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TMI Blog2017 (11) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial available with the assessing authority, re-assessment proceedings are nothing but are roving and fishing inquiry of the matter, which is not permissible under the law nor it is permissible under Section 29 of the VAT Act. In the assessment orders the assessing authority has properly examined the entire material and thereafter has allowed input tax credit on the sale price by accepting the credit notes, which are issued by the seller and once this aspect has been considered and examined, there was no occasion to the assessing authority to seek permission for re-assessment for re-opening the matter and in view of the aforesaid reasons the writ petitions stand allowed - petition allowed - decided in favor of petitioner. - Writ Tax No. 281, 285, 286 of 2017 - - - Dated:- 20-11-2017 - Hon'ble Abhinava Upadhya And Hon'ble Ashok Kumar, JJ. For the Petitioner : Aloke Kumar For the Respondent : C. S. C. ORDER ( Delivered by Hon'ble Ashok Kumar, J. ) In all the above writ petitions the issue involved is one and the same and, therefore, by a common judgment, they are being decided by us. By means of the writ petitions the petitioner has chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said purchased goods are affected on lower rate, therefore, the petitioner has not fulfilled the conditions so stipulated in Notification dated 20.8.2010 as well as the conditions so provided under Section 13(1)(f) of the U.P. VAT Act. After the grant of permission, by the Additional Commissioner, the assessing authority of the petitioner has issued notices under Section 28 read with Section 29 of the VAT Act dated 3.4.2017 by which the assessing authority of the petitioner has directed the petitioner to participate in the re-assessment proceedings. By means of the writ petitions, the petitioner has challenged the said orders granting permission dated 30.3.2017 and the notice issued in pursuance thereto by the assessing authority dated 3.4.2017. In all the cases the counter affidavits and rejoinder affidavits have been exchanged. We have heard Sri Aloke Kumar, learned counsel for the petitioner and Sri C.B.Tripathi, learned special counsel representing the respondents. Learned counsel for the petitioner has submitted that the petitioner has filed all the details with regard to its claim in the nature of credit note of ₹ 1,20,12,941-23 (for the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the petitioner has relied upon a decision of this Court in the case of Varun Beverages Ltd. Vs. State of U.P. and others, reported in 2016(62) NTN DX 324. Learned counsel for the petitioner has submitted that without considering the reply and without examining the records, the permission sought by the assessing authority has been granted by the Additional Commissioner by passing an order under Section 29(7) of the VAT Act. According to the learned counsel for the petitioner, the order granting permission is bad and as such, is liable to be quashed. Reliance has also been placed on a Division Bench judgment of this Court in the case of M/s. Bharat Heavy Electricals Limited Vs. State of U.P. and others, reported in 2017 UPTC-205 wherein in paragraph-8, this Court has held as under: 8. Learned Senior Counsel for the petitioner submits, the sanction order is bad inasmuch as the reassessment is proposed to be made on a mere change of opinion and re-examination of the same material which was available before and which had been examined by the Assessing Authority while framing the original assessment order and that such course is impermissible in view of recent decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y urged on behalf of petitioner that there is neither any information nor material on record nor any reason has been recorded................................................ Section 29 of the VAT Act provides the procedure of assessment of tax on turnover as escaped from the assessment. Sub-section (1) of Section 29 of the VAT Act provides that if the assessing authority has 'reason to believe' that the whole or any part of the turn over of a 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..................., 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. Sub-section (1) of Section 29 of the VAT Act clearly provides the procedure for assessment and re-assessment and the conditions are stipulated for doing so. The first condition is 'that any part of the turn over has escaped from assessment to tax', in that event the assessing authority is required to record the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Bharat Heavy Electricals Limited (supra). For ready reference paragraph nos.14, 15 and 16 of the aforesaid judgment are quoted here-in-below: 14.It is settled law that the jurisdiction to initiate reassessment proceedings arises only after the assessing authority records his reason to believe that any turnover has escaped assessment Thus, not only is the belief of escapement essential but more importantly, it is necessary for the Assessing Authority to record his reason/s as to existence of the belief of such escapement. In Commissioner of Sales Tax Vs. Bhagwan Industries (P) Ltd. (1973) 31 STC 293 (SC) the phrase reason to believe appearing in a similar provision in Section 21 of the U.P, Sales Tax Act, 1948 providing for reassessment was interpreted thus: The words reason to believe in Section 21 of the U.P. Sales Tax Act convey that there must be some rational basis for the assessing authority to form the believe that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of the turnover of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the petitioner was not entitled to claim deduction towards labour charges over and above 10% of the payments received by relying on Rule 9(3) of the Rules. In other words according to the petitioner's assessing authority: (i) petitioner had not produced the entire work contract documents during the original assessment proceedings for Assement Year 2009-10 (U.P.) (ii) in the course of provisional assessment proceedings for subsequent period for March 2013, the entire contract documents were produced wherefrom it appeared to the petitioner's assessing authority that the petitioner had been awarded contracts for Supply, Erection and Commissioning of complete Power Plants on turnkey basis. Based, upon these two fact allegations it has been inferred (iii) the petitioner was liable to deduction (on account of value of labour and service charges and profit thereon) at the rate 10% only on all payments received against such contracts in view of Rule 9 (3) of