sarvshree s.k. enterprises through its prop. V. commissioner of commercial tax u.p. lucknow

WTAX/101/2018

AI Insights

The case involves Sarvshree S.K. Enterprises, a company engaged in civil construction, which challenged the reassessment proceedings initiated by the Commissioner of Commercial Tax, U.P. The reassessment was based on an order that permitted reopening of a completed assessment for the Assessment Year 2009-10 under the U.P. Tax on Entry of Goods into Local Area Act, 2007. The petitioner argued that the reassessment was merely a change of opinion and lacked new material, which was supported by various judgments from the High Court and the Supreme Court. The court agreed with the petitioner, emphasizing that reassessment must be based on new material and not on mere suspicion or change of opinion.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 691875 (HC-UTTAR_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 13-03-2019
• Assessment Year: misc
• Other Referred Cases: State of Uttar Pradesh and others vs. Aryaverth Chawal Udyog and others (2015) 17 SCC 324
• Laws Referred To: U.P. Tax on Entry of Goods into Local Area Act, 2007, U.P. Value Added Tax Act, 2008
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: C S C
• Assessee Lawyers: KRISHNA AGARAWAL
• Keywords: Best judgement assessment; Change of opinion; Compounding; Entry Tax; Reassessment
• Section: 13; 6; 9(4); 29(7)

