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TMI Blog2014 (6) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... en eyes. There is not even a slightest whisper either in the impugned notice or in the counter-affidavit that the petitioner is guilty of concealing any material fact or has not truly and correctly disclosed the contract work undertaken by him. There is no allegation that the petitioner by playing fraud obtained the order dated 7th February, 1994 by which the application under Section 7-D of the petitioner was accepted. - Section 7-D opens with non-obstante clause. It gives an overriding effect over the provision in the same or the other Act mentioned in the obstante clause. The words "reason to belief" as used in Section 21 (1) of the Act, 1948 has not to be based on surmises and conjectures, rather it is to be based on objective satisfaction. There has to be nexus between the reason to belief and the materials on the record. It is true that if there are materials on the record, the Court shall not enter into the sufficiency of the materials for forming a belief, but if there is no material which is referred to for forming a belief the initiation of reassessment proceedings is arbitrary and falls beyond the Sections 21 (1) and (2) of the Act, 1948. There was no material to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractor during the Assessment Year 2000-01. In the Assessment year 2001-02, petitioner had executed 21 civil work contracts and the petitioner applied to the Assessing Authority to be assessed in accordance with the compounding scheme under Section 7-D of the Act, 1948. The Assessing Authority examined the records of all the contracts in 21 cases. After examination of the records, the assessing authority held that out of the above 21 contracts, 9 contracts were such in which the petitioner had purchased more than 5% value of the raw materials from outside the State of U.P. and held that the compounding scheme could not be applied in respect of those 9 contracts. With regard to the remaining 12 contracts the Assessing Authority held that the contract had been executed before introduction of the compounding scheme 2000-01, hence the petitioner was eligible for the benefit of the compounding scheme as prevalent in the Assessment Year 1996-97. The Tax liability of the petitioner was determined accordingly. The order dated 28/2/2004 has been filed as Anxexure-5 to the writ petition. On 20/3/2008, the Additional Commissioner, Commercial Tax, Noida Zone, Noida issued a notice to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are without jurisdiction. Refuting the submission of learned counsel for the petitioner, the learned counsel for the State submits that the Commissioner of Commercial Tax has clarified vide circular dated 09/2/2007 that the benefit of the compounding scheme cannot be provided after 31/3/2000. The proceedings initiated under Section 21 (2) of the Act, 1948 is wholly legal, just and proper and the notice for initiation contains valid reasons, and even if there is a change of opinion, proceedings can be initiated under Section 21 (2) of the Act, 1948. Learned counsel for the parties have placed reliance on various judgments of this Court as well as of the Apex Court, which shall be referred to while considering their submissions. The State Government, in exercise of power under Section 7-D of the Act, 1948 has issued a compounding scheme for Civil Works Contractor. Section 7-D of the Act, 1948 is quoted below: 7-D Composition of tax liability.- Notwithstanding anything contained in this Act, but subject to directions of the State Government, the assessing authority may agree to accept a composition money either in lump sum or at an agreed rate on his turnover in lieu o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) and (2) of the Act, 1948 are as follows: 21. Assessment of tax on the turnover not assessed ruing the year.--[(1) If the Assessing Authority has reason to believe that the whole or any part of the turnover of a dealer, from any assessment year or part thereof, had 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 has 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 re-assess the dealer to tax according to law]: Provided that the tax shall be discharged at the rate at which it would have been charged had the turnover not escaped assessment, or full assessment, as the case may be. [(2) Except as otherwise provided in this section, no order of assessment or re-assessment 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 on the basis of reasons recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the escapement of the turnover of the assessee from assessment in a particular year, or a part of the year. In short if, there are in fact, some reasonable grounds for the assessing officer to believe and form an opinion objectively that turnover has escaped assessment, the assessing authority would be well within its jurisdiction to take action under Section 21 of the Act. 12. Section 21 of the Act is based upon the theory that the taxes must be collected by the statutory machinery. The escapement from assessment whether it results on account of a 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 capracious manner. The escapement of assessment contemplated under that section may be due to various reasons. The term 'turnover has escaped assessment of tax' which includes under assessment, may as well be result of lack of care on the part of the assessing officer or by reason of his inadvertance on his part. Section 21 does not prohib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri materia with Section 21 of the Act. In finding out the meaning of the expression escaped assessment or has been under assessed envisaged by Section 21 of the Act, we see no reason why the said expressions should bear a more limited meaning than that it bears under Section 147 (b) of the Income Tax Act. The object of the two sections under the two statutes is to gather the revenue which has improperly escaped and both the Acts deals with taxing statues. 