Hon'ble Piyush Agrawal,J.
(Delivered by Hon'ble Piyush Agrawal, J.) By means of the present writ petition, the petitioner has prayed for issuing a writ of certiorari quashing the sanction order dated 30.03.2017 passed by the respondent no. 1 for the Assessment Year 2009-10 as well as the consequential notice dated 22.04.2017 for the Assessment Year 2009-10 passed by the respondent no. 2.
The facts of the case are that the petitioner is a Company incorporated under the provisions of Indian Companies Act, 1956 having its registered Office at 46, Janpath, 1st Floor, New Delhi and U.P. Office at Windsor Club, Vaibhav Khand, Indrapuram, Ghaziabad. The present Office of the petitioner is at Plot No. 22, Sector - 135, Noida. The petitioner is a builder and engaged in the business of construction and sale of flats to the interested persons/allottee, after purchasing the land from the Development Authorities and developed the land so purchased.
The petitioner had not entered into any tripartite agreement between the petitioner and the purchaser, as the petitioner developed the land after purchasing the same from the Development Authorities. In other words, the petitioner is a sole owner of the land on which the flats were constructed. According to the petitioner, the ownership of the flats continues with it from the time of construction till the execution of registered sale deed in favour of the interested person/prospective buyers and as such, the petitioner does not fall within the category of works contract. The original assessment order was passed for the year in dispute on 30.04.2013. The Assessing Authority, after considering all the materials available on record as well as the judgement of the Apex Court in the case of K. Raheja Development Corporation Vs. State of Karnataka, reported in (2005) 5 SCC 162, letter of allotment, etc., came to the conclusion that there is no transfer of any material in execution of works contract and the petitioner is not liable for payment of any tax.
Thereafter, reassessment notice dated 18.02.2007 was issued by the respondent no. 1 under section 29(7) of the U.P. Value Added Tax Act, 2008 (hereinafter referred to as, ' VAT Act') to show cause as to why permission may not be granted to the Assessing Authority for reopening the completed assessment in view of the judgement of the Apex Court in Larsen and Toubro Limited and Others Vs. State of Karnataka and Others, reported in 2013 NTN (153) 65, where the builders were liable for payment of tax on the transfer of material used in execution of works contract. In response to the notice, the petitioner submitted a detailed reply explaining each and every issue raised in the notice and stated that the proceedings for granting permission to reopen the completed assessment may be dropped, as there is no fresh material.
The respondent no. 1, by means of the impugned order dated 30.03.2017, granted permission to the respondent no. 2 to reopen the completed assessment on the ground that the petitioner has received booking amount from the prospective purchasers, which amounts to transfer of property in execution of works contract and hence, the turnover of the petitioner has escaped assessment. Further, on the basis of the judgement in Larsen and Toubro Limited (supra), the petitioner is also liable for payment of tax. In pursuance of the order dated 30.03.2017, the impugned reassessment show cause notice dated 22.04.2017 under section 29(7) of the Act has been issued. Hence, this writ petition.
We have heard Shri Rakesh Ranjan Agarwal, learned Senior Counsel, assisted by Shri Suyash Agarwal, learned counsel for the petitioner and Shri C.B. Tripathi, learned Special counsel for the respondents.
Learned counsel for the petitioner has submitted that admittedly, the petitioner is a builder, who purchases the land from the Development Authorities. Thereafter, it constructs flats over it being the sole owner of the land. The flats are sold only after completion through registered sale deed executed in favour of interested buyers. It is further submitted that the modus operandi of its business in the disputed year, i.e., 2009-10, was identical and similar with the previous as well as in subsequent years.
The learned counsel for the petitioner has further submitted that for the Assessment Years 2004-05 and 2005-06, the Assessing Authority had levied tax on the petitioner treating it as a dealer and imposed tax on the material used in the execution of works contract on the basis of the judgement of the Apex Court in the case of K. Raheja Development Corporation (supra). Against the said order, Writ Petition No. 997 of 2006 and Writ Petition No. 1238 of 2006 were filed before this Court, which were allowed on 23.03.2007. Against the said order, the State went in SLP before the Apex Court. The Apex Court, vide its order dated 30.12.2007, allowed the appeal filed by the State only on the limited ground that the writ petition against the assessment order was not maintainable. The petitioner should have filed the appeal as provided under the Act.
In pursuance of the order of the Apex Court, the petitioner filed an appeal, the appellate authority allowed the appeal and remanded the matter back to the Assessing Authority for deciding afresh by order dated 20.10.2009. Against the aforesaid order, the petitioner preferred Second Appeal Nos. 231 and 232 of 2010 before the Commercial Tax Tribunal, Noida Bench, Noida, which were allowed vide order dated 11.06.2010. The Tribunal, after considering all the materials available on record, allotment letter and the judgement of the Apex Court as well as other judgements on the subject, came to the conclusion that the petitioner is not a work contractor and there is no liability for payment of tax on the material used in the execution of works contract. Since there was a mistake, apparent on record, hence an application under section 22 of the VAT Act was moved before the Tribunal and the same was also allowed on 12.07.2010. Against the order passed by the Tribunal, holding the petitioner was not liable for payment of tax on the material used in execution of works contract, the Department preferred a revision before this Hon'ble Court, which was dismissed on 20.09.2012.
