w w w . L a w y e r S e r v i c e s . i n



New Mount Trading & Investment Co. Ltd. v/s Additional Commissioner Grade-I Commercial Tax & Another

    Writ Tax No. 147 of 2017

    Decided On, 04 December 2017

    At, High Court of Judicature at Allahabad

    By, THE HONOURABLE MRS. JUSTICE BHARATI SAPRU & THE HONOURABLE MR. JUSTICE SAUMITRA DAYAL SINGH

    For the Petitioner: Rakesh Ranjan Agrawal Senior Advocate assisted Anish Agarwal, Suyash Agarwal, Advocates. For the Respondent: C.B. Tripathi, Standing Counsel.



Judgment Text

Saumitra Dayal Singh, J.

1. Heard Sri R.R. Agrawal, learned Senior Counsel assisted by Sri Anish Agrawal and Sri Suyash Agrawal, learned counsel for the petitioner and Sri C.B. Tripathi, learned standing counsel appearing for the State.

2. Petitioner is a company incorporated under the Companies Act, 1956. It has filed the present petition to challenge the reassessment proceeding initiated against it under Section 29 of the U.P. VAT Act, 2007 (hereinafter referred to as the Act) for the Assessment Year 2008-09 (U.P.). These proceedings have been initiated vide reassessment notice dated 2.3.2017 issued by the Deputy Commissioner, Commercial Tax, Sector-III Allahabad, upon prior permission obtained by that authority under the proviso to Section 29 (7) of the Act, from the Additional Commissioner, Grade-I, Commercial Tax, Allahabad Zone, Allahabad.

3. On 20.12.2007, the petitioner claims to have purchased from Kanpur Development Authority a freehold plot of land to construct residential flats under a housing scheme by the name Kanha Shyam Residency, Kanpur. In April, 2008 the petitioner started raising construction of boundary wall on the said plot of land. It is then disclosed that the map for such construction was sanctioned by the Kanpur Development Authority on 16.7.2008. Thereafter, it started raising further constructions on the aforesaid plot that the petitioner describes as Block-A, Towers 1 and 2. However, according to the petitioner, initially, that is during the Assessment Year 2008-09, it met the expenditure of these constructions from its own resources for which purpose it is also disclosed to have obtained a term loan of Rs. 25,00,00,000/- from the State Bank of India, on 17.8.2010 in the shape of cash credit facility.

4. According to the petitioner, it first advertised the project for sale of flat by the name of Kanha Shyam Residency, Kanpur in November, 2010 and made first allotment of a residential flat in that housing scheme, on 12.10.2010 i.e. in A.Y. 2010-11. In paragraph 11 of the writ petition, it has been stated as under :-

"That till 12.11.2010, no flat/unit was sold/booked to the prospective purchasers, on the plot of land purchased from Kanpur Development Authority. On 12.11.2010, the first unit was allotted in the project "Kanha Shyam Residency" to a prospective purchaser."

5. It is on record, on 22.5.2014 a survey was conducted by the Special Investigation Branch of the Commercial Tax Department with respect to the constructions that were being raised by the petitioner. Also, the petitioner was subjected to the assessment for Assessment Years 2011-12, 2012-13 and 2013-14 vide assessment orders dated 26.9.2016. For all these Assessment Years the petitioner was subjected to tax on deemed sale of construction material, made in favour of persons who gained allotment of individual residential flat/s being constructed by the petitioner. In those assessment orders it had been recorded that the petitioner had received booking for 3 flats during the Assessment Year 2010-11; 24 flats during the Assessment Year 2011-12; 34 flats during the Assessment Year 2012-13; 22 flats during the Assessment Year 2013-14 and; 17 flats during the Assessment Year 2014-15 in the aforesaid scheme Kanha Shyam Residency, Kanpur. However, even in those assessment orders there is no whisper of the petitioner having received any booking or having sold even a single residential flat/unit during the Assessment Year 2008-09.

