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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 ..... Bareli. The company is registered both under the U.P. Trade Tax Act, and Central Sales Tax Act. It is stated that the company does not have electric connection from U.P. State Electricity Board or from any other source, at its factory or residential premises at Rai Bareli. The entire manufacturing process is dependent on the electricity generated from the four diesel generating sets with capacity of more than 1000 KVA each. The generating sets are installed at the factory site situated at Rae Bareli, where the entire manufacturing activity is undertaken. The factory runs exclusively from the power generated by the diesel generating sets. 4. The company consumes large quantity of diesel for running the generating sets. For the 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 purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by requested that kindly communicate the reasons which must have been recorded by the Assessing Authority before sending the proposal to you for seeking permission to initiate the proceedings under Section 21 (2) (proviso) to the Act. Apart from the requirement of recording the reasons in writing by the Assessing Authority while sending the proposal for initiating the proceedings U/S 21 (2), a circular was also issued on 2nd September, 2000 by the Commissioner of Trade Tax, U.P., Lucknow in which specific directions have been issued that the reasons must be recorded in writing on the order sheet by the Assessing Authority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or production of electricity and the number of units utilised on per tonne basis of the manufacture of paper. 10. Shri Bharat Ji Agarwal, learned counsel appearing for the petitioner submits that the petitioner had produced the entire records including the purchase of diesel for captive generation of power from the diesel generating sets. The company has manufacturing facility at Rai Bareli, where it does not have electricity connection and thus the electricity produced by the generating sets is used both for the purpose of manufacturing of paper and for the other purposes namely for use in administrative 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was pointed out that the meaning of the expression, `reason to believe'' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe'' in place of the words `for reasons to be recorded by him in writing, is of the opinion''. Other provisions of the new section 147, however, remain the same." 12. In M/s Aryaverth Chawal 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 " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Narain, Deputy Commissioner (Assessment), Trade Tax 1st, Allahabad, which reads as follows:- "3A That the petitioner company is registered under U.P and Central Sales Tax Act and its Head Office is situated at Allahabad. It manufactures all kinds of paper at Rai Bareli. For the assessment years 1997-98 to 2000-2001, the assessment proceedings have been completed in due course. On examination of the assessment orders and files of the aforesaid years, it was found that the petitioner had purchased diesel oil in bulk quantity, disproportionate to production and sale. The account books were not examined 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulp as well as other purchase of goods namely chemicals, general stores, packing material, wire & felt, electrical stores and high speed diesel, but does not refer to or co-relate the manufacture with the utilisation of the purchased/consumed raw material including diesel oil. We further find that there is nothing in the assessment orders, which may show as to how much high speed diesel oil purchased was actually consumed and the number of units utilised in manufacture of paper. Section 21 (1) of the Act provides:- Section 21. Assessment of tax on the turnover not assessed during the year. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, which would in such case not warrant the formation of the belief relating to escapement of assessment of turn over. 20. In this case, though the entire material was before the assessing authority, he did not apply his mind to it, and or has failed to consider it, on account of which the whole or any part of the turn over may have escaped assessment or has been underassessed. There can be no denial that the consumption of raw material is relevant for the purposes of determination of turn over. The assessing authority made assessment without giving any weight to it for ascertaining 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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