Krishna Enterprises vs The Commissioner Of Sales Tax And ...
2004 Latest Caselaw 1319 Del

JUDGMENT

B.C. Patel, C.J.

1. The petitioner has invoked the provisions of Articles 226 and 227 of Constitution of India, inter alia, praying that the respondents be directed to cancel/rescind the circular dated 12.11.2002 by issuance of a Writ of Mandamus and directions be issued declaring that "Tea" is to be assessed under the Delhi Sales Tax Act, 1975 at the first point of sale; and that the reassessments made by the sales tax officer may be quashed and set aside.

2. The respondents are not pressing the circular dated 12.11.2002 and therefore, the Court is not required to examine the legality or the validity of the said circular. In the present case, the Court is required to examine the validity of the reassessment orders made by the assessing officer, copies of which are at pages 46 to 49 of the writ petition, for the assessment years 2001-02 and 2000-01 dated 7.8.2003 and 8.8.2003, respectively. Earlier assessment orders are placed on record at pages 37 to 40 of the writ petition in respect of assessment years 2000-01 and 2001-02 dated 5.9.2002 and 16.3.2003, respectively.

3. The petitioner herein is a stockist in so far as tea is concerned. The assessing officer while making the assessment orders examined all the material and the relevant provisions of law. The firm was trading at the relevant time in tea and all sales/purchases were tax paid and hence there was no tax liability as specifically mentioned in the orders made by the assessing officer. In the assessment orders it is specifically intimated similarly.

4. When the assessment orders were made, the notification dated 28.11.2000, a copy of which is placed on record at page 32, was already in existence. The notification indicated that tea was not mentioned in Item No. 16 of the Second Schedule, i.e. Kirana items. The purpose of referring to the notification at this stage is that it was already in existence when the assessment orders were made by the assessing officer.

5. We are required to consider the nothings made by the assessing officer for reopening the completed assessments. At page 43 of the writ petition, a copy of the order sheet has been placed and, therein, on 30.7.2003 the assessing officer has recorded as under:-

"The case has been reopened in view of notification effective from 28.11.00 regarding Tea being last point item as not included in kirana item."

The Assessing Officer also specifically noted while reopening as under:-

" No penalty as dealer not clear about notification."

In the reassessment order for the year 2001-02, at page 46 of the paper book, there is a reference to the notification as under:-

"The case has been reopened in view of notification effective from 28.11.2000 regarding tea being tax paid item as not included in Kiryana item."

Similar is the position with regard to the other assessment year as well. It is in this background that the learned counsel for the petitioner has questioned the legality and validity of the reassessment orders.

6. Our attention was drawn to various decisions of this Court as well as the Apex Court. In Jindal Photo Films Ltd. v. Deputy Commissioner of Income Tax and Anr: [1998] 234 ITR 170 a Division Bench of this Court pointed out as under:-

"The power to reopen an assessment was conferred by the Legislature not with the intention to enable the Income-tax Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods. (See CIT v. Rao Thakur Narayan Singh .

In Phool Chand Bajrang Lal , their Lordships have held while interpreting section 147 as it stood in the assessment year 1963-64:

"An Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of the specific reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessed to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reasssessment proceedings, either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an assessed to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief."

Following the settled trend of judicial opinion and the law laid down by their Lordships of the Supreme Court time and again, different High Courts of the country have taken the view that if an expenditure or a deduction was wrongly allowed while computing the taxable income of the assessed, the same could not be brought to tax by reopening the assessment merely on account of subsequently the Assessing Officer forming an opinion that earlier he had erred in allowing the expenditure or the deduction (See Siesta Steel Construction Pvt. Ltd v. K.K. Shikare [1985] 154 ITR (Bom); Satpal Automobile Co. v. ITO ; Gopal Films v. ITO [1983] 139 ITR 566 (Kar) and CWT v. Manilal C. Desai [1973] 91 ITR 135 (MP).

