner, raised by the learned standing Counsel we find that the Apex Court in the case of State of U.P. v. Anil Kumar Ramesh Chandra Glass Works and Anr. (2005) 11 SCC 451, has held as follows: This Court had repeatedly held that Article 226 should not be permitted to be invoked in order to challenge show cause notices unless accepting the fact in the show cause notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution, in a given case although may not entertain a writ petition inter alia on the ground of availability of an alternative remedy, but the said rule cannot be said to be of universal application. Despite existence of an alternative remedy, a writ court may exercise its discretionary jurisdiction of judicial review inter alia in cases where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right or if there has been a violation of a principle of natural justice or where vires of the act is in question in the aforementioned circumstances, the alternative remedy has been held not to operate as a bar. See Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. , Sanjana M. Wig v. Hindustan Petroleum Corporation. Ltd. , State of H.P. v. Gujarat Ambuja Cement Ltd. and Anr. (2005) 6 SCC 499. 12. In the case of Star Paper Mills Ltd. v. State of U.P. and Ors. 2000 AIR SCW 5782, the Apex Court has held as follows: 5. The issues relating to entertaining writ petitions when alternative remedy is available, were examined by this Court in several cases and recently in State of Himachal Pradesh and Ors. v. Gujarat Ambuja Cement Ltd. and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un Municipality and Ors. v. Amalendu Das and Ors. ; S.T. Muthusami v. K. Natarajan and Ors.; R.S.R.T.C. and Anr. v. Krishna Kant and Ors.; Kerala State Electricity Board and Anr. v. Kurien E. Kalathil and Ors. ; A. Venkatasubbiah Naidu v. S. Chellappan and Ors. ; anr L.b. Sudhakar Reddy and Ors. v. State of Andhra Pradesh and Ors. ; Shri Sant Sadguru Janardan Swami (Moingiri Mhaharaj) Sahakari Dugdha Utpadak Sanstha and Anr. v. State of Maharashtra and Ors. ; Pratap Singh and Anr. v. State of Haryana and G.K.N. Dnveshafts (India) Ltd. v. Income Tax Officer and Ors. 2003 (1) SCC 72. 9. In Harbans Lal Sahnia v. Indian Oil Corporation Ltd. , this Court held, that: the rule of exclusion of writ jurisdiction by availability of alternative remedy is a rule of discretion and not one of compulsion and the Court must consider the pros and cons of the case and then may interfere if it comes to the conclusion that the petitioner seeks enforcement of any of the fundamental rights; where there is failure of principles of natural justice or where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. 10. In G. Veerappa Pillai v. Raman and Raman Ltd. ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords, it must be based on reasons which are relevant and material as held by the Apex Court in Ganga Saran Sons P. Ltd. v. ITO . 15. The expression "reason to believe" in Section 147 does not mean purely subjective satisfaction on the pan of the Assessing Officer The belief must be held in good faith; it cannot be merely a pretence. It f open to the Court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Assessing Officer in starting proceedings under Section 147 is open to challenge in a Court of law as held in S. Narayanappa v. Commissioner of Income Tax ; Madhya Pradesh Industries Ltd. v. ITO; Sowdagar Ahmed Khan v. ITO , ITO v. Lakhmani Mewal Das ; ITO v. Nawab Mir Barkat Ali Khan Bahadur ; CST v. Bhagwan Industries (P) Ltd. (1973) 31 STC 293 (SC) and State of Punjab v. Balbir Singh (1994) 3 SCC 2999. 16. The formation of the required opinion and belief by the Assessing Officer is a condition precedent. Without such formation, he will not have jurisdiction to initiate proceedings under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer see e.g. The appellant preferred appeals and the Supreme Court dismissed the appeals, observing that since the reasons for reopening of assessments under Section 148 had been disclosed in respect of five assessment years, the Assessing Officer had to dispose of the objections, if filed by passing a speaking order before proceeding with the assessments for those years. 18. The Constitution Benches of the Hon'ble Supreme Court in K.S. Rashid and Sons v. Income tax Investigation Commission and Ors. ; Sangram Singh v. Election Tribunal, Kotah and Ors. ; Union of India v. T.R. Varma ;State of U.P. and Ors. v. Mohammad Nooh A.I.R. 1958 SC 86 and K.S. Venkataraman and Co. (P) Ltd. v. State of Madras , has held that Article 226 of the Constitution confers on all the High Courts a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Pradesh (whether regularly or otherwise) the business of buying, selling supplying or distributing goods directly or indirectly, for case o deferred payment or for commission, remuneration or other valuable consideration and includes- (i) a local authority, body corporate, company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business; (ii) a factor, broker, arhti, commission agent, decreed agent, or any other mercantile agent, by whatever name called, and whether of the same description as here in before mentioned or not, who carries on the business of buying, selling, supplying or distributing goods belonging to any principal, whether disclosed or not; (iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not, and whether the offer of the intending purchaser is accepted by him or by the principal or nominee of the principal; (v) a Government which, whether the course of business or otherwise, buys, sells, supplies or distributes goods, directly or otherwise for case or for differed payment or for commission, rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtra-ordinary dated 8.8.1998. 