6. It is in this background that a proposal for reassessment appears to have been made by the petitioner's assessing authority to initiate reassessment proceeding against the petitioner for the Assessment Year 2008-09. Copy of the said proposal has been brought on record alongwith the second supplementary counter affidavit filed by the revenue today. Perusal of that proposal itself clearly reveals that the same had been made upon : the survey conducted by the Special Investigation Branch of the Commercial Tax Department dated 22.5.2014; the assessment orders for the Assessment Years 2011-12 and 2012-13 in the case of the assessee; the stand taken by the petitioner during the aforesaid assessment proceedings wherein it had stated that the constructions had begun in July, 2008. Thereafter, the Assessing Officer took note of the balance sheet of the petitioner for the Assessment Year 2008-09 wherein it had disclosed purchase of construction material worth Rs. 1,19,87,175/-.

7. Having noted the aforesaid facts, the Assessing Authority then recorded his 'reason to believe' as to alleged escapement from tax, of turnover of deemed sale of construction material in light of the judgment of the Supreme Court in the case of K. Raheja Development Corporation v. State of Karnataka, (2005) 5 SCC 162 and Larsen and Toubro v. State of Karnataka, (2014) 1 SCC 708. It is on the aforesaid 'reason to believe' that the Additional Commissioner has granted approval to the petitioner's assessing authority to reassess the petitioner for Assessment Year 2008-09 (U.P.), outside the normal period of limitation.

8. Upon, the instant writ petition being entertained the revenue first filed a counter affidavit wherein in response to paragraph 11 of the writ petition (extracted above). It has stated as below:-

"That the contents of paragraph no.11 of the writ petition are wrong hence are denied. It is submitted in reply that until and unless the petitioner comes out with the detail of resource on the basis of construction of flat was started by him. This clearly presuppose that he realize the earnest money as well as the installment from the prospective buyers but neither he disclosed the date of allotment of flats in favour of the prospective buyer neither the source or resource from which the construction started by him in the month of July 2008."

9. Learned Senior Advocate Sri Rakesh Ranjan Agarwal submits that in the instant case there does not exist any material that any turnover had escaped assessment at the hands of the petitioner inasmuch as despite the survey conducted by the Special Investigation Branch of the revenue on 22.5.2014 and the subsequent assessment orders (for the Assessment Years 2011-12 onwards), there does not exist any material to doubt the correctness of the statement made by the petitioner that it did not receive booking for even a single residential flat/unit in the aforesaid scheme Kanha Shyam Residency, during the Assessment Year 2008-09.

10. Then, as to the 'reason to believe' recorded by the assessing authority, learned Senior Advocate submits that there does not exist any 'reason' inasmuch as in the two judgments referred to by the assessing authority in the proposal made by him, namely K. Raheja Development Corporation (supra) and Larsen and Toubro (supra), the Supreme Court had specifically held that the question of deemed sale of construction material in such a transaction would arise only if the builder raise constructions on behalf of the another. Learned Senior Advocate submits that in so far as it is admitted that up to the Assessment Year 2010-11, petitioner had not received booking for a single residential flat/unit from any person and further in so far as there is no material to disbelieve the claim of the petitioner that till that time it was raising the constructions in question on its own account, it could never be said that any turnover had escaped assessment at the hands of the petitioner for the Assessment Year 2008-09 (U.P.).

11. In opposition, Sri C.B. Tripathi, learned standing counsel appearing on behalf of the revenue submits the petitioner does not dispute the correctness of the allegation that in fact it had purchased construction material worth Rs. 1,19,87,175/- during the Assessment Year 2008-09. Therefore, the revenue has a right to verify whether due tax has been paid on such purchases.

