Allahabad High Court
M/S Pernod Ricard India (P) Ltd. vs State Of U.P. And Others on 13 July, 2010
Author: Rajes Kumar
Bench: Rajes Kumar, Bharati Sapru
1
AFR
Reserved
Civil Misc. Writ Petition No. 517 of 2010
M/s Pernod Ricard India (P) Ltd. (Formerly known as M/s. Seagram India
Pvt. Ltd., 41, Nehru Road, Meerut.......................................................Petitioner.
Vs.
State of Uttar Pradesh and others......................................Respondents.
Hon'ble Rajes Kumar, J.
Hon'ble Bharati Sapru, J.
(Delivered by Hon'ble Rajes Kumar, J.) In the present petition, the petitioner is seeking the following reliefs:
1- Certiorari quashing the order dated 20.3.2010 (enclosed as Annexure-6 to the writ petition) passed by the Additional Commissioner, Commercial Taxes, Meerut Zone, Meerut;
2- Certiorari quashing the notice dated 20.3.2010 (enclosed as Annexure-7 to the writ petition) issued by the Deputy Commissioner, Commercial Taxes, Sector-12, Meerut;
3- Mandamus restraining the respondent no. 4 in proceeding in any manner pursuant to the order dated 20.3.2010 passed by the Additional Commissioner, Grade-I, Commercial Taxes, Meerut Zone, Meerut;
4- Prohibition restraining/prohibiting the Deputy Commissioner, Commercial Taxes, Sector-12, Meerut (respondent no. 4) from proceeding in any manner pursuant to the notice dated 20.3.2010;
5- any other suitable writ, order or direction as this Hon'ble Court may deem fit and proper in the circumstances of the case;
6- to award the cost of the petition to the petitioner.
When the writ petition came up for consideration on 16.4.2010, Sri Bharat Ji Agrawal, Senior Advocate, appearing on behalf of the petitioner has not pressed relief no. 1 and in respect of other reliefs, he submitted that the petitioner is challenging the initiation of proceeding under Section 21 of the U.P. Trade Tax Act (hereinafter referred to as the "Act") for the assessment year 2003-04 under the U.P. Trade Tax Act on the ground that the proceeding has been initiated on account of change of opinion, which according to him, is not permissible in law. He, therefore, submitted that the notice issued under Section 21 of the Act and the entire consequential proceedings are liable to be quashed.
The writ petition was entertained only on this ground and learned Standing Counsel was directed to file a counter affidavit. Counter and rejoinder affidavits have been exchanged and the pleadings are complete.
With the consent of learned counsel for the parties, the writ petition has 2 been heard finally at the stage of admission itself and is being disposed of.
The brief facts giving rise to the present writ petition are that the petitioner is a Private Limited Company incorporated under the Companies Act, 1956 having its registered office at 104, Ashoka Estate, Barakhamba Road, New Delhi. The petitioner has its Corporate Office at Gurgaon, in the State of Haryana. There are various units situate in different parts of the country. One of the units is situated at Daurala in the State of U.P. This unit is manufacturing Indian Made Foreign Liquor (IMFL). The petitioner had taken the factory situated at Daurala only. It is the case of the petitioner in the writ petition that earlier there was a Company known as Seagram Manufacturing Limited (SML) which was later on renamed as Seagram (P) Limited under Section 43-A of the Companies Act. Later on, the said Company was merged with Seagram India (P) Limited with effect from April, 2003 by an order dated 3.9.2003 passed by the Delhi High Court under Sections 391 and 394 of the Companies Act. Subsequently, with effect from 23.4.2007 the name of the Company was changed under Section 21 of the Companies Act to Pernod Ricard India (P) Limited. The assessment year involved in the present writ petition is 2003-04. In the said year, the Company in the name of Seagram India (P) Limited was in existence. The petitioner had its establishment in different States across the country, including States of Maharashtra, Haryana, Punjab, Rajasthan, Chandigarh, Jammu & Kashmir, Himachal Pradesh, Delhi, Bihar, Jharkhand, Kolkata, Dehradun, Gwalior, etc. It is the contention of the petitioner that a consolidated balance-sheet of the entire Company was being prepared at the Corporate Office. For the assessment year 2003-04 (U.P.) original assessment orders were passed on 29.3.2007 in respect of the manufacture and sale of IMFL both under the U.P. Trade Tax Act as well as under the Central Sales Tax Act in respect of the petitioner's unit situated at Daurala, District Meerut. During the course of the original assessment proceeding, the petitioner had produced complete books of account and upon verification, the assessing authority has accepted the total sales of IMFL at Rs.31,66,87,066/- which included the payment of Rs.21,61,72,585/- towards State Excise Duty. A consolidated balance-sheet was also produced before the assessing authority during the course of original assessment proceeding.