24. Before its amendment the term manufacturer was defined as follows: (ee) 'Manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the State after their manufacture and includes a dealer who sells bicycles in completely knocked down form. (h) 'Sale' with its grammatical variations and cognate express; ms, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for case or deferred payment or other valuable-consideration and includes- (i) a transfer, otherwise than in pursuance of a contact, of property in any goods for cash, deferred payment T other valuable consideration; (ii) a transfer of property in goods whether as goods or in some other forms involved in the execution of a works contrail; (iii) the delivery of goods on hire purchase or any system of payment by installments; (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; and (v) the supply of goods by any unincorporated association or body of persons to a member thereof f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han at which it is assessable under this Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making, such inquiry as it may consider necessary, assess or reassess the dealer or tax according to law: Provided that the tax shall be changed at the rate at which it would have been charged had the turnover not escaped assessment, full assessment as the case may be. Explanation I: Nothing in this Sub-section shall be deemed to prevent the assessing authority from making an assessment to the best of its judgment. Explanation II: For the purposes of this Section and of Section 22, "assessing authority" means the officer or authority who passed the earlier-assessment order, if any, and includes the officer or authority having jurisdiction for the time being to assess the dealer. Explanation III: Notwithstanding the issuance of notice under this sub-section, where an order of; assessment or reassessment is in existence from before ; the issuance of such notice it shall continue to be effective as such, until varied by an order of assessment or reassessment made under this Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for any assessment year is set aside under Section 30, a fresh order of assessment or reassessment for that year may be made within six months from the date on which such earlier order was set aside. (5-A) If an expert order of assessment or reassessment or penalty passed against a sick unit is set aside by the State Government by an order under Sub-section (2) of Section 38, a fresh order of assessment or re-assessment or penalty, as the case may be, for that year may be made within one year from the date of receipt of such order of State Government by the assessing authority concerned. (6) Where the proceeding for assessment or re-assessment for any assessment year remain stayed under the orders of any court or authority, the period commencing on the date of stay order and ending with the date of receipt by the Assessing Authority concerned of the order vacating the stay, shall be excluded in computing the period of limitation provided in this section: Provided that if in so computing,, the period of limitation comes to less than six months, such assessment or re-assessment may be made within six months from the date of receipt by the Assessing Authority of the order v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whole or any part of the turnover of the dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax or where the tax rate applied is law or any deductions or exemptions have been wrongly allowed has been empowered to make assessment order or reassessment order as the case may be. However, under Sub-section (2) of Section 21 of the Act the limitation for making re-assessment is two years from the end of such assessment year or March 31, 1998 whichever is later. First proviso to Sub-section (2) of Section 21 of the Act provides for extended period of limitation of six years from the end of such year or March, 31, 2002 whichever is later. Under the said proviso action can be taken only after the Commissioner either suo motu or on the basis of the reasons, recorded by the assessing authority is satisfied and he authorizes the assessing authority to make assessment order or reassessment order which can also be in a case involving a change of opinion. MERITS OF THE