K. Ranjeet Mohan, vs. Assistant Commissioner of Income-Tax,

Court No. - 1 Case :- SALES/TRADE TAX REVISION No. - 519 of 2013 Revisionist :- M/S Sayeed Corporation Opposite Party :- The Commissioner Commercial Tax Counsel for Revisionist :- M.M. Rai Counsel for Opposite Party :- C.S.C. Hon'ble Piyush Agrawal,J. Heard Sri M.M.Rai, learned counsel for the revisionist and Sri A.C.Tripathi, learned counsel for the opposite party. Present revision has been filed against the order dated 2.11.2012 passed by the Commercial Tax Tribunal, Allahabad Bench-1, Allahabad in Second Appeal No. 059 of 2011 for the assessment year 2001-02 arising out of assessment proceedings initiated under section 21 of the U.P. Trade Tax Act, 1948, in which following questions of law have been framed. i) Whether on the facts and in the circumstances of the case the Commercial Tax Tribunal as well as the authorities below were justified in imposing tax on Bitumen amounting to Rs. 40000/- on a turnover of Rs. 2 lakh under section 21 when no authorisation was sought by the assessing authority and given by the Additional Commissioner, Allahabad Zone, Allahabad for initiation of proceeding as per provision to section 21(2) of the U.P. Trade Tax Act 1948 to tax Bitumen. ii) Whether on the facts and in the circumstances of the case Tribunal was legally justified in upholding the levy of tax on Bitumen under section 21 of the U.P. Trade Tax Act, 1948 when there was no material on record to form a "reason to believe" that the turnover thereof has escaped from assessment as no exemption was given in the original assessment order dated 4.2.2006 and there was no evidence on record that the same was transferred in the work contract. iii) Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in not addressing itself on the application given under section 12-B, of the U.P. Trade Tax Act, 1948, the affidavit and the certificate issued by the Superintending Engineer U.P.P.W.D. Fatehpur, certifying the Bitumen was supplied by the department to the contractee for the construction of road in the civil work contract performed during the assessment year 2001-02. Brief facts of the case are that the revisionist is engaged in the business of purchase and sale of Gitti as well as stone grit, stone ballast, supply of fire wood and labour work as well as civil contractor. The original assessment order was passed by the assessing authority on 4.2.2006. The claim of revisionist was accepted so far as Gitti of Rs. 511260/- purchased from the registered dealer. Thereafter reassessment proceedings were initiated and the proposal dated 1.9.2006 was sent by the

assessing authority on the ground that the purchases of Rs. 511260/- shown from the registered dealer are not verifiable. The Additional Commissioner, Grade I-Allahabad Zone, Allahabad by order dated 15.11.2006 granted permission to reopen the complete assessment. After permission, the assessing authority issued notice dated 5.7.2007. Thereafter the assessing authority by its order dated 1.9.2007 has passed the reassessment order imposing tax of Rs. 65951/- on Gitti as well as Rs. 40,000/- on the supply of coal tar. The revisionist contested the matter upto the Tribunal unsuccessfully, hence the present revision. Learned counsel for the revisionist submitted that at the time of passing the original assessment order a detailed scrutiny of books of accounts as well as material on record was made, hence the benefit of tax paid purchase of Gitti of Rs. 511260/- was allowed. By way of reassessment the assessing authority without going through the material on record has wrongly passed the reassessment order which has been affirmed by the Tribunal. There was neither any material on record nor any information with regard to sale and supply of Bitumen on which tax has been imposed. He further submits that an application under section 12-B of the U.P. Trade Tax Act was filed along with an affidavit and the certificate issued by the Superintending Engineer, PWD certifying Bitumen has been given in the disputed area by the PWD Department. Therefore, the Tribunal ought to have allowed the appeal. Per contra, Sri Tripathi, learned counsel for the opposite party submits that while framing the original assessment order the benefit on purchase of stone ballast has wrongly been given as the purchases shown from the registered dealer as on verification the same was termed out to be incorrect. He further submits that time and again opportunity was given to the dealer to justify tax paid purchases of Gitti but he has filed to do so, therefore, the Tribunal has rightly dismissed the appeal of the dealer. The Court has perused the record. The dispute is with regard to claim, made by the dealer about purchases of Gitti from the registered dealer to the tune of Rs. 511260/-. The record reveals that at the time of passing of the original assessment order the benefit of the same was given after due verification. Thereafter reassessment proceeding has been initiated . The permission was granted by the Additional Commissioner, Allahabad Zone, Allahabad by order dated 15.11.2006. The reassessment order dated 1.9.2006 reveals that two dealers from which tax paid purchases has been shown by