A proposal has been sent by the Deputy Commissioner, Commercial Taxes, Sector-12, Meerut to the Additional Commissioner, Grade-II, Commercial Taxes, Meerut Zone, Meerut for granting permission under the proviso to Section 21 (2) of the Act to initiate the proceeding beyond the normal period of limitation. The Additional Commissioner, Grade-I, Commercial Taxes, Meerut Zone, Meerut issued a show cause notice on 26.2.2010. The petitioner filed its reply to the show cause notice and after giving opportunity of hearing the Additional 3 Commissioner, Grade-I, Commercial Taxes, Meerut Zone, Meerut passed an order dated 20.3.2010 and granted permission to the Deputy Commissioner (Assessment) to initiate the proceeding under Section 21 of the Act. In pursuance thereof, the Deputy Commissioner (Assessment) issued the notice under Section 21 of the Act on 20.3.2010, which is being challenged in the present writ petition.
Learned counsel for the petitioner submitted that during the course of the assessment proceeding, the petitioner has produced the balance-sheet, profit and loss account and necessary details required by the assessing authority for the purposes of assessment and on examination of such details, the assessing authority has accepted the books of account and disclosed turnover. The present proceeding has been initiated on account of change of opinion, which is not permissible in law.
Sri S.P. Kesarwani, learned Additional Chief Standing Counsel, submitted that in the year under consideration, the petitioner has received certain amounts towards lease rent and in pursuance of the agreement such receipt was liable to tax under Section 3-F for transfer of right to use the goods while such transaction has neither been considered nor examined nor any finding to this effect has been recorded while passing the original assessment order. Since on this issue, no opinion has been expressed specifically in the original assessment order, therefore, the initiation of proceeding with a view to levy the tax on such receipt under Section 3-F of the Act cannot be said to be on account of change of opinion. He submitted that only those cases fall within the purview of change of opinion where on a particular issue the matter has been examined in detail in the original assessment order and thereafter the assessing authority reopens the proceeding on account of change of view. He further submitted that even on the same material which exists on record and has not been considered inadvertently or oversight, constitute a material for reopening the case under Section 21 of the Act. In support of the contention, he relied upon the Division Bench decision of this Court in the case of Kalpana Kala Kendra Vs. Sales Tax Officer, reported in 1989 UPTC-59. He submitted that sufficiency of the material cannot be examined by this Court in a writ jurisdiction under Article 226 of the Constitution of India and even if one material is sufficient for the valid initiation of the proceeding. He further submitted that it is open to the petitioner to participate in the proceeding and file necessary details and make the pleas before the assessing authority, which can be examined during the course of reassessment proceeding. But on the facts and circumstances, the writ petition is not maintainable and is liable to be dismissed.