Judgement Text

"1 Reserved on: 25.02..2019 Delivered on: 13.03.2019 Court No. - 35 Case :- WRIT TAX No. - 101 of 2018 Petitioner :- Sarvshree S.K. Enterprises Through Its Prop. Respondent :- Commissioner Of Commercial Tax U.P. Lucknow Counsel for Petitioner :- Krishna Agarawal Counsel for Respondent :- C.S.C. Hon'ble Bharati Sapru,J. Hon'ble Piyush Agrawal,J. (Delivered by Hon'ble Piyush Agrawal, J.) The present writ petition has been filed challenging the reassessment proceedings, initiated against it, by granting permission to reopen the completed assessment for the Assessment Year 2009-10 under U.P. Tax on Entry of Goods into Local Area Act, 2007 Act (hereinafter referred to as, \"Entry Tax Act\") vide impugned order dated 07.09.2017 passed by the respondent no. 2 as well as ex parte reassessment order dated 31.03.2018 passed by the respondent no. 3. The petitioner is engaged in the business of civil construction work and opted for compounding under Section 6 of the U.P. Value Added Tax Act, 2008 2 (hereinafter referred to as \"the VAT Act\"). By the order dated 22.03.2013, the respondent no. 3 had accepted the petitioner's compounding application. In the said compounding order, it was specifically mentioned that the assessment order under the Entry Tax Act will be passed separately, in accordance with law. Under Section 9(4) of Entry Tax Act, an assessment order dated 22.03.2013 was passed making a best judgement assessment by enhancing the purchase of cement to the tune of Rs. 10,69,675/- and imposed entry tax of Rs. 21,393/-. The petitioner assailed the said assessment order before the first appellate authority, who, by its order dated 14.08.2013, dismissed the appeal and confirmed the best judgement assessment. The petitioner has accepted the first appellate order and has not preferred any appeal. The respondent no. 2 issued notice dated 22.07.2017 under section 29(7) read with section 13 of 3 the Entry Tax Act for granting sanction to the Assessing Authority for initiation of reassessment proceedings. The petitioner filed its objection. Thereafter, the respondent no. 2, vide impugned order dated 07.09.2017, granted permission to the Assessing Authority to reassess the petitioner in the extended period of limitation. We have heard Shri Krishna Agarawal, learned counsel for the petitioner and learned standing counsel for the State – respondent and perused the materials brought on record. The aforesaid writ petition was entertained by this Court on 31.01.2018 and granted time to the learned standing counsel to file counter affidavit and stayed the further proceedings, pursuant to the impugned order dated 07.09.2017, until further orders of this Court. Thereafter, on 31.03.2018, consequential reassessment order was passed ex parte, which was challenged by way of moving an amendment 4 application on various grounds. The amendment application was allowed by this Court on 08.10.2018. It was argued on behalf of the petitioner that there was no fresh material which came to the knowledge of the respondents after passing of the assessment order, which warrants for initiation of reassessment proceedings. It was further argued that the respondent no. 3, while framing the original assessment order dated 22.07.2017, made a best judgement assessment by enhancing the purchase of cement and consequently, enhanced the levy of entry tax on the same, which has been confirmed by the first appellate authority vide order dated 14.08.2013. The proceeding of reassessment is only a change of opinion, which is not permissible under the law as well as by various judgements rendered by this Court as well as by the Apex Court. Rebutting the argument, the counsel for the State relied upon the two impugned orders and emphasized that the present writ petition lacks merits and the same 5 is liable to be dismissed. On perusal of the record, it reveals that originally, the best judgment assessment was passed against the petitioner, which was confirmed by the first appellate authority, which means that the Assessing Authority, while framing the original assessment order, has gone deep into the record and verified the same and thereafter, made the best judgement assessment. The respondent no. 2, while granting permission by extending the period of limitation and reopening the completed assessment, had observed that since, seeing the nature of work done by the petitioner, the consumption of cement appears to be much more than disclosed by the petitioner, the high value of amount received by the petitioner from Zila Panchayat, Karvi towards constructions of CC Road, Culvert (PuliyaI), etc., the purchase of cement should be enhanced. Thereafter, the reassessment order dated 31.03.2018 was passed ex parte fixing the turnover of Rs. 6 1,94,04,832/- and imposed the liability of entry tax @ Rs. 3,88,096.64 by the respondent no. 2. The observation made in the impugned orders for passing the reassessment order is nothing but change of opinion without any new material being brought on record, which has come to the knowledge of the respondents and the said action cannot be permitted under the law. The reassessment proceeding must be based on some material and not on mere suspicion. The Assessing Authority must have some material, on which it forms its opinion and the same should not be arbitrary, irrational, vague or irrelevant. In the absence of such material, the action taken by the respondents cannot be sustained. The case in hand, the reassessment proceedings and the consequential assessment order have been passed only on presumption and conjectures, which is not permissible under the law. The Hon'ble Supreme Court in the case of State of Uttar Pradesh and others vs. Aryaverth Chawal 7 Udyog and others (2015) 17 SCC 324 has held that mere change of opinion while perusing the same material cannot be a “reason to believe” that a case of escaped assessment exists requiring assessment proceedings to be reopened. The Apex Court in paragraph 30 has held as follows: “30. In case of there being a change of opinion, there must necessarily be a nexus that requires to be established between the \"change of opinion\" and the material present before the assessing authority. Discovery of an inadvertent mistake or non-application of mind during assessment would not be a justified ground to reinitiate proceedings under section 21(1) of the Act on the basis of change in subjective opinion Commissioner of Income-tax v. Dinesh Chandra H. Shah [1972] 3 SCC 2311 and Income-tax Officer v. Nawab Mir Barkat Ali Khan Bahadur [1975] 4 SCC 3602 ) (emphasis supplied).” In view of the aforesaid facts and circumstances, this Court is of the opinion that the impugned order dated 07.09.2017 passed by the respondent no. 2, granting permission to reopen the completed assessment, as well as the consequential ex parte reassessment order dated 31.03.2018 for the Assessment Year 2009-10 passed by the respondent no. 3 are liable 8 to be quashed being tantamount to change of opinion, which is not permissible under the law. The writ petition succeeds and is allowed. The impugned order dated 07.09.2017 passed by the respondent no. 2 and the consequential reassessment order dated 31.03.2018 passed by the respondent no. 3 are hereby quashed. Order Date :-13.03.2019 Amit Mishra "