Allahabad High Court
M/S Parmarth Steel And Alloys Pvt. Ltd. vs State Of U.P. And Others on 28 March, 2022
Bench: Surya Prakash Kesarwani, Jayant Banerji
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Court No. - 3 Case :- WRIT TAX No. - 874 of 2010 Petitioner :- M/S Parmarth Steel And Alloys Pvt. Ltd. Respondent :- State of U.P. and Others Counsel for Petitioner :- Krishna Agrawal,P. Agrawal Counsel for Respondent :- C. S. C. With Case :- WRIT TAX No. - 875 of 2010 Petitioner :- M/S Parmarth Iron Pvt. Ltd. Respondent :- State of U.P. and Others Counsel for Petitioner :- Krishna Agrawal,P. Agrawal Counsel for Respondent :- C. S. C. With Case :- WRIT TAX No. - 353 of 2012 Petitioner :- M/S Shashi Steel Corporation Respondent :- State of U.P. and Others Counsel for Petitioner :- Praveen Kumar Counsel for Respondent :- C.S.C. With Case :- WRIT TAX No. - 13 of 2014 Petitioner :- M/S Shikha Steel Co. Respondent :- State Of U.P. And 3 Ors. Counsel for Petitioner :- Pradeep Agrawal,Krishna Agrawal Counsel for Respondent :- C.S.C. Hon'ble Surya Prakash Kesarwani,J.
Hon'ble Jayant Banerji,J.
1. These cases have been remanded by the Hon'ble Supreme Court by order dated 28.8.2019 passed in civil appeals.
2. The aforesaid writ petitions have been filed challenging the notices for reassessment under Section 21(1) of the U.P. Trade Tax Act, 1948.
3. After the aforesaid order of the Hon'ble Supreme Court, these writ petitions were listed on 18.2.2021, 5.3.2021 and 4.3.2022.
4. On 4.3.2022, this Court passed the following order:
"Case called out. None appears for the petitioner to press this writ petition.
List/put up in the additional cause list in the week commencing 21.3.2022 alongwith connected matter."
5. Today, case has been called out. No one appears for the petitioners to press the writ petitions even in the revised call.
6. In the aforesaid Writ Tax No. 874 of 2010, Writ Tax No. 875 of 2010, Writ Tax No. 353 of 2012 and Writ Tax No. 13 of 2014, the petitioners have prayed for the following relief:
Relief as prayed in Writ Tax No. 874 of 2010 Relief as prayed in Writ Tax No. 875 of 2010 Relief as prayed in Writ Tax No. 353 of 2012 Relief as prayed in Writ Tax No. 13 of 2014
i) issue a suitable writ order or direction in the nature of writ of certiorari quashing the permission granted by the opposite party no. 3 on 30.4.2010 for the assessment year 2003-04, 2004-05, 2005-06, 2006-07 and the consequential notice under Section 21(1) for the assessment year 2003-04 (ANNEXURE NO. 10 & 12) of this Writ Petition as well as the notice issued under sub section 1 of section 21 of the Act by the opposite party no. 4 for the assessment year 2007-08 (ANNEXURE NO. 12) to this Writ Petition after summoning the records.
ii) issue a suitable writ order or direction in the nature of mandamus/prohibition directing/prohibiting the Opposite Party No. 4 not to impose and realise tax under section 21 of the Act for the assessment year 2003-04, 2004-05, 2005-06, 2006-07 & 2007-08 during the pendency of this Writ Petition before this Hon'ble Court or till the finalization of proceeding by the Central Excise Department.
iii) issue a suitable writ order or direction in the nature of writ of mandamus directing the Opp. Parties not to take any action against the petitioner under Section 21 till the finalization of proceedings in pursuance of the search dated 10.7.2007 under the Central Excise Act, 1944.
i) issue a suitable writ order or direction in the nature of writ of certiorari quashing the permission granted by the opposite party no. 3 on 30.4.2010 for the assessment year 2003-04, 2004-05, 2005-06 & 2006-07 and the consequential notice under Section 21(1) for the assessment year 2003-04 (ANNEXURE NO. 11 & 13) of this Writ Petition as well as the notice issued under sub section 1 of section 21 of the Act by the opposite party no. 4 for the assessment year 2007-08 (ANNEXURE NO. 13) to this Writ Petition after summoning the records.
ii) issue a suitable writ order or direction in the nature of mandamus/prohibition directing/prohibiting the Opposite Party No. 4 not to impose and realise tax under section 21 of the Act for the assessment year 2003-04, 2004-05, 2005-06, 2006-07 & 2007-08 during the pendency of this Writ Petition before this Hon'ble Court or till the finalization of proceeding by the Central Excise Department.
iii) issue a suitable writ order or direction in the nature of writ of mandamus directing the Opp. Parties not to take any action against the petitioner under Section 21 till the finalization of proceedings in pursuance of the search dated 10.7.2007 under the Central Excise Act, 1944.