16.We were also referred to another decision of this Court in Commissioner of Sales Tax, U.P., Lucknow, v. M/s Panna Lal Gupta, 1987 U.P.TC 441. That case is again distinguishable. All that had been held there was that re-assessment of same turnover already considered in the original assessment without any fresh material is not justified under Section 21 of the Act. 17. We are not impressed by the argument that the instant case is a case of change of opinion. The change of opinion necessarily postulates that the assessing authority had an occasion to consider the material earlier, and on the same set of facts another opinion was sought to be formed. The question of change of opinion cannot arise where there has been no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the case of the department that the petitioner did not truly and correctly disclosed the nature of the contract work taken by him in the relevant year. The Deputy Commissioner (Executive), Trade Tax examined the contract awarded to the petitioner and accepted the application for compounding. In the said circumstances, the proceedings initiated under Section 21 (2) of the Act, 1948 were held to be without jurisdiction. Following was laid down in paragraphs 14,15,16 and 17 which are quoted below: 14. It is not in dispute that the order dated 7th February, 1994, passed by the Deputy Commissioner (Executive), Trade Tax accepting the payment of tax at the rate of one per cent on the amount received during 1990-91 still subsists and unsuccessful attempt was made to cancel the order dated 7th February, 1994. The question which arises whether in such circumstances the Trade Tax Officer could issue the impugned notice dated 4th November, 1999 under Section 21 (2) of the Act. Section 21 of the Act deals with the assessment of tax on the turnover not assessed during the year. In other words it talks about the reassessment of the turnover which has escaped the assessment. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay lump sum i.e. one per cent of the sum received by him during the assessment year in question to which the department also agreed. The said agreement is valid and binding on both the parties. In the absence of any material to show that the order dated 7th February, 1994 was tainted on account of fraud or concealment of material fact, it is not open to the department to initiate reassessment proceedings under Section 21 of the Act as it would amount the ignoring of the order dated 7th February, 1994. Where the application under Section 7-D is allowed there is no assessment as it is commonly understood in Taxing Statutes. The question of escapement of turnover would hardly arise in such cases. The demand, as held by this Court in the case of Sri Durga Bricks Field supra) is not relatable to the actual turnover . Section 7-D opens with non-obstante clause. It gives an overriding effect over the provision in the same or the other Act mentioned in the obstante clause. It is equivalent to saying that inspite of the provisions or the Act mentioned in the non-obstante clause, the provision following it will have its full operation or the provisions embraced in the non-obstante claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accordingly quash the order dated 6th February, 1997. In the result, the writ petition succeeds and is allowed. There shall be no order to costs. 17. The scheme of the Trade Tax Act shows that ample power has been conferred on the authorities to take appropriate action in appropriate cases when the order is prejudicial to the interest of Revenue. Besides power of the rectification under Section 22 of the Act the power of revision under Section 10-B of the Act, is there. The power in appropriate could be exercised under Section 10-B of the Act by way of revision by the Commissioner of Trade Tax. The Commissioner of Trade Tax under Section 10-B has been empowered to call for and examine the record relating to any dealer passed by any officer subordinate to him for the purpose of satisfying himself as to the legality or propriety of such order. The power being there under Section 10-B of the Act, we find no force in the argument of the learned Standing Counsel that in such circumstances the only remedy open to the department is to initiate reassessment proceedings under Section 21 of the Act. The order of the Additional Commissioner, Commercial Tax, Noida, Zone, Noida dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide its judgment and order dated 26/2/2013 in Civil Appeal No.1843/2013, State of U.P. Ors Vs. M/s Systematic Conscom Ltd. In paragraph 24 of the judgment the Apex Court had left the question open as to whether the Assessing Authorities can demand the State Development Tax from those dealers who had already opted for the composition charges under the composition scheme. It is useful to quote paragraph 24 of the said judgment which is as under: 24. Now, we leave it open to the assessing authorities, whether to demand the State Development Tax from those dealers who had already opted for the composition charges under the composition scheme by way of issuing appropriate demand notices in accordance with law. If and when such demand notices are issued by the assessing authority/authorities, the assessees are at liberty to question the same before the appropriate forum. In view of our observations as above, that there was no material to form a belief that that tax has escaped assessment and the proceedings initiated were not justified, we are of the view that it is not necessary for us to consider the first submission raised by the learned counsel for the petitioner that Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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