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TMI Blog2017 (12) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing authority of the petitioner as to any turnover having escaped assessment. The petitioner's assessing authority in fact desires to conduct a fishing and roving inquiry to explore the possibility of escapement of turnover, though at present he does not appear to have with him any material that may lead to formation of a 'reason to believe' as to escapement of any part of the petitioner's turnover - It being a jurisdictional issue that goes to the very root of the matter, the revenue cannot plead that the assessee may be first required to show cause without the revenue first satisfying this Court that it had jurisdiction to reassess the petitioner. Then, the jurisdiction to reassess the petitioner cannot be claimed merely because in subsequent assessment years the petitioner has been subjected to tax and the assessing officer wants to explore a possibility if similar liability may arise in the present year as well. There must exist relevant material with the assessing authority to claim occurrence of the taxable event and further that such event occurred during the Assessment Year in question and that it escaped assessment. The fact situation of the present case admits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t residential flats under a housing scheme by the name Kanha Shyam Residency, Kanpur. In April, 2008 the petitioner started raising construction of boundary wall on the said plot of land. It is then disclosed that the map for such construction was sanctioned by the Kanpur Development Authority on 16.7.2008. Thereafter, it started raising further constructions on the aforesaid plot that the petitioner describes as Block-A, Towers 1 and 2. However, according to the petitioner, initially, that is during the Assessment Year 2008-09, it met the expenditure of these constructions from its own resources for which purpose it is also disclosed to have obtained a term loan of ₹ 25,00,00,000/- from the State Bank of India, on 17.8.2010 in the shape of cash credit facility. According to the petitioner, it first advertised the project for sale of flat by the name of Kanha Shyam Residency, Kanpur in November, 2010 and made first allotment of a residential flat in that housing scheme, on 12.10.2010 i.e. in A.Y. 2010-11. In paragraph 11 of the writ petition, it has been stated as under:- That till 12.11.2010, no flat/unit was sold/booked to the prospective purchasers, on the plot of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to alleged escapement from tax, of turnover of deemed sale of construction material in light of the judgment of the Supreme Court in the case of K. Raheja Development Corporation Vs. State of Karnataka, (2005) 5 SCC 162 and Larsen and Toubro Vs. State of Karnataka, (2014) 1 SCC 708. It is on the aforesaid 'reason to believe' that the Additional Commissioner has granted approval to the petitioner's assessing authority to reassess the petitioner for Assessment Year 2008-09 (U.P.), outside the normal period of limitation. Upon, the instant writ petition being entertained the revenue first filed a counter affidavit wherein in response to paragraph 11 of the writ petition (extracted above). It has stated as below:- That the contents of paragraph no.11 of the writ petition are wrong hence are denied. It is submitted in reply that until and unless the petitioner comes out with the detail of resource on the basis of construction of flat was started by him. This clearly presuppose that he realize the earnest money as well as the installment from the prospective buyers but neither he disclosed the date of allotment of flats in favour of the prospective buyer neither t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a matter that can be adjudicated only after the petitioner participates in the reassessment proceeding. In this regard, he further submits that at the present time the petitioner has only been required to show cause and, therefore, the writ petition may be dismissed. He relies on the division bench judgment of this Court in the case of M/s Express Projects Pvt. Limited Vs. State of U.P. and Others, Writ-Tax No. 314 of 2007 decided on 4.10.2013, the aforesaid writ petition was dismissed on the following observations:- 7. In view of the opinion of the Supreme Court in State of U.P. v. Assotech Realty Pvt. Ltd. (Supra), setting aside judgment of the High Court made relying on the principles of law in K. Raheja Development Corporation v. State of Karnataka (Supra), and interfering at the stage of making assessment orders, we are not inclined to examine the facts of each case, examine the evidence and record findings at this stage. The petitioners will have adequate opportunity to place their facts and prove their case before departmental authorities in assessments and appeals before approaching the High Court in revision. 8. In the aforesaid facts and circumstances, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment made under this section in pursuance of such notice . 29. (7) Where the Commissioner, on his own or 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 re-assessment may be made within a period of eight years after expiry of assessment year to which such assessment or re-assessment may involve a change of opinion: Provided that it shall not be necessary for the Commissioner to hear the dealer before authorising the assessing authority. The phrase 'reason to believe' in the context of reassessment proceeding has been subject matter of interpretation by the Courts. The Supreme Court in the case of Commissioner of Sales Tax Vs. Bhagwan Industries (P) Ltd., (1973) 31 STC 293 (SC) interpreted the phrase 'reason to believe' appearing in a similar provision in Section 21 of the U.P, Sales Tax Act, 1948 providing for reassessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea is raised are those of regular assessment and not of reassessment. In the course of regular assessment proceedings it is open to assessing authority to raise all his doubts, suspicion and seek clarification on the same from the assessee. However, the context changes, completely and decisively when such a plea is raised with reference to challenge raise as to the jurisdiction of the assessing authority to initiate reassessment proceedings. Once the assessee sets up a challenge as to existence of the 'reason to believe' or as to existence of material on which that 'reason to believe' may be formed, the burden rests on the revenue to first establish before this Court itself that it had jurisdiction to initiate reassessment