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TMI Blog2014 (8) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer to reopen the assessment. The word "reasons to believe" would mean cause or justification. The Assessing Officer was justified in forming an opinion that there has been an under assessment. The expression "reason to believe" cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The same principle applies to the competent authority while granting permission. Only a limited reason is required to be given by the competent authority while granting permission to reopen the assessment. The Court finds that there was sufficient application of mind in coming to a conclusion that it was a case of under assessment and that a finding is required to be given as to whether enzyme is a chemical or not. reassessment proceedings can only take place when there is an assessment order and there is reason to believe that there has been a case of under assessment or escaped assessment. In the event, there is no assessment order there can be no reassessment proceedings. Consequently, initiation of proceedings under Section 21 of the Act when there is no assessment order is a clear case of non application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of India concern certifying that enzymes sold by the petitioner falls under the category of chemicals. Inspite of this reply being given, the competent authority granted permission to the Assessing Officer to issue a notice under Section 21 of the Act for reopening the assessment proceedings for the assessment year 2003-04, 2004-05 and 2005-06 under the U.P. and Central Sales Tax Act. The petitioner, being aggrieved by the sanction order as well as by the notice, has filed Writ Petition No.704 of 2010 for its quashing in the aforesaid assessment years. The petitioner has also filed Writ Petition No.705 of 2010, which relates to the assessment year 2006-07 under the Central Sales Tax Act and Writ Petition No.706 of 2010, which relates to the assessment year 2006-07 under the U.P. Trade Tax Act. The contention of the petitioner is, that the reply of the petitioner was not considered and that no reason has been given by the authority while granting approval to the Assessing Officer to reopen the assessment proceedings under Section 21 of the Act. The order granting permission is without any application of mind and, consequently, on this ground the order is liable to be quashed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trade Tax Act. The petitioner preferred an appeal, which was allowed and the matter was remanded back to the Assessing Officer for fresh assessment. During the pendency of assessment proceedings before the Assessing Officer pursuant to the remand order of the appellate authority reassessment proceedings were initiated under Section 21 of the Act. The learned counsel submitted that during the pendency of original assessment proceedings the question of escaped assessment does not arise and, therefore, question of issuance of notice under Section 21 of the Act was wholly illegal and had been issued without any application of mind and was liable to be quashed. In support of his submission, the learned counsel has placed reliance on various decisions, which will referred hereinafter. On the other hand, the learned counsel for the State Sri C.B. Tripathi submitted that the scope of reopening the assessment proceedings under Section 21 is much wider than that under Section 147 of the Income Tax Act. The learned counsel for the State submitted that even though there is a change of opinion, assessment proceedings can be reopened if one finds that a case of under assessment or escaped ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r irrelevant to the purpose of the section. To this limited extent, the action of the Assessing Officer in starting proceedings under Section 147 is open to challenge in a Court of law as held in S. Narayanappa v. Commissioner of Income Tax, (1967) 63 ITR 219 (SC); Kantamani Venkata Narayana and Sons Vs. Additional Income Tax Officer, (1967) 63 ITR 638 (SC), Madhya Pradesh Industries Ltd. v. Income Tax Officer, (1970) 77 ITR 268 (SC); Sowdagar Ahmed Khan v. Income Tax Officer, (1968) 70 ITR 79 (SC), Income Tax Officer v. Lakhmani Mewal Das, (1976) 103 ITR 437 (SC); Income Tax Officer v. Nawab Mir Barkat Ali Khan Bahadur, (1974) 97 ITR 239 (SC); Commissioner of Sales Tax v. Bhagwan Industries (P) Ltd., (1973) 31 STC 293 (SC) and State of Punjab v. Balbir Singh (1994) 3 SCC 2999. The formation of the required opinion and belief by the Assessing Officer is a condition precedent. Without such formation, he will not have jurisdiction to initiate proceedings under Section 147. The fulfillment of this condition is not a mere formality but it is mandatory. The failure to fulfill that condition would vitiate the entire proceedings as held by the Apex Court in the case of Johrilal v. Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped the assessment to tax or that it has been under assessed or has been assessed at a lower rate or that deductions or exemptions have been wrongly allowed. In M/s Vikrant Tyres Limited Vs. State of U.P. and others, 2005 UPTC 501 a Division Bench of this Court held:- 14. Re-assessment on the same material by same authority, if permitted, for no valid reason, will open flood gate for arbitrary action exposing one to unending process, permitting uncertainty, re-opening of closed chapters without assigning good reason, depending upon whims of individuals and in the end precipitating anomalous situations. 15. It, therefore, naturally follows that there has to be some valid ground viz. Some relevant document or material having escaped notice or there has been wrong calculation due to human error bona fide committed, or ignorance of correct and complete facts due to mistake or ignorance of fraud/mis-representation (but not mere change of opinion on same material). In M/s Radico Khaitan Limited, Bareilly Road, Rampur Vs. State of U.P. and others, 2010 NTN (42) 240 a Division Bench of this Court held:- In view of the above, we are of the view that the proceedings und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be taxed at the rate of 4% or as an unclassified item at the rate of 10%. In M/s Elpee Electricals Vidya Peeth Road, Varanasi Vs. State of U.P. and others in Writ Petition No.688 of 2006 decided on 27th November, 2012 notice under Section 21(2) of the Act was issued, which was challenged before the Court. The Court refused to interfere in the notice on the ground that the Court found that there was no discussion made by the Assessing Officer as to whether the inverters were electronic goods or not and, consequently, whether it was taxable as an electronic good or not. In M/s Shree Bhawani Paper Mills Ltd. Vs. State of U.P. and others, 2012 NTN (48) 99 a Division Bench of this Court held:- We do not find that Section 21(1) necessarily refers to any new material, which may be discovered or which may have been brought to the notice of the competent authority, as a pre-condition for initiating proceeding for re-assessment. Even if the material has been disclosed at the time of assessment, if the assessing authority has reason to believe that such material having connection with assessment, was not considered as a result of which the whole or any part of the turn ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation of the belief regarding escaped assessment. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under the above 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 the section. Whether the grounds are adequate or not is not a matter which would be gone into by the High Court or this Court, for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. What can be challenged is the existence of the belief but not the sufficiency of reasons for the belief. At the same time, it is necessary to observe that the belief must be held in good faith and should not be a mere pretence. In the light of the aforesaid, we are of the opinion that in the absence of determination of a vital issue as to whether enzyme is a chemical or not, the competent authority was justified in granting permission to the Assessing Officer to reopen the assessment. The word reasons to believe would mean cause or justification. The Assessing Officer was justified ..... X X X X Extracts X X X X X X X X Extracts X X X X
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