the Rules. He has, therefore, submitted that the belief of escapement has not been shown to exist on record. The belief must be founded on reasonable grounds as has been held in the case of Commissioner of Sales Tax Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposal which was sent to the Additional Commissioner for reassessment was sent by the assessing officer namely Sri Rajeev Aurthor, Deputy Commissioner, Commercial Tax, Sector 2, Chandauli who was holding the charge of the assessing officer of the petitioner at the relevant time when the proposal was sent. 13. That with regard to the contents of paragraph nos. 20 to 23 of the writ petition it is stated that section 29(1) of the U.P.Value Added Tax Act prescribes as follows: 29(1)If the assessing authority has reason to believe that the whole or any part of the turnover of a 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,l the assessing authority may, after issuing notice to t he dealer and making such inquiry as it may consider necessary, access or re-assess the dealer to tax according to law: Under this provision that when the assessing officer has reason to believe that the assessment or any part thereof has been under assessed or any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rview of change of opinion. He has also relied upon a decision of this Court in the case of Kalpana Kala Kendra Vs. Salex Tax Officer, reported in 1989 UPTC 59 in which it has been held that Section 21(para materia of Section 29 of the VAT Act) of the Trade Tax Act is based upon the theory that the taxes observed must be collected by the statutory machinery. He has, therefore, submitted that in the said decision this Court has clearly observed that on account of result of negligence or ignorance of the Assessing Authority, the proceedings under Section 21 of the Act for re-opening the assessment cannot be dropped. Sri Tripathi, learned counsel appearing for the department also relied upon a decision of the Hon'ble Supreme Court in the case of Eveready Industries India Ltd. Vs.State of Karnataka, reported in 2016 (94) VST 302 (SC). He submitted that in the said judgment the Hon'ble Apex Court has held that the exemption notification requires strict interpretation. In order to get benefit of exemption notification, the assessee has to satisfy that it fulfills all the conditions contained in the notification. He has heavily relied upon the contents of para-22 of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment is confined upon the assessing authority in the following four circumstances: (1) the tax is escaped assessment (2) it is under assessed, (3) it has been assessed at a lower rate, (4) any deductions or exemptions have wrongly been allowed. This is subject to the satisfaction recorded by the assessing authority that he has reason to believe that any of the above four conditions exist. In view of the above, recording of the satisfaction as to the reason to believe that either of the above four conditions exist are necessary for issuing notice for making reassessment. The aforesaid provision is paramateria with Section 21 of the U.P. Trade Tax Act, 1948. Section 21 of the said Act also uses the phrase 'reason to believe' and it is only on that ground that the assessing authority under this Act has been empowered to reopen the assessment and to reassess the assessee for the purpose of tax in the relevant year. The phrase 'reason to believe' used in Section 21 which is paramateria with Section 29 of 'the Act' has come up for consideration number of times before the law Courts and the law on the point has been crysta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or fresh material has been referred to for the formation of the opinion with regard to the reason to believe that the matter requires consideration and accordingly, the order granting permission and notice issued for re-assessment are quashed. In the case of M/s. Vikrant Tyres Limited (supra) a Division Bench of this Court has considered the provisions of Section 21 of the Trade Tax Act (para materia of Section 29 of VAT Act). The relevant extracts of the said judgment are quoted here-in-below: 13.The fact that decision to initiate re-assessment proceedings can be taken after giving notice and opportunity of hearing to the dealer, shows that Assessing Authority has to act judiciously and it cannot act arbitrarily or upon whims i.e. without disclosing ground acceptable in law. The Assessing Officer has to justify ''reassessment' on a ground covered under Section 21(1), and it most not be opposed to good conscience, fair play and public policy. 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 ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment proceedings initiated by the Assessing Authority, it was mandatory to record such a fact by way of a reason (based on some material or evidence) that one of the two statutory pre-condition for application under Section 13 (1)(f) existed. 31.In absence of any material it was not open to the authorities to assume existence of such facts for the purpose of acquiring jurisdiction and to later, in the course of reassessment proceedings to conduct an inquiry as to its existence or otherwise. The Supreme Court in the case of Arun Kumar Ors Vs. Union of India Ors (2007) 1 SCC 732 has categorically held : 74.A jurisdictional fact is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of input tax credit shall be claimed and be allowed to the extent of tax payable on the sale value of goods or manufactured goods. Learned counsel for the department, therefore, has submitted that in any case in view of the provisions of Section 13(1)(f) the amount of input tax credit cannot be lower than the purchase price. He has submitted that this aspect requires consideration by the assessing authority. Therefore, re-assessment proceedings are valid. We have examined the issue in detail and found that the submission of the learned counsel for the department, appears to be attractive, however, in the present set of facts, particularly when admittedly the transaction has properly been examined and verified and where there is no fresh material available with the assessing authority, re-assessment proceedings are nothing but are roving and fishing inquiry of the matter, which is not permissible under the law nor it is permissible under Section 29 of the VAT Act. In this regard we will like to refer paragraph nos.36 and 37 of the judgment in the case of M/s. Bharat Heavy Electricals Limited (supra) which are quoted here-in-below: 36.Thus we do not find there exist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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