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TMI Blog2010 (2) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... f loss of rubber on which tax was admitted and paid. In the facts and circumstances, we are of the view that the order passed under section 21(2) of the Act is not sustainable and is liable to be set aside, inasmuch the notice under section 21 of the Act is based on no material. W.P. allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ot;the Rules"), the goods should be returned within six months, while, in the present case, it is not so and, therefore, the claim has been wrongly allowed. In pursuance thereof, notice under section 21(1) of the Act was issued by the assessing authority. Both the order under section 21(2) of the Act and notice under section 21(1) of the Act are being challenged in the present writ petition. Heard Sri S.D. Singh, learned counsel for the petitioner and Sri U.K. Pandey, learned standing counsel. The learned counsel for the petitioner submitted that during the course of assessment proceeding, the claim has been examined in detail by the assessing authority and after examining the claim, the same has been allowed. He submitted that in the proposal sent by the Deputy Commissioner, which is annexure 3 to the writ petition, it has only been expressed that the exemption has been wrongly allowed on the turnover of Rs. 4,28,27,644 while it is liable to tax in accordance with law. No material has been disclosed in such proposal on the basis of which he has formed the opinion that such turnover is liable to tax. He submitted that the Additional Commissioner has wrongly applied rule 44(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or full 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 in pursuance of such notice. (2) Except as otherwise provided in this section, no order of assessment or reassessment under any provision of this Act for any assessment year shall be made after the expiration of three years from the end of such year or March 31, 1996, whichever is later: Provided that if the Commissioner on his own or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d various High Courts in several decisions. The apex court held that the belief must be formed on the basis of the material, which has a nexus to the escaped turnover. In Joti Parshad v. State of Haryana [1992] 6 JT 94 (SC) the honourable Supreme Court while dealing with the meaning of the expression "reason to believe" in section 26 of the Indian Penal Code held that the reason to believe is not the same as suspicion and a person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. It is settled principle of law that in a writ jurisdiction under article 226 of the Constitution of India, this court cannot look into the sufficiency of the material on the basis of which a belief has been formed and notice under section 21 of the Act has been issued. This court can only examine whether there was any material and whether the material is relevant to form the belief of escaped income. (Vide Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), Indra Prastha Chemicals Pvt. Ltd. v. Commissioner of Income-tax reported in [2004] 271 ITR 113 (All); [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court under article 226 of the Constitution as held in Daulatram Rawatmal v. Income-tax Officer [1960] 38 ITR 301 (Cal), Jamna Lal Kabra v. Income-tax Officer [1968] 69 ITR 461 (All), Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 (SC), C. M. Rajgharia v. Income-tax Ofzficer [1975] 98 ITR 486 (Pat) and Madhya Pradesh Industries Ltd. v. Income-tax Officer [1965] 57 ITR 637 (SC). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the assessing officer could not have reason to believe. In such a case, the notice issued by him would be liable to be struck down as invalid as held in the case of Ganga Saran and Sons P. Ltd. v. Income-tax Officer [1981] 130 ITR 1 (SC). In the case of Indra Prastha Chemicals Pvt. Ltd. v. Commissioner of Income-tax reported in [2004] 271 ITR 113; [2005] UPTC 53, this court held as follows: "Thus, it is well-settled that the 'reason to believe' under section 147 must be held in good faith and should have a rational connection and relevant bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment yet at the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. This view was reiterated by the honourable Supreme Court while dealing with the provisions of section 21 of the U.P. Trade Tax Act in Commissioner of Sales Tax v. Bhagwan Industries (P) Ltd. [1973] 31 STC 293 in which it was held that reasonable grounds necessarily postulate that they must be germane to the formation of the belief regarding escaped assessment. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under this section. If however, the grounds are relevant and have a nexus with the formation of belief regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under this section." It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was sought to be formed. The question of change of opinion cannot arise where there has been no previous proceeding of assessment in respect of a turnover in dispute. As pointed out by the Calcutta High Court in Income-tax Officer v. Mahadeo Lal Tulsyan [1978] 111 ITR 25, a change of opinion by the assessing officer contemplates formation of two different opinions or to make two different inferences at two stages on the same set of primary facts. The distinction between an inadvertent mistake or omission and change of opinion was pointed out by one of us after reviewing a large number of decided cases, both by this court and by the Supreme Court, in Commissioner of Sales Tax, U.P. v. Madhu Chemical Works, Bareilly [1988] 71 STC 421 (All); [1988] UPTC 230. It was held that in a case where a particular point has been considered on merits, and a view is taken, it would not be a case of inadvertent mistake or omission, if it is found that the view taken earlier was wrong. It would be a case of change of opinion, but if it is not so, then it would be a case of non-application of mind and an action would be justified under section 21 of the Act." In the case of Commissioner of Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position, that mere change of opinion could not be a valid ground for reopening the assessment under section 34(1)(b) of the Act. We would accordingly uphold the answer returned by the High Court on the short ground that the reassessment for the year in question was sought to be reopened for the reason that the successor of the Income-tax Officer who had made the original assessment had changed his opinion which did not furnish a justifiable reason for taking action under section 34(1)(b)." While considering section 147 of the said Act in the case of Income-tax Officer v. Nawab Mir Barkat Ali Khan Bahadur reported in [1974] 97 ITR 239 (SC); AIR 1975 SC 703, the same view has been taken. Having second thoughts on the same material does not warrant initiation of proceedings under section 147 of the Income-tax Act. In the case of Harbans Lal Malhotra v. Assistant Commissioner, Ghaziabad reported in [1997] 107 STC 98; [1994] UPTC 1041, the Division Bench of this court held that the authority cannot issue any notice on account of change of opinion nor in the absence of any material for the year in question. It has been further held that the original assessment order disclosed the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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