It has further been argued that against the judgement and order of this Court dated 20.09.2012, holding that the petitioner is not a dealer and hence, not liable for tax on the material used for execution of works contract, neither any appeal was preferred by the State, nor any material was brought on record showing the order of this Court has been set aside/modified/recalled / stayed by the competent Court. In other words, the Department has accepted the order passed by this Court.
It is further argued by the learned counsel for the petitioner that once the issue has been settled inter-parties and there is no new material brought on record to suggest otherwise, the completed assessment in disputed, i.e., 2009-10, cannot be permitted to be reopened merely on the basis of change of opinion and therefore, the impugned order dated 30.03.2017 and consequential notice dated 22.04.2017 are liable to be set aside.
The counsel for the petitioner has relied upon the judgement of this Court in Varun Beverages Ltd. Vs. State of U.P. & Others reported in (2017) 99 VST 393 (All); wherein, this Court has held as under:-
"8. It is not disputed before us that if there is a change of opinion, reassessment under Section 29(7) is not permissible. When it can be said "change of opinion" has been recently considered by Apex Court in State of Uttar Pradesh and others Vs. Aryaverth Chawl Udyoug and others (2016) 91 VST 1 (SC) wherein after referring to its earlier decisions in Binani Industries Limited, Kerala Vs. Assistant Commissioner of Commercial Taxes, VI Circle, Bangalore 2007 (15) SCC 435 and A.L.A. Firm Vs. Commissioner of Income-tax 1991 (2) SCC 558 the Court said as under:
"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 reassessment."
9. In the present case, entire material which is now being taken into consideration for the purpose of impugned notice and approval granted was available before Assessing Authority and after having considered the same, assessment was made. Now authorities, taking a different view, have issued impugned notice. Thus, it is a clear case of change of opinion, hence reassessment is not permissible in view of aforesaid exposition of law."
It is further argued that in the impugned order, the respondent has relied upon a survey report dated 22.09.2009 submitted by the SIB Unit, for which no notice, whatsoever, was given by the respondent no. 1. The said survey report has been relied upon behind the back of the petitioner as the petitioner was neither put to any notice while issuing notice dated 18.02.2007 under section 29(2) of the VAT Act (Anneuxre No. 6 to the writ petition), nor before passing the impugned order dated 30.03.2017 (Anneuxre No.8 to the writ petition). Therefore, the impugned order, relying upon the survey report, is also bad. On the said point, the petitioner has relied upon the judgement in Hindustan Liver Limited Vs. R.W. Wadkar ACIT, reported in (2004) 268 ITR 332 (Bom.) at page 338; wherein, following observation has been made:-
"21. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced."
Learned counsel for the petitioner further submitted that even assuming, without admitting, that the survey report dated 22.09.2009 was to be taken into account, but the same were already considered by the then Assessing Authority while passing the original assessment order. Therefore, there is no fresh or tangible material or information to form a reasonable belief to have a live-link with the information of belief that a turnover has escaped assessment, which could legally be permitted for initiation of reassessment proceedings under section 29(7) of the VAT Act. At best, it can be said that it is only a change of opinion, which is not permissible under the Act. In support of this submissions, learned counsel for the petitioner has relied upon the judgements in CIT Vs. Kelvinator India Limited, reported in (2010) 320 ITR 561 (SC) and M/s Bharat Heavy Electronics Limited Vs. State of U.P. and Others (Writ Tax No. 181 of 2014, decided on 28.02.2017), (see pages 11, 12, 19 & 20). The relevant observations made in the judgement are quoted below:-
"It is settled law that the jurisdiction to initiate reassessment proceedings arises only after the assessing authority records his reason to believe that any turnover has escaped assessment Thus, not only is the belief of escapement essential but more importantly, it is necessary for the Assessing Authority to record his reason/s as to existence of the belief of such escapement. In Commissioner of Sales Tax Vs. Bhagwan Industries (P) Ltd. (1973) 31 STC 293 (SC) the phrase "reason to believe"appearing in a similar provision in Section 21 of the U.P, Sales Tax Act, 1948 providing for reassessment was interpreted thus:
"The words "reason to believe" in Section 21 of the U.P. Sales Tax Act convey that there must be some rational basis for the assessing authority to form the believe that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. 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 ground are of an extraneous character, the same would not warrant initiation of proceedings under the above section. If, however, the grounds are relavant 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 ground are adequate or not is not a matter which would be gone into by the High Court or the Supreme 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 or reasons for the belief. At the same time, the belief must be held in good faith and should not be a mere pretence."