i. Issue a writ, order or direction in the nature of certiorari quashing the impugned re-assessment proceedings for the assessment year 2005-06 under Sub Section (2) of Section 21 of the Act.
ii. Issue a writ, order or direction in the nature of certiorari quashing the impugned notice dated 12.03.2012 (Annexure No. 1 to the writ petition) issued by the respondent no. 3 and further proceeding pending before respondent no. 3 for assessment year 2005-06 under Sub Section (2) of Section 21 of the Act.
iii. Issue a writ, order or direction in the nature of mandamus prohibiting/ directing the respondent nos. 3 and 4 not to proceed in any manner in pursuance of notice dated 12.03.2012 (Annexure No. 1 to the writ petition) for assessment year 2005-06 under Sub Section (2) of Section 21 of the Act.
i) issue a suitable writ order or direction in the nature of certiorari quashing notices dated 19.10.2013 issued by Respondent No.7).
ii) issue a suitable writ order or direction in the nature of certiorari quashing the approval dated 24.3.2011 for the assessment year 2004-05 granted by the Opposite Party No. 3 under subsection 2 of Section 21 (ANNEXURE NO. 1) to this Writ petition after summoning the records.
iii) Issue a suitable writ order or direction in the nature of writ of mandamus/ prohibition directing/ prohibiting the Opposite Party no. 3 & 4 not to proceed in any manner in pursuance of the notice under Section 21 of the Act for the assessment year 2004-05, 2005-06 & 2006-07.
7. Perusal of the reliefs sought by the petitioners reveal that notices under Section 21 of the UP Trade Tax Act, 1948 and the approval granted, relating to assessment years 2003-04, 2004-05, 2005-06 and 2006-07 have been challenged by the petitioners. The above noted first three writ petitions are pending in this Court from about a decade and the fourth writ petition is pending from about eight years. The order sending back the matter to this Court was passed by Hon'ble Supreme Court on 28.8.2019. Two and half years have also passed since the order of the Hon'ble Supreme Court. Perusal of the order-sheet as briefly noted above also shows that the petitioners are not appearing to press the writ petitions.
Since, none appears for the petitioners even in the revised call and also since there is an order of the Hon'ble Supreme Court with certain directions, therefore, we proceed to decide these old writ petitions with the assistance of the learned Standing Counsel.
8. Hon'ble Supreme Court, by the aforesaid order, has remitted back the matter with the following observation:
"As a result, the impugned judgment(s) are set aside and the proceedings are remanded to the High Court for reconsideration on merits in accordance with law and in light of the reported decision in Aryaverth Chawal Udyog (supra)."
9. In the case of Aryaverth Chawal Udyog (supra) reported in (2015) 17 SCC 324 (paragraphs 28 to 30), Hon'ble Supreme Court has held as under:
"28. This Court has consistently held that such material on which the assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by the assessing Authority in pursuance of such belief. In case of absence of such material, this Court in clear terms has held the action taken by assessing Authority on such "reason to believe" as arbitrary and bad in law.
In case of the same material being present before the assessing Authority during both, the assessment proceedings and the issuance of notice for re-assessment proceedings, it cannot be said by the assessing Authority that "reason to believe" for initiating reassessment is an error discovered in the earlier view taken by it during original assessment proceedings. (See: Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan, (1980) 4 SCC 71).
29. The standard of reason exercised by the assessing Authority is laid down as that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion. The necessary sequitur is that a 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. (See: Binani Industries Ltd. v. CCT,(2007) 15 SCC 435; A.L.A. Firm v. CIT, (1991) 2 SCC 558). If a conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making the assessment and again a different or divergent view is reached, it would tantamount to "change of opinion".
If an assessing Authority forms an opinion during the original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for re-assessment. Thus, reason to believe cannot be said to be the subjective satisfaction of the assessing Authority but means an objective view on the disclosed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment.
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 (CIT v. Dinesh Chandra H. Shah, (1972) 3 SCC 231; CIT v. Nawab Mir Barkat Ali Khan Bahadur, (1975) 4 SCC 360)."
10. The aforequoted judgement in the case of Aryaverth Chawal Udyog (supra) has been reproduced by the Hon'ble Supreme Court in the aforesaid order dated 28.8.2019 while remanding the matter.