proceedings and thereafter it may claim that the assessee be required to show cause before the assessing authority on merits. This Court, in The General Electric Company of India Ltd. Vs The Sales Tax Officer, 1973 UPTC 386 and again in M.L.Shukla Co. Vs The Sales Tax Officer, 1981 UPTC 396 had clearly laid down the law that a completed assessment can be reopened if there is material before the Sales Tax Officer that points towards escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd further that such event occurred during the Assessment Year in question and that it escaped assessment. The issue pertaining to occurrence or otherwise of the taxable event, in the facts of this case is discussed below. With respect to date of sale or booking made of the residential flats/units by the petitioner we find from the pleadings (made in paragraph 11 of the writ petition as replied in paragraph 11 of the counter affidavit), as a fact it is clear that the revenue has not denied that till 12.11.2010, no flat/unit was sold/booked to the prospective purchasers and that on 12.11.2010, the first unit was allotted in the project Kanga Shyam Residency to a prospective purchaser. Besides the pleadings, we find that the proposal to reassess the petitioner for the Assessment Year 2008-09 is wholly silent on the factual aspect as to when according to the revenue, the petitioner first received booking for a flat or when according to it the petitioner sold any flat. Read in its entirety, the proposal itself discloses that the assessing officer took note of four facts being - the survey by the SIB dated 22.05.2014; assessment orders for the Assessment Years 2011-12 and 2012-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the Appellants are owners as even if the Appellants are owners to the extent that they have entered into Agreements to carry out construction activity on behalf of somebody else for cash, deferred payment or other valuable consideration, they would be carrying out a works contract and would become liable to pay turnover tax on the transfer of property in the goods involved in such works contract. Further under the said Act there is no distinction between construction of residential flats or commercial units. Thus, a works contract, within the meaning of the term in the said Act, can also be for construction of commercial units. For the purposes of considering whether an agreement amounts to a works contract or not, the provisions of the Karnataka Ownership Flats (Regulation of Promotion of Construction, Sales, Management and Transfer) Act, 1972 will have no relevance. (emphasis supplied) Then having considered the terms of the agreement with reference to the fact noted above, the Supreme Court held as below:- 20. Thus the Appellants are undertaking to build as developers for the prospective purchaser. Such construction/development is to be on payment of a price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. The label of payment is not decisive but the factum of the payment is. The construction is done on payment of price as agreed upon between the developer and the flat purchaser. It is not necessary to recapitulate all clauses of the agreement under KOFA or for that matter under MOFA. Raheja Development1 takes note of relevant clauses of the recitals and the agreement under KOFA. We need not repeat them. Similarly, Form V of the Maharashtra Ownership Flat Rules contains recital such as, ''as a result of the Development agreement the promoters are entitled and enjoined upon to construct buildings on the said land'. One of the relevant clauses (omitting unnecessary portion) in Form V reads, 1.the promoter shall construct the said building/s....in accordance with the plans, designs, specifications .....which have been seen and approved by the flat purchaser with the owner, such variations and modifications as the promoter may consider necessary or as may be required by the concerned local authority/the government concerned..... provided that the promoter shall have to obtain prior consent in writing to the flat purchaser in respect of variations or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken to build for the prospective purchaser for cash or deferred payment or a valuable consideration pursuant to a contract then to that extent, the contract is works contract and there is deemed sale of material (goods) used in the construction of building and merely because the builder has a right of lien in the event due monies are not paid does not alter the character of contract being works contract. 109. In Article 366 (29-A) (b), the term works contract covers all genre of works contract and it is not limited to one specie of the contract. In Raheja Development, the definition of works contract in KST Act was under consideration. That definition of works contract is inclusive and refers to building contracts and diverse construction activities for monetary consideration viz; for cash, deferred payment or other valuable consideration as works contract. Having regard to the factual position, inter alia, Raheja Development1 entered into development agreements with the owners of the land and it also entered into agreements for sale with the flat purchasers, the consideration being payment in installments and also the clauses of the agreement the Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue could not have also alleged that any turnover ever escaped assessment at the hands of the petitioner in that year. Then, looked from this angle, in absence of any material to establish that a taxable event had occurred and further that such taxable event had escaped assessment at the hands of the petitioner, the revenue authority could never entertain a 'reason to believe' that any turnover had escaped the assessment. Consequently, the jurisdiction to issue reassessment notice would also never arise in such this fact situation. Therefore, for reasons discussed above, the reassessment issue notice in the present case dated 2.3.2017 and the sanction order dated 25.2.2017 are wholly without jurisdiction and consequently deserve to be quashed. As to the objection raised by learned counsel for the parties on the basis of judgment of the another division bench M/s Express Projects Pvt. Ltd. (supra) it is seen in that case notices had been issued and assessment order has been passed, apparently for different years. However, from a plain reading of the judgment it does not appear that writ petition involved reassessment notices. In fact there is neither any me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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