Hon'ble Ritu Raj Awasthi, J.
Heard Sri S.M.K. Chaudhary, learned Sr. Advocate assisted by Sri Mudit Agrawal and Sri H.P. Srivastava, learned Additional Chief Standing Counsel appearing for the State, respondents.
This writ petition challenges the order passed by the Additional Commissioner dated 10.6.2010, by means of which he has granted sanction for issuing notice under Section 21(2) of the Trade Tax Act, on the extended period of limitation i.e. after two years. The petitioner earlier also filed a writ petition against the order passed by the Additional Commissioner granting approval under Section 21(2) of the Act, on 25.11.2009.
The Additional Commissioner, since did not record any reason while granting the aforesaid sanction, the petitioner being aggrieved challenged the aforesaid order by filing a Writ Petition No. 452 (MB) of 2010.
This writ petition was decided by a Division Bench of this Court (Hon. Devi Prasad Singh and Hon. S.C. Chaurasia, JJ.) on 6.4.2010, reported in 2010 NTN (Vol. 43) 202, M/s. U.P. Cooperative Federation Ltd. Vs. State of U.P. & others.
Before the Division Bench, in substance two points were raised on behalf of the petitioner; viz. (1) No tax could be imposed on the petitioner since, the rice bran and rice polish and kinkee were not taken back from the millers in terms of agreement, and (2) all these aspects of the matter have been considered by the Assessing Authority while assessing the tax and no defect was found, therefore, the power conferred under Section 21(2) of the Act, can not be used on the same facts and circumstances, to reopen the assessment, merely on the change of opinion.
The Division Bench by the detailed order allowed the writ petition, setting aside the order passed by the Additional Commissioner dated 25.11.2009, with liberty to the respondents to proceed afresh and pass a fresh order after giving due opportunity of hearing to the parties. The Division Bench in paragraph 16 of the order observed as follows:
"16. In the present case, the Additional Commissioner while passing the impugned order had considered the submission made by the petitioner in his reply but while concluding his finding and taking decision to remit the matter to the Assessing Officer for reassessment in pursuance to power conferred by sub-section 2 of Section 21 of the Act had not recorded satisfaction after discussing the reply submitted by the petitioner and other evidence on record. The word used "reason to believe" means competent authority must disclose his mind and consider the objection filed by the assessee, submitted in response to notice. No finding has been recorded by the Additional Commissioner as to how and under what circumstances the original assessment of the respective year is bad in law or the petitioner is liable to pay tax on the rice bran, rice polish and kinkee. At least prima facie finding should have been recorded by the Additional Commissioner to indicate that how and in what manner the petitioner is liable to pay tax under the escaped liability. The reply submitted by the petitioner should have been considered by the Additional Commissioner and reason should have been assigned as to why the ground enumerated in the reply submitted by the petitioner (Annexure-6) is not correct or it is not believable."
In view of the aforesaid observations made by the Division Bench in the judgment and order dated 6.4.2010, the Additional Commissioner issued notice to the petitioner and after giving opportunity of hearing, has passed the impugned order giving detailed reasons as to why the reply submitted by the petitioner in response to the notice, is not being accepted and how the rice bran, rice polish and kinkee were liable to be taxed and that it was a case of escaped assessment etc. Sri S.M.K. Chaudhary, learned Sr. Advocate, challenging the aforesaid order dated 10.6.2010, has raised various pleas including the plea of taxability of the aforesaid items under the Act itself on various grounds namely; (1) rice bran, rice polish and kinkee are not taxable under the provisions of Section 2 (h) at the time of sale, (2) the aforesaid issue, in fact, was settled by the assessing authority in the assessment order itself where no such liability was found to be fastened upon the petitioner about taxability of the aforesaid items and (3) the Additional Commissioner in no case could have recorded categorical finding on the merits of the case including on the factum of liability to pay tax on the aforesaid items.
Submission is that in view of the fact that the Additional Commissioner has recorded specific findings with respect to the taxability of items and also on the liability of the petitioner of tax, now there remains nothing for the assessing authority to decide by applying his own mind even if it is a case of reopening of the assessment.
Sri H.P. Srivastava, learned Additional Chief Standing Counsel, in response, has submitted that in the instant case, the Additional Commissioner was having no option but to record findings aforesaid after considering the reply of the petitioner, since direction was issued by the Division Bench of this Court which could not have been violated by him and, therefore, such findings have been recorded. He further says that the plea raised by the petitioner regarding change of opinion or that the matter was already considered in the original assessment order, was in fact raised before the Division Bench of this Court also which pleas were not accepted, as the matter was remitted to the Additional Commissioner for passing fresh orders, therefore, such a plea can not be allowed to be raised in the instant writ petition.