Writ Tax Nos.874 & 875, both of 2010:-
11. Perusal of the impugned order dated 13.04.2010 relating to Assessment Years 2003-04, 2004-05, 2005-06 and 2006-07 under proviso to Section 21(2) of the U.P. Trade Tax Act, 1948 (hereinafter referred to as ''the Act, 1948'), reveals that the Additional Commissioner has granted the permission to invoke extended period of limitation to initiate proceedings for reassessment on the basis of huge documentary material received by the department in hard-disk and CD relating to the petitioners found in search/ survey conducted by the Central Excise Department on 10.07.2007 on the business premises of the petitioners and some other related premises. The materials received and materials coming in possession of the respondent-department revealed huge undisclosed sales/ purchases by the petitioner during the years in question. As per materials available on record, the documents received in hard-disk and CD revealed unaccounted sales of 1557 metric tons M.S. ingots apart from huge unaccounted purchases of raw material and scrape which were not disclosed during the course of regular assessment proceedings. The Additional Commissioner granted repeated opportunities to the petitioners to submit reply but on the dates fixed, the petitioners merely sought adjournments. As per impugned notices under Section 21(1) of the Act, 1948 for the Assessment Year 2003-04, the unaccounted/ undisclosed sales of M.S. ingots of 1557.142 MT came to light. As per impugned notice under Section 21(1) of the Act, 1948 for the Assessment Year 2007-08 (U.P.) for the period from April, 2007 to June, 2007, the undisclosed/ unaccounted sales of 6358.58 metric ton came to light on the basis of material on record. It also came to light on examination of the documentary materials available in the hard-disk and DVD that the petitioners have made following unaccounted purchases of iron ingots from one M/s Jain Steel, Bijnor:
Assessment Year Quantity in metric ton 2003-04 1353.51 2004-05 8808.74 2005-06 5728.865 2006-07 7757.930
12. Apart from above, the materials available in the hard-disk also revealed purchases of scrap by the petitioners from various dealers and sale of ingots to various local dealers and also to some Firms of Uttarakhand. It also came to light on the basis of materials available in the hands of the respondents that the petitioners made undisclosed purchases during the Assessment Year 2003-04 from M/s Kamakhya Steels Pvt. Ltd., Bijnore (658.28 MT). These details of evaded purchases/ sales which have been extracted above from the impugned notices under Section 21(1) of the Act, 1948. Evaded transactions in some greater detail are mentioned in the impugned notices.
Writ Tax No.13 of 2014:-
13. In this writ petition, the approval dated 24.03.2011 for the Assessment Year 2004-05 was granted by the Additional Commissioner under the proviso to Section 21(2) of the Act, 1948 noticing the information received by the Deputy Commissioner (Special Investigation Branch) Second Unit, Ghaziabad through letter No.659 dated 26.03.2010 from the Director General of Central Excise Intelligence, New Delhi regarding adverse material found in search/ survey conducted at the business premises of M/s Parmarth Iron Pvt. Ltd. Bijnor and some other units. The CD/ soft copy and hard-disk as received by the respondents revealed Sale Ledger Account and other particulars relating to the petitioner which revealed unaccounted/ evaded purchases/ sales of about Rs.4,31,35,901/- during the Assessment Year 2004-05. After following due procedure of law, the permission was granted by the Additional Commissioner under proviso to Section 21(2) of the Act.
14. As per notice for the Assessment Year 2004-05, it is evident that the respondents were having relevant information in their possession against the petitioner indicating huge evaded/ unaccounted transactions during the Assessment Year 2004-05.
Writ Tax No.353 of 2012:-
15. The impugned order granting permission under the proviso to Section 21(2) of the Act, 1948 for the Assessment Year 2005-06 was passed by the Additional Commissioner, Trade Tax on the basis of information received which revealed evaded/ unaccounted purchases/ sales of about Rs.2,31,81,000/- as evident from the Sale Ledger Account and other particulars available in the hard-disk and CD/ soft copy received from the Deputy Commissioner (SIB), Second Unit, Ghaziabad vide letter No.663, dated 27.03.2010, which is based on the report/ materials received from the Director General of Central Excise Intelligence, New Delhi.
16. In the case of The Commissioner of Sales-tax U.P. vs. M/s. Bhagwan Industries (P) Ltd., Lucknow, AIR 1973 SC 370 (Paras 9 & 10), Hon'ble Supreme Court has held as under:
"9. 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.
10. 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 whether that material in 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."
(Emphasis supplied)
17. It is settled principles of law that proceedings under Section 21 of the Act, 1948 can be initiated if the material on which the Assessing Authority bases its opinion, is not arbitrary, irrational, vague, distant or irrelevant. 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 Section 21 of the Act, 1948. 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 for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. The question as to whether that material in 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.
18. Facts of the present cases as briefly noted above leaves no manner of doubt that the Assessing Authority was having relevant material in his hands on the basis of which he had reason to believe that for the Assessment Years in question, the petitioners have evaded tax on undisclosed sales and made huge transactions of purchases and sales out of the Books of Account. Therefore, the permission under the proviso to sub-Section (2) of Section 21 of the Act, 1948 for the Assessment Years in question have been lawfully granted by the concerned Additional Commissioner, Trade Tax and the notices under Section 21(1) of the Act, 1948 have been lawfully issued by the concerned Assessing Authorities to the petitioners for the Assessment Years in question. Under the circumstances, we do not find any merit in these writ petitions.
19. For all the reasons aforestated, all the writ petitions are dismissed.
Order Date :- 28.3.2022 A. V. Singh