CASE 26. We find that in the original assessment order dated 18th November, 1996 the respondent No. 2 while dealing with the issue of tax liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was liable to tax on the point of sale to Consumer. This Court had held that the Tribunal had committed an error in ignoring the aforementioned notification wherein the goods mentioned therein are liable to tax on the point sale to consumer. Even though in the aforesaid decision this Court had held old, discarded and unserviceable plastic and glass goods to liable to consumer. Even though in the aforesaid decision this Court had held that old, discarded and unserviceable plastic and glass goods are liable to tax on the point of sale to consumer under the notification dated 7th September, 1981, it appears that the respondent No. 2 has give proposal to imposed tax on broken glass which have been purchased by the petitioner from unregistered dealer within the State of Uttar Pradesh and sold in its commission agency business on the ground that petitioner is the manufacturer or importer within the meaning of Section 2(ee) of the Act. 29. The provisions of Section 2(ee) of the Act as substituted in the year 1997 came up for consideration before the Apex Court in the case of Jhunjhunwala and Ors. (supra) and the Apex Court has held as allows: 9. According to the High Court, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation" must have reference to information as to law. Where in consequence of information in this possession, the Income Tax Officer has reason to believe that income has been assessed at too low a rate, he is empowered to revise the assessment; and thee can be no doubt that the belief of the Income Tax Officer that any given income has been assessed at too low a rate may in many cases be due to information about the true legal position in the matter of the relevant rates. If the word "information" in reference to this class of cases must necessarily include information as to law, it is impossible to accept the argument that, in regard to the other cases falling under the same provision, the same word should have a narrower and a more limited meaning. We would accordingly hold that the word "information" in Section 34(I)(b) includes information as to tin true and correct state of the law and so would cover information as u relevant judicial decisions. If that be the true position, the argument that the Income Tax Officer was not justified in treating the Privy Council decision in question as information within Section 34(I)(b) cannot be accepted. 32. In the case of Shyam Babu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not by the assessee and the assessee only purchases those poppy seeds from the farmers. 35. In State of Karnataka and Ors. v. C. Lalitha , the Apex Court has observed: A judgment, as is well known, is not to be read as a statute. But, it is also well known that the judgment must be construed as if it had been rendered in accordance with Law. 36. In the case of Gajraj Singh v. State of U.P. the Appex Court has held: A doubt arising from reading a judgment of the Court can be resolved by assuming that the judgment was delivered consistently with the provisions of law and therefore a course or procedure in departure from or not in conformity with statutory provisions cannot be said to have been intended or laid down by the Court unless it has been so stated specifical. 37. In the case of Hiralal Rattanlal etc. etc. (supra) the Apex Court has held that a proviso may be separate provisions and may substantially alter the main section. 38. In the case of Parson Tools and Plants, Kanpur the Apex Court has held as follows: 16. If the legislature willfully omits to incorporate something of an analogous law in a subsequent statute, or even if there is a cases omissus in a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val to the proposal if any made by the assessing authority for making the reassessment. 45. In the case of Rajesh Kumar and Ors. v. Dy. CIT and Ors. the Apex Court was Considering the provisions of Section 142(2-A) of the Act which Empowers the Assessing Officer after obtaining the approval of the of the Commissioner to direct for special audit of the books of account of the assessee. The provisions of Section 142(2-A) of the Act did not provide for giving of any opportunity of hearing by the Commissioner to the assessee. The Apex Court has held as follows: 53. The factors enumerated infection 142(2A) of the Act, thus, arc not exhaustive. Once it is held, that the assessee suffers civil consequences and any order passed by it would be prejudicial to him, principles of natural justice must be held to be implicit. The principles of natural justice must are required to be applied inter alia to minimize arbitrariness. 