Sri H.P. Srivastava, however, very candidly stated that once the Additional Commissioner came to the conclusion and passed an order fixing the liability and taxability of the items which allegedly escaped assessment, the assessing authority would hardly have any scope for forming a different view as the observation made by the higher authority cannot be ignored by the subordinate authority.
We have considered the aforesaid arguments and after giving our anxious consideration, we would like to put on record at the outset that the Additional Commissioner while considering the matter for allowing the assessing officer to issue notice under Section 21(2) of the Act, within the extended period of limitation, can not be required to give categorical and specific findings upon the issue involved, namely; whether the articles/goods which are said to have escaped assessment, are actually taxable or not nor the Additional Commissioner can record a finding upon the taxability in a manner which binds the assessing authority who finds himself helpless in independently considering the issues involved.
In the case of M/s Manaktala Chemicals Pvt. Ltd. Vs. State of U.P. and others, 2006 U.P.T.C. 1128, a Division Bench of this Court in which one of us (Pradeep Kant, J.) was a member, held that Section 21(2) of the Act though specifically does not say that opportunity is to be afforded to the dealer while granting the sanction by the Commissioner but the principle is well recognized, that even if there is no specific provision in the statute, such opportunity need be given to make the action taken or order passed in consonance with the principles of natural justice, unless, of course, the statute specifically excludes the applicability of principle of natural justice, such an opportunity is deemed to be inbuilt in the provision, in case any action taken or order passed would effect the rights of any person adversely. In the case of Indian Oil Corporation, Agra Vs. Commissioner, Trade Tax, reported in 1999 U.P.T.C. 365, a Division Bench of this Court after holding the circular issued on 7.7.1992 binding on the Assessing Authoirty held that the dealer should have been given a hearing in the matter before any re-assessment order could have been passed, and since such an opportunity was not given, the order of approval granted by the higher authority was quashed.
This Court in the case of M/s Manaktala Chemicals Pvt. Ltd. (Supra), further observed that once the proviso postulates recording of reasons by the Assessing Authority, it necessarily obligates the Commissioner or the Additional Commissioner to consider such reasons and make them known to the assessee, before he finally forms his satisfaction and even if the Commissioner or the higher authority on his own reasons feels satisfied that it is just and expedient to re-open the assessment, it would still require that such reason must be made known to the dealer also so that before the assessment is re-opened he may have an opportunity to satisfy the higher authority that the reasons assigned by the Assessing Authority are not relevant or they are incorrect or they do not make out a legal ground for reopening of the assessment and likewise if the Commissioner or the higher authority proposes to authorize the Assessing Authority for reopening the assessment on his own, then also reasons for such satisfaction have to be supplied to the dealer, so that he may have a say to convince the higher authority for not authorizing the Assessing Officer for reopening the assessment.
The aforesaid judgment was considered by another Division Bench of this Court in the case of M/s. Radico Khaitan Limited, Bareilly Road, Rampur Vs. State of U.P. and others, 2010 NTN (Vol 42) 240, wherein the Court observed that under the proviso the Commissioner does not exercise the judicial power in strict sense. He is not supposed to adjudicate the issue. He has to satisfy on the basis of the reasons recorded by the assessing authority that it is just and expedient to authorize the assessing authority to make the assessment or reassessment beyond the period of limitation prescribed under Section 21 (2) of the Act. Therefore, a detailed reason was not required to be given while granting the authorisation. What is required under the proviso is that there should be an application of mind to arrive at the satisfaction on the consideration of the reasons recorded and the submissions of the assessee.
Once the Additional Commissioner grants sanction by an order, showing his satisfaction about the reopening of the assessment proceedings for a particular assessment year during the extended period of limitation the assessee could have a right to challenge the reassessment order on various grounds, but may not be able to challenge the validity of the notice on the ground of limitation though finality stands attached to the assessment proceedings if the Assessing Officer does not reopen the assessment by issuing notice within two years under Section 21(2) which assessment can not be reopened unless approval is granted by the Commissioner/Additional Commissioner within the extended period prescribed. Also where the notice is issued within two years the very validity of the notice can be challenged on various grounds before the assessing officer, who can withdraw the notice, himself.
The requirement of opportunity being afforded to the assessee by the Commissioner/Additional Commissioner before granting approval is only with a view that if the assessment is to be reopened by the Assessing Officer on his own under Section 21(2) of the Act, within a period of two years, the assessee would be entitled to challenge the same before the Assessing Officer and the Assessing Officer would be at liberty to withdraw the notice even without undergoing the exercise of assessment. But in case notice under Section 21(2) of the Act is issued beyond the period of two years but within six years i.e. the extended period of limitation after the approval granted by the Commissioner/Additional Commissioner, it would be difficult for the assessee; (1) to convince the assessing officer to look into the validity of the approval granted, extending the period of limitation for issuing notice and (2) to convince him to take a decision against the directive issued by the higher and the superior authority. By affording an opportunity to the assessee by the Commissioner/Additional Commissioner before he grants approval for reopening the assessment, will allow him to bring forth the reasons, because of which, the assessment be not directed to be reopened, which plea otherwise may not be available in such a case before the Assessing Officer.
