M/S Chemicos vs Addl. Commissioner Grade-I And ...
2015 Latest Caselaw 1503 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 37								AFR
 

 
Case :- WRIT TAX No. - 1729 of 2011
 
Petitioner :- M/S Chemicos
 
Respondent :- Addl. Commissioner Grade-I And Others
 
Counsel for Petitioner :- Rakesh Ranjan Agarwal
 
Counsel for Respondent :- C.S.C.
 

 
Hon'ble Tarun Agarwala,J.

Hon'ble Surya Prakash Kesarwani,J.

(Per : Hon'ble Surya Prakash Kesarwani, J.)

1- Heard Sri R.R.Agrawal, learned Senior Counsel assisted by Sri Suyash Agrawal for the petitioner and Sri C.B.Tripathi, learned Special Counsel for the respondents.

2- This writ petition has been filed challenging the authorization order dated 22.3.2011 passed by the Additional Commissioner Grade-I, Commercial Tax, Sahranpur Zone, Saharanpur under the proviso to Section 21 (2) of the U.P. Trade Tax Act, 1948 (hereinafter referred to as the ''Act') for the Assessment Year 2004-05 and the notices dated 30.11.2011 issued by the Assessing Authority under Section 21 of the Act.

3- The submission of the learned counsel for the petitioner is that re-assessment proceedings initiated by the Assessing Authority is based on change of opinion which is impermissible and consequently the impugned order as well as the notice deserves to be quashed.

4- Learned Special Counsel submits that the goods sold by the petitioner were a kind of thinner and was liable to tax at the rate of 12% under Notification No. KANJ-1163/1 dated 10.4.2000 effective from 1.4.2000, while the assessing authority applied the tax rate of 4% in the assessment order due to non application of mind. He submits that neither there was any discussions in the aforesaid assessment order with regard to applicability of the rate of tax in terms of the notification dated 10.4.2000 nor the said notification could be even noticed by the assessing authority and as such the initiation of proceedings under Section 21 (1) of the Act is wholly valid.

5- We have carefully considered the submissions of the learned counsel for the parties.

6- We find that the assessing authority, while passing the assessment order for the Assessment Year 2004-05 has neither noticed nor considered the notification dated 10.4.2000, which provides the rate of tax of 12% on thinner. It merely accepted the turn over and tax, as disclosed by the assessee. Thus, the assessment order was without application of mind with regard to the applicable rate of tax on the commodity sold by the petitioner.

7- The provisions of Section 21 of the Act for re-assessment can be invoked by an assessing authority, if he 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 the Act, or any deduction or exemption has been wrongly allowed in respect thereof then 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.

8- In the present set of facts, the Additional Commissioner Grade-I, Commercial Tax, Sahranpur Zone, Saharanpur, while granting the authorization has found that in view of the notification dated 10.4.2000 the assessing authority was having reason to believe that the turnover of the petitioner has been assessed to tax at a rate lower than that at which it is assessable under the Act.

9- In our opinion, in the present set of facts; the belief of the assessing authority is not baseless rather it is backed by reasonable grounds. Once, we find that there exists reasonable grounds germane to the formation of the belief by the assessing authority that the turnover of the assessee was assessed to tax at a rate lower than that at which it is assessable under the Act, the assessing authority would be clothed with jurisdiction to initiate proceedings under Section 21 of the Act. The question whether the grounds are adequate or not is not a matter which would be gone into by this Court, inasmuch as the sufficiency to initiate proceedings under Section 21 of the Act, is not a justiciable issue. The petitioner can challenge the existence of the belief and not the sufficiency of reasons for the belief.

10- In the case of CST v. Bhagwan Industries (P) Ltd. 1973 (3) SCC 265, Hon'ble Supreme Court held in paragraphs 11 and 12 as under :

"11. The controversy between the parties has centered on the point as to whether the assessing authority in the present case had reason to believe that any part of the turnover of the respondent had escaped assessment to tax for the assessment year 1957-58. Question in the circumstances arises as to what is, the import of the words "reason to believe", as used in the section. In our opinion, these words convey that there, must be some rational basis for the assessing authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If such a basis exists, the assessing authority can proceed in the manner laid down in the section. To put it differently, 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 dealer has escaped assessment, it can take action under the section. Reasonable grounds necessarily postulate that they must be germane to the formation 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.

12. It may also be mentioned that at the stage of the issue of notice the consideration which has to weigh is whether there is some relevant material giving rise to prima facie inference that some turnover has escaped assessment. The question as to 633 whether that material is sufficient for making assessment or re-assessment under section 21 of the Act would be gone into after notice is issued to the dealer and he has been heard in the matter or given an opportunity for that purpose. The assessing authority would then decide the matter in the light of material already in its possession as well as fresh material procured as a result of the enquiry which may be considered necessary."

11- In view of the above discussions and the law laid down by Hon'ble Supreme Court in the case of CST v. Bhagwan Industries (P) Ltd. (supra ), we do not find any illegality in the impugned order and the notice issued by the Assessing Authority under Section 21 of the Act. The writ petition is wholly devoid of merit and, therefore, deserves to be dismissed.

12-In result, the writ petition fails and is hereby dismissed. However, there shall be no order as to costs.

 

 
Dt. 28.7.2015
 
Ak/
 

 
(S.P.Kesarwani,J.)     (Tarun Agarwala,J.)