12. Second, he submits that whether the petitioner could be subjected to tax for the Assessment Year 2008-09 (U.P.) in light of the judgment of the Supreme Court in the case of K. Raheja Development Corporation (supra) and Larsen and Toubro (supra) would be a matter that can be adjudicated only after the petitioner participates in the reassessment proceeding. In this regard, he further submits that at the present time the petitioner has only been required to show cause and, therefore, the writ petition may be dismissed. He relies on the division bench judgment of this Court in the case of M/s Express Projects Pvt. Limited v. State of U.P. and Others, Writ-Tax No. 314 of 2007 decided on 4.10.2013, the aforesaid writ petition was dismissed on the following observations:-

"7. In view of the opinion of the Supreme Court in State of U.P. v. Assotech Realty Pvt. Ltd. (Supra), setting aside judgment of the High Court made relying on the principles of law in K. Raheja Development Corporation v. State of Karnataka (Supra), and interfering at the stage of making assessment orders, we are not inclined to examine the facts of each case, examine the evidence and record findings at this stage. The petitioners will have adequate opportunity to place their facts and prove their case before departmental authorities in assessments and appeals before approaching the High Court in revision.

8. In the aforesaid facts and circumstances, in which a reference has been decided holding that the view taken in K. Raheja Development Corporation v. State of Karnataka (supra) is correct, and that the Supreme Court had set aside the order passed by this Court interfering in writ petitions in matters arising out of assessment orders and had relegated the petitioners to file the appeal, all the counsels appearing for the petitioners pray to withdraw the writ petitions to seek remedies under the U.P. Sales Tax Act or the U.P. Value Added Tax Act, 2008, as the case may be, in accordance with the law. The prayer is allowed."

13. Having considered the argument so advanced by learned counsel for the parties, we find that the jurisdiction to reassess the petitioner could arise under Section 29 only if an after the petitioner's assessing authority records a valid 'reason to believe' as is the requirement of the Act itself. In this regard, Section 29(1) of the Act is reads as below:-

"29. (1) If the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under-assessed or has been assessed to tax at a rate lower than that at which it is assessable under this Act, or any deductions or exemptions have 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:

Provided that the tax shall be charged at the rate at which it would have been charged had the turnover not escaped assessment or full assessment as the case may be.

Explanation I.- Nothing in this sub-section shall be deemed to prevent the assessing authority from making an assessment to the best of its judgment.

Explanation II.- For the purpose of this section and of Section 31, "assessing authority" means the officer or authority who passed the earlier assessment order, if any, and includes the officer or authority having jurisdiction for the time being to assess the dealer.

Explanation III.- Notwithstanding the issuance of notice under this sub-section, where an order of assessment or re-assessment is in existence from before the issuance of such notice it shall continue to be effective as such, until varied by an order of assessment or re-assessment made under this section in pursuance of such notice".

29. (7) Where the Commissioner, on his own or on the basis of reasons recorded by the assessing authority, is satisfied that it is just and expedient so to do, authorises the assessing authority in that behalf, such assessment or re-assessment may be made within a period of eight years after expiry of assessment year to which such assessment or re-assessment may involve a change of opinion:

Provided that it shall not be necessary for the Commissioner to hear the dealer before authorising the assessing authority."

14. The phrase 'reason to believe' in the context of reassessment proceeding has been subject matter of interpretation by the Courts. The Supreme Court in the case of Commissioner of Sales Tax v. Bhagwan Industries (P) Ltd., (1973) 31 STC 293 (SC) interpreted the phrase 'reason to believe' appearing in a similar provision in Section 21 of the U.P, Sales Tax Act, 1948 providing for reassessment 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 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 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."

(Emphasis supplied)

15. Applying the above principle, this court, in the case of Rathi Industries Limited v. State of U.P. 2014 U.P.T.C. 960 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."

(Emphasis supplied)

16. Thus, it cannot be gain said that at present merely a show cause notice has been issued to the petitioner and that it would be open to the petitioner to establish that no taxable event had occurred during the assessment year 2008-09 (U.P.). That plea may be permitted to be raised and may be sustained if the proceedings in which or with reference to which such plea is raised are those of regular assessment and not of reassessment. In the course of regular assessment proceedings it is open to assessing authority to raise all his doubts, suspicion and seek clarification on the same from the assessee.

17. However, the context changes, completely and decisively when such a plea is raised with reference to challenge raise as to the jurisdiction of the assessing authority to initiate reassessment proceedings. Once the assessee sets up a challenge as to existence of the 'reason to believe' or as to existence of material on which that 'reason to believe' may be formed, the burden rests on the revenue to first establish before this Court itself that it had jurisdiction to initiate reassessment proceedings and thereafter it may claim that the assessee be required to show cause before the assessing authority on merits.