Though the Assessing Officer even after issuance of the notice on approval of the Additional Commissioner would have full jurisdiction and power to discharge the notice on facts and considering the legal position, but the decision taken by the Additional Commissioner with regard to opening of assessment after two years would be final.
In fact, the provision for having sanction from the Commissioner before issuing the notice under Section 21(2) of the Act beyond the period of two years is a provision not only for safeguarding the interest of revenue, so that, in case there has been an actual escape of assessment with respect to certain articles or goods, the notice could be issued and reassessment be made. But it also keeps a check upon the arbitrary exercise of power by the assessing authority after the period of two years is over, which otherwise attaches finality to the proceedings taken under the Act.
The Additional Commissioner while exercising power under Section 21(2) of the Act for granting approval is not required to act as an Assessing Officer or the appellate authority. In fact he is only to see whether it is a fit case where the approval asked for, be given to reopen the assessment within the extended period of limitation or not and for reaching the required conclusion, it essentially requires that the Commissioner/Additional Commissioner himself records his satisfaction, prima facie, with respect to the issues and the reasons given by the Assessing Officer and also pleas raised by the assessee.
The satisfaction aforesaid again has to be only prima facie and not final without infringing upon the discretion of jurisdiction of the assessing authority to deal with the matter.
The plea raised by the learned counsel for the respondents, that pleas which were raised in the earlier writ petition challenging the approval granted by the Additional Commissioner can not be allowed to be raised in the present writ petition for challenging the impugned order, requires consideration. From a perusal of the order passed in the earlier petition, it is clear that the petitioner has raised the same very pleas in the present writ petition, which were raised in the earlier petition viz. the articles/goods are not taxable under the Act and that it is a case of change of opinion. The pleas aforesaid were not accepted by the Court and the matter was remanded to the Additional Commissioner.
We, therefore, do not find it expedient to allow the petitioner to raise those pleas once again in the instant writ petition which pleas, as may be permissible, may be raised before the assessing authority. But the plea of the respondents' counsel that in view of the directive issued by the High Court in the earlier writ petition, the Additional Commissioner was bound to adjudicate and record reasons, giving specific findings on the issue as directed by the Court, does not appeal us, nor was it a requirement under the aforesaid provision of Section 21, see the case of M/s. Radico Khaitan Limited, Bareilly Road, Rampur (Supra).
The judgment dated 6.4.2010, passed in the earlier writ petition of the petitioner was not read in its true context i.e. keeping in mind the provisions of the Act, the controversy involved and the issues raised.
Moreover, according approval beyond the period of limitation of two years prescribed under Section 21 (2) of the Act is only a provision for extending the period of limitation for giving an opportunity to the Assessing Officer as well as to the assessee to reconsider/reopen the assessment and proceed with the assessment proceeding with respect to the articles/goods, which have escaped assessment. The judgment was to be read as per the statutory provisions and not in violation thereof. For adjudication on the issues raised, and for making an assessment, may be reassessment, there has to be application of mind by the concerned authority.
In this context para 10 of the of the judgment in the case of M/s. U.P. Cooperative Federation (Supra), is relevant which is quoted below:
"A perusal of Sub-section 1 of Section 21 shows that in case assessing authority has reason to believe that the whole or any part of the turnover of a dealer, from any assessment year or part thereof, had escaped assessment to tax or has been under assessed or has been assessed to tax at the rate lower than that at which it is assessable under this Act, or any deductions or exemptions has been wrongly allowed in respect thereof, the Assessing Authority may, after issuing notice to the dealer and making such inquiry, as it may consider necessary, assess or re-assess the dealer to tax according to law."
On going through the order passed by the Division Bench of this Court in the earlier writ petition we find that, in fact, the aforesaid order only meant that the Additional Commissioner was to record only his prima facie satisfaction on the issues raised by the petitioner in his reply and not final or categorical findings.
We considering the plea raised by the learned counsel for the petitioner on all the issues, which require consideration by the assessing authority do observe that the findings recorded by the Additional Commissioner are only with respect to his satisfaction for the purpose of approval for reopening the assessment under Section 21(2) of the Act during the extended period of limitation and they can not be taken as binding upon the Assessing Officer in the matter of reassessment.
We, therefore, direct that while making reassessment, the Assessing Officer will not be guided by any of the observations made by the Additional Commissioner with respect to taxability on the items or on any other issue and will consider the pleas which might be raised by the assessee since by the impugned order only the period of limitation for issuing notice has been extended but proceedings are yet to commence before the assessing officer.
The writ petition is accordingly disposed of.
16.9.2010 Arjun