JUDGMENT
Prakash Krishna and Bharati Sapru, JJ.
1. By means of the present writ petition the petitioner, a proprietorship firm carrying on the business of purchase and sale of foodgrains, has sought quashing of notice issued under Section 21(1) of U.P. Trade Tax Act by the respondent No. 1, Trade Tax Officer, Sector 11, Agra dated 9-5-2002. The facts of the case in brief are as follows.
2. The petitioner is a registered dealer under U.P. Trade Tax Act and is carrying on the business of foodgrains who claimed certain exemption of tax paid Arhar amounting to Rs. 12,51,750/- on the basis of form III-C(2) issued by the selling dealer, namely, M/S P. Kishan Chandra and Company, Agra. Similarly it claimed exemption on the purchases made from M/S Puran Chandra and Brothers and others amounting to Rs. 4,80,000/- against form III-C(2). In all the petitioner claimed exemption of tax paid on foodgrains amounting to Rs. 48,85,000/- against eight forms III-C(2). The Assessing Officer on the basis of these forms granted exemption from payment-of tax to the petitioner, while framing the assessment order for the relevant assessment year 1998-99 with the rider that the said exemption shall remain in operation till the verification of these forms. Subsequently, on verification sit transpired that the petitioner claimed exemption from trade tax on the basis of these forms to a much higher figure than the sales disclosed by the Belling dealers. A notice under Section 21(2) of the Act was issued by the Additional Commissioner (Grade-1) Trade Tax, Agra Zone, Agra before granting sanction to reopening of the assessment proceedings against the petitioner, on the allegations that the selling dealer, namely, M/S P. Kishan Chandra and Company had made sales to the extent of Rs. 1,51,750/-Snstead of Rs. 12,51,750/-. Similarly, M/s Puran Chandra and Company, the another selling dealer had made sales worth Rs. 1,15,000/-, but the petitioner had got exemption on Rs. 3,32,000/-. In addition to above, M/s Sanjay Dal Mill, the other selling dealer, from whom the purchases worth Rs. 148,63,000/- were disclosed and exemption on the basis of form III-C(2) was obtained on worth Rs. 48,63,000/-, was a non-existent one. A reply was submitted by the petitioner which was found inadequate and the Additional Commissioner (Grade-1) by the order dated 12-3-2002 granted sanction to the Assessing Officer to reopen the assessment on the ground that the turn over of the petitioner dealer has escaped assessment. In pursuance to the permission granted by the Additional Commissioner, the impugned notice was issued by the Trade Tax Officer, Sector-11, Agra vide Annexure-7 to the writ petition calling upon the petitioner to appear before him along with the account books on the date fixed. The said notice is under challenge in the writ petition.
3. Sri Rakesh Ranjan Agrawal, learned Counsel for the petitioner submits that very initiation of the proceedings under Section 21(2) of the Act is bad in as much as the petitioner made the purchases from the afore stated firm who gave it forms III-C(2) which are prima facie genuine documents and were issued by the Trade Tax department to the concerned dealers (selling dealers). Reliance was placed upon a decision of the Apex Court in Chunni Lal Parshadi Lal v. CST 1986 (62) STC 112 as also on Star Paper Mills Ltd. Saharanpur v. CST 2004 UPTC 317. The crux of the argument is that the petitioner has made purchases from the registered dealers and the forms handed over by them were produced in the assessment proceedings and the genuineness of those forms were not doubted by the Assessing Officer and as such, no case for reopening of the assessment under Section 21 of the Act has been made out. The initiation of the proceedings under Section 21 of the Act is thus wholly arbitrary, submits the learned Counsel for the petitioner.
4. The learned Counsel for the department, on the other hand, submits that at this stage the department is in possession of sufficient material to form the belief that the turnover of the petitioner dealer has escaped assessment. The question as to whether there was collusion between the selling dealer and the petitioner shall be gone into by the Assessing Authority in the reassessment proceedings. The submission is that this Court has limited jurisdiction to examine as to whether the initiation of the proceedings for reassessment is justified in law or nor. In other words, he submits that the question of sufficiency of material cannot be gone into at this stage.
5. Considered the respective submissions of the learned Counsel for the parties.
6. A bare perusal of Section 21(1) of the Act would show that if the Assessing Authority has reason to believe that the whole or any part of the turnover had escaped assessment of tax or was under-assessed or was assessed at a lower rate of tax or any deduction or exemption has been wrongly allowed, the Assessing Authority may, after issuing notice to the dealer, make reassessment.