Applying the above principle, this court, in the case of Rathi Industries Limited Vs. State of U.P. and another has further elaborated-
From a perusal of the aforesaid, it is apparently clear that the words "reason to believe" in Section 21 of the U.P. Trade Tax Act conveys that there must be some rational basis for the assessing authority to form a belief that the whole or any party of the turnover of a dealer has for any reasons escaped assessment. Such reason or reasonable ground to believe that the whole or any part of the turnover had escaped assessment must be germane to the formation of the believe regarding escaped assessment. Such reasons or grounds must have a nexus with the formation of the belief. The approach has to be practical and not pedantic."
In absence of any material it was not open to the authorities to assume existence of such facts for the purpose of acquiring jurisdiction and to later, in the course of reassessment proceedings to conduct an inquiry as to its existence or otherwise. The Supreme Court in the case of Arun Kumar & Ors Vs. Union of India & Ors (2007) 1 SCC 732 has categorically held :
74. A "jurisdictional fact" is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.
75. In Halsbury's Laws of England, it has been stated:
"Where the jurisdiction of a tribunal is dependent on the existence of a particular state of affairs, that state of affairs my be described as preliminary to, or collateral to the merits if, the issue. If, at the inception of an inquiry by an inferior tribunal, a challenge is made to its jurisdiction, the tribunal has to make up its mind whether to act or not and can give a ruling on the preliminary or collateral issue; but that ruling it not conclusive."
76. The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction.
84. From the above decisions, it is clear that existence of "jurisdictional fact" is sine qua non for the exercise of power. If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of "jurisdictional fact", it can decide the "fact in issue" or "adjudicatory fact". A wrong decision on "fact in issue" or on "adjudicatory fact" would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present."
Thus we accept the contention of the petitioner that in this case, in the state of the reason to believe as contained in the proposal made by the petitioner's assessing authority, the jurisdictional fact of applicability of Rule 9 (3) of the Rules is not established.
It was further argued that while passing the original assessment order, the survey report dated 22.09.2009 was taken into account and the petitioner has given a satisfactory reply to the same as well. Even if the discovery of an inadvertent mistake or non-application of mind during the assessment would not be justifiable ground for re-initiating proceeding under section 29(7) of the Act.
In support of his submission, he has relied upon the judgement of the Apex Court in State of U.P. Vs. Arayaverth Chawal Udyog Limited (2015) 17 SCC 324; wherein, in paragraph nos. 30 & 31, the Apex Court has held as under:-
"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 231 : and Income-tax Officer v. Nawab Mir Barkat Ali Khan Bahadur: [1975] 4 SCC 360.
31. The above observations regarding the import of the words "reason to believe" though made in the context of different statutes have, in our opinion, equal bearing on the construction of those words in Section 21 of the Act."
Rebutting the contentions of the learned counsel for the petitioners, learned counsel for the respondents has argued that it is not a case of change of opinion. The petitioner is a builder and is making construction for and on behalf of the prospective buyers after getting the booking amount and in view of the latest judgement in the case of Larsen and Toubro Limited (supra), where it has been held that the material used in the execution of works contract is liable to be taxed as the works contractor enters into the agreement. In the case in hand, the petitioner has issued the letter of allotment to the prospective buyers and was receiving payments in installment, which itself shows that the petitioner has entered into an agreement and therefore, is liable to be taxed, accordingly and the same has escaped to tax at the time of passing the original assessment order. Therefore, the present writ petition is liable to be dismissed.
We have perused the record. It is beyond doubt that the reassessment proceedings have been initiated against the petitioner to reopen the completed assessment in view of the subsequent judgement of the Apex Court in Larsen and Toubro Limited (supra). It is admitted fact that at the time of passing of the original assessment order, the Assessing Authority has taken note of survey report dated 22.09.2009 and thereafter, passed the original assessment order holding that the petitioner is not liable for payment of tax on the material used in the execution of works contract.
The facts are not disputed. The petitioner has not entered into any tripartite agreement with the prospective buyers or with any development authority from whom the land was purchased. The petitioner, after purchase of the land from the development authority, has constructed the flats as per the layout plan sanctioned by the local authorities. The ownership of the flat was never transferred before its completion. The flats are sold by the petitioner only after its completion through registered sale deeds executed in favour of the interested buyers. The petitioner's business module has been same in the previous and subsequent years. For the assessment years 2004 - 05 and 2005-06 tax was levied, which was challenged before this Court in Writ Petition Nos. 997 & 1238 of 2006 and was allowed on 23.03.2007, against the said judgement, the State filed Special Leave Petition before the Apex Court and the Apex Court allowed the Special Leave Petition on the ground that against the assessment order, writ petition was not maintainable.