Reverting back to the case at hand, it is clear from the reasons placed by the Assessing Officer on record as also from the statement made in the counter affidavit that all that the Income-tax Officer has said is that he was not right in allowing deduction under section 80-I because he had allowed the deductions wrongly and, therefore, he was of the opinion that the income had escaped assessment. Though he has used the phrase "reason to believe" in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax Officer nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing Officer to the same set of facts. While passing the original orders of assessment the order dated February 28,1994, passed by the Commissioner of Income-tax (Appeals) was before the Assessing Officer. That order stands till today. What the Assessing Officer has said about the order of the Commissioner of Income-tax (Appeals) while recording reasons under section 147 he could have said even in the original orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the Assessing Officer to initiate proceedings under section 147 of the Act."

7. Section 24 of the Delhi Sales Tax Act, 1975 specifically provides that the Commissioner must have "reason to believe" that the turnover of the dealer has escaped assessment to tax, or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made there from. Therefore, there must be "reason to believe". In the absence of "reason to believe" there is no question of invoking Section 24 of the said Act. A Division Bench of this Court in Jindal Photo Films Ltd (supra), while examining a similar situation under the Income Tax Act, 1961, pointed out that between the date of the orders of assessment sought to be reopened and the date of formation of opinion by the Income Tax Officer, something must have happened. No new material was placed on record and no fresh information was received. The Court pointed out that in such situations it is merely a fresh application of mind by the assessing officer to the same set of facts Exactly an identical situation arises here. The notification was there in existence since 2000, return was filed by the assessed giving all the details and it was for the assessing officer to assess the assessed considering the law applicable. At this juncture, we would like to refer to the judgment of the Apex Court in Parashuram Pottery Works Co. Ltd. v. Income-tax Officer, Circle I, Ward A, Rajkot : [1977] 106 ITR 1. At page 7 of the said judgment the Apex Court held as under:-

"The duty of the assessed in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessed to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessments: See Income-tax Officer v. Lakhmani Mewal Das ."

8. The case of Jindal Photo Films Ltd (supra) was again considered by a Full Bench of this Court in the case of Commissioner of Income Tax v. Kelvinator of India Ltd : [2002] 256 ITR 1. The Court after approving Jindal Photo Films Ltd (supra) held at page 15 as under:-

"It is a well settled principle of law that what cannot be done directly cannot be done indirectly. If the Income-tax Officer does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment or by way of rectification of mistake. In a case of this nature the Revenue is not without remedy. Section 263 of the Act empowers the Commissioner to review an order which is prejudicial to the Revenue."

9. In the instant case also under the Delhi Sales Tax Act, 1975 the Commissioner is empowered to exercise the power of revision vide Section 46.

10. The learned counsel for the revenue submitted that the principle relied upon by the petitioner cannot be introduced in the matter of sales tax as the decisions cited at the Bar pertain to the provisions contained in the Income Tax Act. However, a Division Bench of this Court in the case of Hoshyar Singh Suresh Chandra Sarees Pvt. Ltd and Ors. v. Commissioner of Sales Tax and Anr., after considering a catena of decisions pointed out as under in para 44 at page 222:-

"44, We are also of the opinion that in the instant there was no fresh material with the assessing officer and there was no information with the assessing officer nor is there anything to show that the assessed concealed some material from the assessing officer so as to enable him to reopen the case. In view of the law which we have discussed above and other decisions it is clear that merely because the assessing officer has changed his opinion, the assessing officer cannot call upon the assessed for reassessment and cannot issue coercive notice."

11. In view of the well settled position of law as discussed hereinabove and the facts of this case, which we have indicated above, it is clear that it is a case of a mere change of opinion and nothing more. Therefore, the petition is required to be allowed. The reassessment orders dated 7.8.2003 and 8.8.2003 are accordingly quashed and set aside.

The writ petition is allowed with costs which we quantify at Rs. 10,000/-.