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TMI Blog2010 (4) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... Paints India Limited (Kasna). The petitioner had a depot at Gurgaon (Haryana). During the year under consideration, the petitioner had disclosed the stock transfer to its Gurgaon depot for Rs. 6,54,91,661.32 and furnished 159 form F for Rs. 6,45,87,874.65. The assessing authority while passing the original assessment order dated March 15, 2004 for the assessment year 2001-02 has examined form F and has accepted the claim of stock transfer on the ground that on the enquiry of the stock transfer invoices, GRs and other documents, no material was found that the goods had been moved in pursuance of prior contract of sale. It appears that a survey was made on September 10, 2004 by the Sales Tax Officer (SIB), Noida, at the premises of M/s. Asian Paints India Limited (Kasna). At the time of survey, one Sri N. Gopalan, Manager of the Asian Paints, was present. From the premises, certain loose parchas were seized. On the basis of loose parchas, it was inferred that the goods had been got manufactured by the petitioner from M/s. Asian Paints India Limited on the basis of the orders of M/s. Hero Honda Motors Limited, M/s. Honda Scooters and Honda Cars and the same had been dispatched to Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year 2004 has also been adopted in the year under consideration. Therefore, the material found in the year 2004-05 is also relevant for the year under consideration on the basis of which the assessing authority has formed the belief of escaped assessment. We have considered the rival submissions of learned counsel for the parties and perused the impugned orders dated August 18, 2007 passed under section 21(2) of the Act by the Additional Commissioner, Grade-I, Trade Tax, Ghaziabad Zone, Ghaziabad, and notices under section 21(1) of the Act issued by the Deputy Commissioner (Assessment) 4, Trade Tax, Ghaziabad, and the original assessment orders dated March 15, 2004. A perusal of the original assessment orders reveals that the assessing authority has examined the stock transfer in detail through the stock transfer invoices, GRs and other documents and has recorded the finding that the goods had not been moved in pursuance of the prior contract of sale. Perusal of the impugned order passed under section 21(2) of the Act and the notices issued under section 21(1) of the Act reveal that no material was found relating to the year under consideration at the time of survey dated S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on the basis of reasons recorded by the assessing authority, is satisfied that it is just and expedient so to do authorises the assessing authority in that behalf, such assessment or reassessment may be made after the expiration of the period aforesaid but not after the expiration of eight years from the end of such year notwithstanding that such assessment or reassessment may involve a change of opinion: Provided further that the assessment or reassessment for the assessment year 1987-88 may be made by March 31, 1993: Provided also that if the eligibility certificate granted under section 4A has been amended or cancelled by the Commissioner under sub-section (3) of section 4A, the order of assessment or reassessment may be made within one year from the date of receipt by the assessing authority of the copy of the order amending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt 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, Indra Prastha Chemicals Pvt. Ltd. v. Commissioner of Income-tax reported in [2004] 271 ITR 113 (All); [2005] UPTC 53. In the case of Commissioner of Income-tax, Gujarat II v. Kurban Hussain Ibrahimji Mithiborwala reported in [1971] 82 ITR 821, the apex court has held that it is well-settled that the Income-tax Officer's jurisdiction to reopen an assessment under section 34 of the Income-tax Act, 1922, depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. In the case of Johri Lal (HUF) v. Commissioner of Income-tax, U.P. reported in [1973] 88 ITR 439 (SC), the apex court has held as follows (at page 439): "The formation of the required belief by the Income-tax Officer before proceedings can be validly initiated under section 34(1)(a) is a condition precedent: The fulfilment of this condition is not a mere formality, it is mandatory, and failure to fulfil that co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. v. Commissioner of Income-tax reported in [2004] 271 ITR 113 (All); [2005] UPTC 53, this court held as follows (at page 119 of ITR): "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 bearing on the formation of the belief and should not be extraneous or irrelevant. Further this court in proceedings under article 226 of the Constitution of India can scrutinise the reasons recorded by the assessing officer for initiating the proceedings under section 147/148 of the Act. The sufficiency of the material cannot be gone into but relevancy certainly be gone into." In the case of Royal Trading Co., Saharanpur v. Trade Tax Officer, Saharanpur reported in [2000] 16 NTN 290, the Division Bench of this court while considering section 21 of the U.P. Trade Tax Act held as follows: "Therefore, action under section 21 of the Act cannot be taken on the whims of the assessing officer by resorting to conjecture of imagination. He has to have before him the facts which are germane to the issue and on the basis of which a rational man can have reason to believe that the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracter, 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 settled principle of law that the notice under section 21 of the Act cannot be issued on account of change of opinion on the basis of material available on record. In the case of Kalpana Kala Kendra, Kanpur v. Sales Tax Officer, Circle 20, Kanpur reported in [1989] 75 STC 198 (All); [1989] UPTC 597, the Division Bench held as follows (at pages 203 and 205 of STC): "Section 21 of the Act is based upon the theory that the taxes must be paid by the assessee in correct sum and likewise it must be collected by the statutory machinery. The escapement from assessment whether it results on account of concealment practised or fraud played by the assessee or as a result of negligence or ignorance of the assessing authority, in our opinion, is of no consequence, provided the action to reopen the assessment is otherwise justified and the assessing officer is not acting arbitrarily or in a capricious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion, 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 Sales Tax v. Gopalji, Varanasi reported in [1974] UPTC 277, the Sales Tax Officer got second thought about the applicability or effect of the survey and hence notice under section 21 was issued. It was held that this would not constitute reason to believe within the meaning of section 21 of the said Act. Hence notice under section 21 was held invalid. In the case of Palco Lining Company v. Sales Tax Officer, Sector IV reported in [1983] 54 STC 255 (All); [1983] UPTC 1116, assessment order recorded that the assessing authority has after elaborately considering the evidence taken the view what was being sold by the petitioner was nothing but collar lining and its turnover of sale was held exempt from the Sales Tax Act. Under a notification the assessing authority, however, issued notice under section 21 of the said Act for reassessing the same matter, hence it was held notice under section 21 to be invalid. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in [1997] 107 STC 98; [1994] UPTC 1041, the (1)This observation is from Palco Lining Company v. Sales Tax Officer [1983] 54 STC 255 (All) at page 256. 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 in the original assessment order all the documents of the petitioner including the agreement in question the transfer of the goods has been held as stock transfer. The notice under section 21 of the Act has been held amounts to re-examining the same matter again and to make fresh enquiry in the same matter, which is not permissible. In the case of Ratan Industries Pvt. Ltd., Agra v. Additional Commissioner, Trade Tax, Agra reported in [2006] 148 STC 111; [2004] 24 NTN 384, the Division Bench of this court in page 117 of STC; paragraph 22 of NTN observed that "it is a well-settled principle of law that the question which has been examined in detail in the original assessment proceeding and thereafter the assessment order has passed, then the said assessment order cannot be reopened under section 21 of the Act on mere change of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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