54. It is trite, even if there is a possibility that the Tribunal would correctly follow the statutory provisions, still compliance of principles of natural justice would be required. See R. v. Kensington and Chelsea Rent Tribunal ex p. MacFarlane (1974) 1 WLR 1486 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity is deemed to be inbuilt in the provision, in case am action taken or order passed would effect the rights of any person adversely. In the case of Indian Oil Corporation, Agra v. Commissioner Trade Tax, reported in 1999 UPTC p. 365, a division bench of this Court after holding the Circular issued on 7th July, 1992 binding on the assessing authority held that the dealer should have been given a hearing in the matter before any reassessment order could have been passed, and since such an opportunity was not given, the order of approval granted by the higher authority was quashed. 10 There is one more reason for holding that the opportunity has to be given to the assesses or: the dealer by the Commissioner be ore he grants/approval for initiating proceedings under Section 21 in the extended period of limitation which stands spelt out from the language used in the first proviso Attached to Sub-section 2. 11. The proviso confers power and gives jurisdiction/authority to the Commissioner if he is Satisfied either on his own or on the basis of the reasons recorded by the assessing authority that it is just and expedient to either assess or re-assess the dealer, only then, he would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine or relevant would not make out a case reopening of the assessment and for that matter also, the dealer has to be associated in the proceedings initiated seeking approval from the Commissioner or the Additional Commissioner, as case may be. 15. Admittedly, the Commissioner before granting sanction/approval did not give any opportunity to the petitioner and obviously he has not recorded any reason for being satisfied that it is just and expedient to reopen the assessment while granting sanction on 29th March, 1993. The order passed by the Commissioner simply reproduces the language used in the aforesaid proviso but it does not disclose any reason for reaching the said conclusion. The order, thus, granting approval itself is liable to be quashed on the aforesaid ground alone. 47. The same view has been taken by this Court in the ease of Olympic Zippers Pvt. Ltd. v. Commissioner of Trade Tax and Anr. 2007 UPTC 146. 48. In the case of Manaktala Chemicals Pvt. Ltd. (supra) this Court has held that reasons are required to be given the Additional Commissioner while granting sanction. The Apex Court in the case of Rajesh Kumar (supra) has held as follows: 20. Principles of na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily spring from a source extraneous to the original record and acting under Section 21 can be taken on the basis of material already on record at the time of the original assessment, if the escapement of assessment to tax was a result of lack of care or inadvertence on the part of the Assessing Officer. In the present case the escapement has resulted on account of lack of care or inadvertence on the part of the Assessing Officer. In the hers and circumstances of the case as there is binding decision of the this Com t m the case of Kabar Khana, Turkmanpur (Supra) wherein it has been held that goods purchased from Kabaris is not exempt from tax but is liable to tax as unserviceable goods the proceedings can therefore be taken on mere change of opinion. LIMITATION: 52. The question still remains as to what would be period of limitation for passing a fresh order by the Additional Commissioner after the same has been set aside by this Court under Article 226 of the Constitution of India on the ground of no reasons have been given. 53. In the case of Grindlays Bank Ltd. v. Income Tax Officer, Calcutta and Ors. AIR 1980 SC 656 the Apex Court has held: Ordinary where the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 days. Such an order was made by the Income Tax Officer in a particular case within the period of 90 days. The assessee filed a writ petition in the Delhi High Court, which set aside that order on the ground that the principles of natural justice had been violated and directed the Income Tax Officer to reconsider the matter afresh. When a fresh order was made after complying with the principle of natural justice, the assessee challenged it on the ground that the latter order was made beyond the period of 90 days prescribed under Section 132(5). The Delhi High Court accepted his contention and said that the order would have to be made within the period of 90 days and that the assessee was not estopped from contending against its validity. The Supreme Court in Director of Inspection of Income Tax v. Pooran Mall Sons held that if once an order was made within a period of 90 days the subsequent order made in pursuance of an order of remand or direction by the High Court could be at any time. 56. Recently a Division (Bench of this Court in Civil Misc. Writ Petition No. 563 of 2007 King Agency v. State of U.P. and Ors. decided on 11th May. 2007 has followed the aforesaid decision a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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