7. The words “any deduction or exemption has been wrongly allowed” occurring in Section 21 of the Act are important and they themselves show that in case of allowance of any deduction or exemption wrongly, it is a case of escaped turnover and the Assessing Authority has jurisdiction to initiate reassessment proceedings on a plain language of Section 21 and the fact which has been found, a clear case of escaped turnover is made out.
In Sonpal Sanjay Kumar v. Sales Tax Officer 1997 UPTC 73 a Division Bench of this Court observed that the assessment orders showed that the Assessing Officer did not satisfactorily deal with the point whether “peas” was a cereal or pulse within the meaning of the notification and Section 14 of the Central Sales Tax Act. The Division observed that this was a case of non-application of mind by the Assessing Officer at the time of the original assessment as a consequence of which the turnover of “peas” has escaped assessment. Hence the proceedings for reassessment under Section 21 could validly have been initiated under Section 21 of the U.P. Trade Tax Act.
In Rawalpindi Flour Mills (P) Ltd. v. State of U.P. 1998 UPTC 172 a Division Bench of this Court observed:
Now the validity of the notice under Section 21 depends on the question whether the petitioner had been allowed the exemption in the original assessment proceedings on a wrong premise to which it was not entitled under law. This question and the other related matters on which the petitioner may like to assail reassessment proceedings can legitimately be raised and canvassed before the Assessing Authority itself. If for some reason the decision goes against the petitioner, there is adequate forum provided under the Act where the aggrieved person can seek redressal of his grievances.
In our considered view on the facts and circumstances of the case, it is not a fit case for interference under Article 226 of the Constitution of India.
In Kalpana Kala Kendra v. Sales Tax Officer 1989 U.P.T.C. 597 this Court observed:
Section 21 of the Act is based upon the theory that the taxes must be collected by the statutory machinery. The escapement from assessment whether it results on account of a concealment practised 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 of 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. The escapement envisaged by Section 21 of the Act for the purposes of reassessment need not necessary spring from a source extraneous to the original record.
In view of the above, it is crystal clear that where any deduction or exemption has been wrongly allowed in an assessment proceeding, it is a case of escaped turnover and reassessment proceedings can take place. The department, after inquiry, has come to know that excess exemption has been granted to the petitioner on the basis of forms III-C(2) submitted by it. It cannot be said that there is no material with the department to form a reasonable belief that the turnover of the petitioner has escaped assessment. The efficiency of material cannot be gone into in these proceedings as the jurisdiction of this Court is limited one. Issuance of notice for reassessment, thus is perfectly justified on the material on record.
8. At this stage, the cases strongly relied, upon by the learned Counsel for the petitioner in support of his submission need consideration. Strong reliance was placed on Chunni Lal Parshadi Lal (Supra). Learned Counsel for the petitioner submitted that there is no finding of collusion or fraud, therefore, the very initiation of reassessment proceedings is illegal and void. It is difficult to accept the said contention. Suffice it to say that the stage to arrive at a conclusion as to whether there was any collusion or fraud between the selling dealer and the petitioner has not yet arrived. The Assessing Officer, upon examination of account books, etc. and after affording opportunity of hearing to the petitioner, will record its satisfaction about the genuineness of the transaction entered into by the petitioner as also the genuineness of the certificate and declaration of Forms III-C(2). The Apex Court in the aforestated case of Chunni Lal Parshadi Lal (Supra) has held:
…The sales tax authorities can examine whether certificate is “farzi” or not, or if there was any collusion on the part of selling dealer- but not beyond-i.e., how the purchasing dealer has dealt with the goods. If in an appropriate case it could be established that the certificates were “farzi” or that there was collusion between the purchasing dealer and the selling dealer, different considerations would arise….
The observation made by the Apex Court should be understood in the fact situation as existed therein. In the case of Chunni Lal Parshadi Lal (Supra) it was found as a fact that there was no collusion or certificates were not “farzi”. In this factual background, the dictum laid down in the aforestated case should be read and understood. Therefore, the dictum laid down in Chunni Lal Parshadi Lal (Supra) is distinguishable on facts and has no application to the facts of the case on hand. For the same reason, other case, Star Paper Mills (Supra), relied upon by the petitioner’s counsel has got no application to the facts of the present case.
9. In view of the above discussions, we find that the initiation of reassessment proceedings under Section 21 of the Act is based on relevant consideration and the authorities below had jurisdiction to initiate reassessment proceedings under Section 21 of U.P. Trade Tax Act. The argument of the petitioner’s counsel that the department does not possess sufficient material to form a reasonable belief that the turnover of the petitioner has escaped assessment has got no substance and is liable to be rejected.
We find no merit in the writ petition.
The writ petition is dismissed with costs. The stay order is vacated.