Learned counsel for the petitioner submitted that in the profit and loss account, the profit from lease has been shown. The balance-sheet of the profit and loss account has been examined during the course of the assessment 4 proceeding and the finding to this effect has been mentioned in the assessment order. He further submitted that a notice dated 18.8.2003 was issued to the petitioner during the course of the assessment proceeding calling upon it to furnish details of the agreements regarding the Technical and Marketing Assistance as well as the copies of the said agreement. The petitioner was also asked, vide the said notice dated 18.8.2003, to furnish complete details of the payment received on account of such agreements for the periods 1997-98 to 2003-04. A copy of the notice dated 18.8.2003 is Annexure-S.A.-I. A similar notice dated 8.9.2003 was again issued by the Deputy Commissioner (Assessment), Sector-4, Commercial Taxes, Meerut calling upon the petitioner to furnish details of the payments on account of trade mark royalty. A copy of the notice is Annexure-S.A.2. In paragraph-9 of the supplementary affidavit, it is stated that the petitioner appeared and filed copies of the agreements as well as details of the gross amount of receipt on account of Technical and Marketing Assistance received on account of bottling income for the period 1.4.2003 to 31.3.2004. Along with the said tabulation, the petitioner also supplied copy of the agreement entered into with the third party bottling units for Technical and Marketing Assistance Agreements. Photocopy of the certified copy of the details submitted by the petitioner in respect of receipts from Technical and Marketing Assistance (towards bottling income) for the period 1.4.2003 to 31.3.2004 as well as copies of the Technical and Marketing Assistance Agreements submitted before the assessing authority is Annexure-S.A.-3. In paragraph-10 of the supplementary affidavit, it is submitted that the petitioner appeared before the assessing authority, a detailed discussion took place in respect of receipt from Technical and Marketing Assistance Agreements and a noting was made in red ink on the tabulation submitted before the assessing authority that "the contract being made at Delhi. The receipts from technical know how/marketing charges/assistance fee from outside U.P." On these facts, it is submitted that neither the agreements pertain to the transfer of right to use the trade mark (as the trade mark was not owned by the Company) nor the agreements were executed in U.P., therefore, the said amount was not treated as amount received on account of sale consideration of transfer of right to use trade mark within the State of U.P. On these facts, he submitted that it is the case where in respect of the receipt for and against the agreements for the purposes of know how the matter has been examined in detail in original assessment proceeding. Therefore, the initiation of proceeding only with a view to move roving and finishing enquiry on account of change of opinion is not permissible in law. Reliance has been placed on the Full Bench decision of the Delhi High Court in the case of Commissioner of Income Tax Vs. Kelvinator of India Limited, reported in 256 ITR-1, the Division Bench decisions in the case of Commissioner of Income Tax Vs. Eicher Limited, reported in 294 ITR-310 5 (Delhi) and in the case of Hari Iron Trading Company Vs. Commissioner of Income Tax, reported in 263 ITR-437 decided by the Punjab and Haryana High Court. The Division Bench decisions of this Court in the case of M/s Aryaverth Chawal Udyog and others Vs. State of U.P. and others, reported in 2008 UPTC, 881, M/s Super Chemicals, Seo Ka Bazar, Agra Vs. Additional Commissioner, Grade-I, Trade Tax, Agra Zone, Agra, reported in 2010 NTN (42), 163, M/s Apollo Tyres Limited, Mohkampor, Delhi Road, Meerut Vs. State of U.P. and others, reported in 2010 NTN (Vol.42), 169.
Sri S.P. Kesarwani, learned Additional Chief Standing Counsel, submitted that during the course of the assessment proceeding, in respect of the receipt, the petitioner might have been asked to produce the agreements and necessary details but the assessment order reveals that there is no discussion in this regard and no opinion has been expressed in respect of such documents and the transactions. Therefore, it is not the case of change of opinion.
We have heard learned counsel for the parties and perused the records. So far as, the legal position is concerned, it is trite that the proceeding under Section 21 of the Act can not be initiated on account of change of opinion. If in the original assessment proceeding on the basis of material on record, there was enquiry in respect of issue or otherwise and on application of mind, issue is determined and an opinion is formed in respect thereof whether by brief reasoning or detailed reasoning proceeding under section 21 of the Act can not be taken on account of change of opinion.