the revisionist are namely; M/s Singh Stone Mill, Kabrai, Mahoba and M/s Mahashakti Stone Mill, Kabrai, Mahoba. There is no information whatsoever contrary to the material on record. So far as M/s Singh Stone Mill for disbelieving the purchases made by the dealer is concerned, the only information has been received that the selling dealer has neither produced bill book nor has given the details of sale list. On the said facts only the benefit of tax paid sale has been disbelieved. Record further reveals that the cash memo, which has been produced by the revisionist has not been disbelieved at any stage nor any finding has been recorded by any of the authorities that the said cash memo is forged and fictitious or the same is not of the selling dealers, hence, there is no reason to believe. This Court in the case of M/s Royal Trading Co., Saharanpur vs. Trade Tax Officer, Saharanpur (2000 U.P.T.C. 642) has held that for initiating reassessment proceedings there must be reasons to believe and the reassessment cannot be initiated on the whims and fancies of the taxing authority. Paragraph nos. 7 and 8 of the said judgment is quoted below: "7. therefore, action under section 21 of the Act cannot be taken on the whims of the Assessing Officer by restoring to conjecture of imagination. He has to have before him the facts which are germane to the issue and on the basis of which a rational man can have rason to believe that the whole or any part of the turnover has escaped assessment or has been under assessed. In Income Tax Officer vs. Madnani Engineering Works Ltd. (1979) 118 ITR. l : 1979 U.P.T.C. 1107 (SC) the Hon'ble Supreme Court while dealing with some what similar provision under section 147 of the Income Tax Act, 1961 held that the existence of reason to believe on the part of the I.T.O was a justifiable issue and it was for the Court to be satisfied whether in fact the I.T.O had reason to believe that income had escaped assessment. In Joti Parshad vs. State of Haryana, J.T. 1992 (6) S.C. 94 the Hon'ble Supreme Court while dealing with the meaning of expression 'reason to believe' in Section 26 of the Indian Penal Code held that the reason to believe is not the same as suspicion and a person must have reason to belief if the circumstances are such that a reasonable man would by probable reasoning, conclude or infer regarding the nature of the thing concerned. In Income Tax Officer vs. Lakhmani Mewal Das (1976) 103 I.T.R. 437: 1976 U.P.T.C. 809 (SC), the Hon'ble Supreme Court held that the reasons for the formation of the belief contemplated by Section 147 (a) of the Income Tax Act, 1961 for the reopening of an assessment mush have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direction nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief. The Hon'ble Supreme Court further observed that though it is true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on the point as to whether action should be initiated for reopening the assessment yet at the same time we have to bear in mind that it is not any and every material, however vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. This view was reiterated by the

Hon'ble Supreme Court while dealing with the provisions of Section 21 of the U.P. Trade Tax Act in Commissioner of Sales Tax v. Bhagwan Industries (P) Ltd. (1973) 31 S.T.C. 293 in which it was held that 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 this 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 this section. 8. In the face of the law as explained in the above rulings the contention of the learned Standing Counsel that action could be initiated under Section 21 merely if the Assessing Officer though that the turnover had escaped assessment is not tenable and is against the patent provision of law which has used the word 'reason to believe' only to protect the tax payer from arbitrary and illegal action of the Assessing Officer. This view is also not supported by the various rulings cited by Sri R.D.Gupta in support of his contention that any reason is good enough for initiating action under section 21. He placed reliance on Kalpana Kala Kendra vs. Sales Tax Officer 1989 U.P.T.C. 597 ( Paragraph 19) in which this Court concluded we are fully satisfied that there is material before the respondent- Assessing Authority, which would furnish him grounds for entertaining a "reasonable belief" contemplated under section 21 of the act. Reliance is also placed on M/s A.L.A. Firm vs. Commissioner of Income Tax 1991 U.P.T.C. 918 (Paragraph 19) in which it was stated as under: " To give a couple of illustrations suppose in I.T.O. in the original assessment, which is a valuminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profit realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently, he finds, in the forest of paper filed in connetion with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the I.T.O. derives information from the recond on an investigation or enquiry into facts not orignally undertaken. Again, suppose an I.T.O. accepts the plea of an assessee that a particular receipt is not income liable to tax. But on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of the sales of house property were already in the file or that the decision subsequently come a cross by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later". From the perusal of the record it shows that there is no material which could be attributed that the wrong claim having been made by the revisionist. The revisionist had admittedly shown purchases of gitti against the cash memo which has not been disbelieved at any stage. The reassessment proceeding has only been initiated as the selling dealer has not shown the cash memo and the sale list. There is no finding of any material so far as M/s Mahashakti Stone Mills as no enquiry what soever has been brought on record. In view of the said facts, initiation of reassessment proceeding is bad. Further once the revisionist

has brought on record by means of an application under section 12-B of the Act before the Tribunal that the Bitumen has neither been used nor purchased by the revisionist but the same was given by the PWD department for its use for repairs of the road. In absence of any material on record the assessing authority was not justified in imposing tax on the use of Bitumen. In view of the aforesaid facts and law the revision is allowed with cost of Rs. 5,000/- and the question of law is answered accordingly. The cost shall be paid within a period of one month from today and compliance report be submitted by the opposite party to the Registrar General of this Court within 45 days from today. . Order Date :- 9.11.2021 samz