The petitioner contested the matter through the remedies provided under the Act and the Tribunal, by its order dated 11.06.2010, after recording a finding of fact, came to the conclusion that the petitioner was not liable for payment of tax on the material used in the execution of works contract, against which the Revenue preferred a Trade Tax Revision, which was dismissed by this Court on 20.09.2012 reported in 2012 VSTI (15) B-923. It has been accepted, at the Bar, that against the order dated 20.09.2012 passed by this Court in CCT Vs. S/s Assotech Ralty Pvt. Ltd 2012 VSTI (15) B-923, no appeal has been preferred before the Apex Court. The Department has accepted the order passed by this Court. Once an order, which has been passed and has been confirmed by this Court under the provision of the Act, the case in hand, then in absence of any new material being brought on record, the completed assessment should not have been reopened.
We are not entering into the merit of the case, but confining it to the reassessment proceeding under section 29 of the Act.
The proceeding of reassessment has been initiated on the basis of a subsequent judgement passed in the case of Larsen and Toubro Limited (supra). The Honb'le Apex Court, time and again, has held that completed assessment should not be reopened on the basis of subsequent judgement being given.
This Court in the case of M/s Samsung India Electronics Pvt. Ltd. Vs. State of U.P. & 2 Others, reported in 2017 UPTC 63, in paragraph nos. 11, 14 & 15, has held as under:-
"11. Further, a subsequent judgment cannot be used to reopen assessments or disturb past assessments which have been concluded. [See Para 7, Austin Engineering V. JCIT (2009) 312 ITR 70 (Guj.) Para 4 and 5, Bear Shoes 2011 (331) ITR 435 (Mad.), B.J. Services Co. Middle East Ltd. v. Deputy Director (2011) 339 ITR 169 (Uttarakhand), Sesa Goa V. JCIT 2007 (294) ITR 101 (Bom.), Geo Miller and Co. 2004 (134) Taxmann 552 (Cal)]. Reliance is also placed on the decision of the Hon'ble Supreme Court in MEPCO Industries V. CIT, (2010) 1 SCC 434, where the CIT on the basis of a subsequent decision of the Supreme Court sought to rectify his earlier order. The Hon'ble Court held that this would amount to a change of opinion.
14. Impugned notices are bad and against principles enunciated by Apex Court in afore quoted decisions. This renders the notices and orders bad and have been passed in colourable exercise of powers and are without jurisdiction.
15. This writ petition has to be allowed with cost as law is well settled that assessment once having become final should not have been reopened on the basis of judgment of the Apex Court. "
Similarly, the Apex Court, in the case of Deputy Commissioner of Income Tax Vs. Simplex Concrete Piles (India) Limited reported in (2012) 25 taxmann.com 283 (SC) has held as under:-
"3. We see no error in the observation made by the Divisoin Bench of the High Court in the impugned judgement that once limitation period of four years provided under Section 147/149(1A) of the Income Tax Act, 1961 (for short, Rs. The Act') expires then the question of reopening by the Department does not arise. In any event, at the relvant time, when the assessment order got completed, the law as declared by the jurisdictional High Court, was that the civil construction work carried out by the assessee would be entitled to the benefit of Section 80HH of the Act, which view was squarely revsersed in the case of CIT Vs. N.C. Budharaja & CO. (1993) 204 ITR 412/70 Taxman 312 (SC). The subsequent reversal of the legal position by the judgement of the Supreme Court does not authorize the Department to reopen the assessment, which stood closed on the basis of the law, as it stood at the relevant time."
In view of the above cited judgements and the principles enunciated therein, reopening of the proceeding of completed assessment in question renders bad and in colourable exercise of powers and without jurisdiction.
It is evidently clear that the assessment, once has become final, should not have been reopened on the basis of subsequent judgment of the Apex Court.
In view of the aforesaid facts and circumstances, we are of the opinion that the present reassessment proceedings have been initiated on the basis of subsequent judgement of the Apex Court, which cannot be used to reopen assessment or disturb past assessment which have been concluded. The Department cannot be authorized to reopen the assessment, which stood closed on the basis of the law as it stood at the relevant time.
We also take judicial notice of the fact that the country is entering into a new era of taxation,i.e., Goods & Services Tax (GST), so the dealers and the Department are set to take up a new challenge of the said Goods & Services Tax. It will be in the interest of both, the dealers as well as the Department, that all old pending matters to be decided at the earliest and attain finality.
In the result, the writ petition succeeds and is allowed. The impugned order dated 30.03.2017 passed by the respondent no. 1 for the Assessment Year 2009-10 as well as the consequential notice dated 22.04.2017 for the Assessment Year 2009-10 issued by the respondent no. 2 are here by quashed.
Order Date :-28.08.2019 Amit Mishra