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TMI Blog2013 (9) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... from sales tax, the assessing authority should not issue notice under Section 21 for re-assessment. The huge quantity of diesel purchased by the assesse for running diesel generating sets should have been examined both for the purposes of its utilisation in manufacture and for ancillary purposes - There was no such error in law, in recording the reasons to believe, that the failure of the assessing authority to consider the utilisation of the diesel oil as fuel purchased by the petitioner was not sufficient material, even if it was disclosed by the assessee for the purposes of the assessment. Reassessment of Escaped Turnover - The assessing authority may also not be allowed to have a second thought about the applicability or effect of the survey - where primary facts necessary for assessment or fully and truly disclosed to the Income Tax Officer at the stage of original assessment proceedings, he was not entitled on a change of opinion to commence proceedings - but where the assessing authority did not apply its mind at all and completely omitted consideration of the purchase of raw material in bulk quantity, even if it was in relation to both manufacture and ancillary activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years 1997-98, 1998-99, 1999-2000 and 2000-2001 the original assessment orders were passed on 16.3.2000, 28.3.2001, 21.3.2002 and 28.2.2003. It is stated that while passing the original assessment orders, complete details of the purchase of the raw material, fuel, packing material etc. was disclosed and was examined by the assessing authority. The assessment orders have become final. It is submitted that the petitioner had duly disclosed the purchase of high speed diesel oil, used in the generating sets for each of the assessment years with the details of other purchases. For the assessment year 1996-97, the petitioner disclosed purchase of high speed diesel valued at Rs. 4,53,63,984.16 in the total purchase of other items of Rs. 16,08,78,644.70, including chemicals, general stores, packing material, wire and felt, electric stores. Similarly for the assessment year 1998-99 the petitioner disclosed purchase of high speed diesel oil for generating sets valued at Rs. 4,80,86,090.33; for the assessment year 1999-2000 of Rs. 5,54,95,287.00; and for assessment year 2000-01 of Rs. 6,85,55,764.00. These purchases were duly taken into account by the Assessing Officer, at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority before sending the proposal for initiating the proceedings U/S 21 (2). A photocopy of the circular dated 2.9.2000 is enclosed herewith. In order to avoid the undue harassment of the assessees by reopening the assessment after the expiry of the period of limitation it was again reiterated by the circular No. 327 dated 3.10.2001 that before sending the proposal for permission for reassessment U/S 21 (2) reasons must be recorded in writing on the order sheet by the Assessing Authority. We may submit that we have obtained the certified copy of the order sheet along with all the entries therein and no reasons for reopening the assessment have been recorded by the Assessing Officer. In these circumstances, the basis for grant of permission U/S 21 (2) of the U.P. Trade Tax Act, is illegal, arbitrary and malicious, hence the notice deserves to be quashed. In as much as without reasons being recorded and supplied to us, we are unable to give any proper reply. You are hereby requested to drop the notice. Thanking you, Yours faithfully, For Shree Bhawani Paper Mills Ltd. sd/- AUTHORISED SIGNATORY" 7. The reply for the three subsequent assessment years was on the same li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... block, residential quarters, street lighting, and all other purposes for which the electricity is consumed in the manufacturing and allied activities. He submits that the details of purchase of diesel in respect of each of the assessment year was truly and correctly disclosed at the time of assessment. The assessing authority completed the assessment without raising any doubt to the sufficiency of the accounts books, the quantity of paper manufactured and the consumption of diesel both for manufacture and other purposes. He submits that the purchase of diesel has no co-relation with the manufacture of paper on per tonne basis from the units of electricity consumed, and in the circumstances the respondents have no authority to initiate proceedings for reassessment. 11. Shri Bharat Ji Agarwal has relied upon judgments of Supreme Court in Commissioner of Income-Tax v. Kelvinator of India Ltd (2010) 320 ITR 561 (SC), in which while examining Section 147, which is pari materia with Section 21 of the U.P. Trade Tax Act, the Supreme Court held that the words 'reason to believe' under Section 147 of the Income Tax Act do not give powers to the assessing officer to reopen assessment on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal Udyog and others vs. State of UP and others 2008 U.P.T.C. 881 a Division Bench of this Court held in paragraphs 47 and 48 as follows:- "47. Section 21 (1) of the U.P. Trade Tax Act contemplates assessment and reassessment is equivalent to Section 147 of the Income Tax Act, 1961. Both the sections relate to the assessment of the escaped assessment to tax. In both the sections the proceeding can be initiated only if the assessing authority "has a reason to believe" that there is escaped assessment. 48. Under Section 21 (1) of the Act the words are "has reason to believe" and not "reason to suspect". The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable and based on reasons, which are relevant. It must be in good faith and not in mere pretence, should have a rational connection and relevant bearing on the formation of the belief, and should not be extraneous or irrelevant. The material should be relating to the particular year for which the assessment is sought to be reopened. It is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined in this light and no findings have been recorded by the assessing authority with regard to the consumption of diesel and the production of paper. In view of the facts narrated above, the assessment orders for the abovenoted years were scrutinized again and it was found that the purchase of diesel oil as disclosed by the petitioner, is unjustified and disproportionate to the production and prima facie, the case of escaped turnover of manufactured paper was made out. On this ground the proposal for reopening the case under section 21 (2) was sent to the Additional Commissioner Grade 1st, Trade Tax, Allahabad who, after detailed examination of the records and after hearing the parties, allowed the assessing authority to reopen the case of the petitioner for the aforesaid years. In pursuance to the permission granted by the Additional Commissioner, the impugned notices were sent to the petitioner who challenged these notices through the present writ petition before this Hon'ble Court and this Hon'ble Court has been pleased to stay further proceeding in pursuance of these notices, hence no further action has been taken." 15. Shri S.P. Kesarwani submits that it is unusual fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. (1) If the assessing authority has reason to believe that the 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 at a rate lower than that 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 charged at the rate at which it would have been charged had the turnover not escaped assessment, or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the turn over. The assessing authority is in such case justified in making re-assessment under Section 21 (1) of the Act. 21. We agree with learned counsel for the petitioner, that Section 21 (1) does not permit reassessment of turnover, which after due consideration has been subjected to assessment for tax, merely because the assessing authority subsequently comes to take a different view of the matter vide Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan AIR 1980 SC 1552. Further where an opinion has been formed in the assessment order, that the turnover of sale was exempted from sales tax, the assessing authority should not issue notice under Section 21 for re-assessment vide M/s Palco Lining Co. v. State of UP 1983 U.P.T.C. 116. The assessing authority may also not be allowed to have a second thought about the applicability or effect of the survey vide Commissioner of Sales Tax v. Gopalji 1974 U.P.T.C. 277, and that where primary facts necessary for assessment or fully and truly disclosed to the Income Tax Officer at the stage of original assessment proceedings, he is not entitled on a change of opinion to commence proceedings vide Commissioner of Income Tax v. B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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