From the perusal of the various documents and the notices annexed along with the supplementary affidavit, it appears that the assessing authority has sought copies of the agreement, etc. from the petitioner in respect of the amount received for providing the technical know how in pursuance of the agreements but perusal of the assessment order reveals that there is no discussion about such material and there is no finding in respect thereof. No opinion has been expressed either way in respect of the material and on the issue. Therefore, on these facts, the question for consideration is whether the present is the case of change of opinion.
We are of the view that only those cases fall under the purview of change of opinion, where the issue is determined on the application of mind and an opinion is formed in respect thereof whether by brief reasoning or detailed reasoning. In case where the issue is not at all determined, no finding in respect thereof is recorded, in asmuch as no opinion in respect thereof is formed, it does not fall within the purview of change of opinion.
The Division Bench of this Court in the case of Kalpana Kala Kendra Vs. Sales Tax Officer (Supra) has held as follows:
"Section 21 of the Act is based upon the theory that the taxes observed must be collected by the statutory machinery. The 6 escapement from assessment whether it results on account of a concealment practiced or fraud played by the assessee or as a result of negligence or ignorance of the Assessing Authority, in our opinion, is of no consequence., provided the action to reopen the assessment is otherwise justified and the Assessing Officer is not acting arbitrarily or in a capricious manner. The escapement of assessment contemplated under that Section may be due to various reasons. The term 'turnover has escaped assessment to tax' which includes under assessment, may as well be a result of lack of care on the part of the Assessing Officer or by reason of inadvertence on his part. Section 21 does not prohibit obtaining of information from investigation material on the record of the original assessment. The scope of that section is not circumscribed by a rider like the one that exists in Section 147 (a) of the Income Tax Act, 1961, namely, that the Income Tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that year, income chargeable to tax has escaped assessment for that year. The escapement envisaged by Section 21 of the Act for the purpose of reassessment need not necessary spring from a source, extraneous to the original record."
In the case of M/s Ema India Ltd Vs. Asstt. Commissioner of Income Tax, Central Circle-I, reported in 2010 UPTC, 246 on a consideration of the decisions of the Apex Court in the case of Kalyanji Mavji & Co. Vs. Commissioner of Income-Tax, West Bengal II, reported in 102 ITR, 287, Indian Eastern Newspaper Society Vs. Commissioner of Income-Tax, New Delhi, reported in 119 ITR, 996 and in the case of A.L.A. Firm Vs. Commissioner of Income Tax, reported in 189 ITR, 285, the Division Bench of this Court held as follows:
"On a combined reading of the judgment of the Apex Court in Kalyanji Mavji (Supra), Indian Eastern Newspaper Society and A.L.A. Firm (Supra), would make it clear that the proposition No.4 viz., where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from enquiry or research into facts or law." still holds goods and the facts of the present case clearly indicates that certain items of income though chargeable to tax had escaped the notice of the assessing officer and no discussion of chargeability of the tax on the said items of income was made by the Assessing Officer in the order. Therefore, in the light of the judgment of the Apex Court in A.L.A. Firm (Supra) the initiation of proceedings under Section 147 of the Act is in accordance with law and no fault can be found with the approach adopted by the Assessing Officer."
We have gone through the various decisions relied upon by learned counsel for the petitioner. In all the cases, in the original assessment order, the issue has been considered and, therefore, the Court has held the re-assessment proceeding invalid on the ground of change of opinion. Such situation is not available here and, therefore, the cases are distinguishable.
7In the present case, as stated above, in the original assessment order, the agreement has not been considered and in respect of the amount received for providing technical know how in pursuance of the agreement, there is no discussion in the original assessment order and in respect thereof no finding has been recorded. Therefore, the present case does not fall within the purview of change of opinion. In the circumstances of the case, we do not find any reason to interfere in the matter. However, it will be open to the petitioner to participate in the proceeding and contest the matter on merit before the assessing authority.
In the result, the writ petition fails and is accordingly, dismissed. Dt.13.7.2010 OP