18. This Court, in The General Electric Company of India Ltd. v. The Sales Tax Officer, 1973 UPTC 386 and again in M.L. Shukla & Co. v. The Sales Tax Officer, 1981 UPTC 396 had clearly laid down the law that a completed assessment can be reopened if there is material before the Sales Tax Officer that points towards escapement of turnover. Those cases had arisen under the U.P. Sales Tax Act, 1948. Even under that Act, a reassessment proceeding could be initiated by the assessing authority upon formation of a 'reason to believe' as required under the Act.

19. In those cases, upon completion of the assessment, certain information had been received by the assessing authority. He initiated the reassessment proceedings to verify the same with reference to the assessee's account books. This Court struck down the reassessment proceedings in both cases. The division bench clarified that section 21 of the U.P. Sales Tax Act, 1948 was certainly not meant for that purpose.

20. In the first place the objection raised by learned standing counsel that the reassessment proceedings have been initiated against the petitioner because tax on purchase of construction materials has not been paid, is misconceived on facts. There is not even a whisper to that effect in the proposal for reassessment or reasons recorded by the petitioner's assessing authority, as annexed with the 2nd Supplementary Counter Affidavit, filed today. Also, no material or information as may give rise to such a belief has been stated to exist. The first objection is thus rejected.

21. Then, in the instant case we find, in fact, there is not even any information with the assessing authority of the petitioner as to any turnover having escaped assessment. The petitioner's assessing authority in fact desires to conduct a fishing and roving inquiry to explore the possibility of escapement of turnover, though at present he does not appear to have with him any material that may lead to formation of a 'reason to believe' as to escapement of any part of the petitioner's turnover.

22. It being a jurisdictional issue that goes to the very root of the matter, the revenue cannot plead that the assessee may be first required to show cause without the revenue first satisfying this Court that it had jurisdiction to reassess the petitioner. Then, the jurisdiction to reassess the petitioner cannot be claimed merely because in subsequent assessment years the petitioner has been subjected to tax and the assessing officer wants to explore a possibility if similar liability may arise in the present year as well. There must exist relevant material with the assessing authority to claim occurrence of the taxable event and further that such event occurred during the Assessment Year in question and that it escaped assessment. The issue pertaining to occurrence or otherwise of the taxable event, in the facts of this case is discussed below.

23. With respect to date of sale or booking made of the residential flats/units by the petitioner we find from the pleadings (made in paragraph 11 of the writ petition as replied in paragraph 11 of the counter affidavit), as a fact it is clear that the revenue has not denied that till 12.11.2010, no flat/unit was sold/booked to the prospective purchasers and that on 12.11.2010, the first unit was allotted in the project "Kanga Shyam Residency" to a prospective purchaser.

24. Besides the pleadings, we find that the proposal to reassess the petitioner for the Assessment Year 2008-09 is wholly silent on the factual aspect as to when according to the revenue, the petitioner first received booking for a flat or when according to it the petitioner sold any flat. Read in its entirety, the proposal itself discloses that the assessing officer took note of four facts being - the survey by the SIB dated 22.05.2014; assessment orders for the Assessment Years 2011-12 and 2012-13; stand taken by the assessee in the aforesaid assessment proceedings and; the purchase of construction material worth Rs. 1,19,87,175/- made by the assessee during the Assessment Year 2008-09. These facts are admitted to the petitioner to be correct. However, none of these facts individually or taken together even remotely suggest that the petitioner had sold or booked a single flat during the Assessment Year 2008-09.

25. The aforesaid four facts noted in the proposal cannot be relied upon, to draw an inference that the petitioner had made any booking or sold any flat during the Assessment Year 2008-09 so as to support the belief less so form a reason that the petitioner had sold any flat or received any booking for the same during A.Y. 2008-09.

26. Then, as to legal effect of such fact, the 'reason to believe' had to be recorded with respect to value of construction material purchased after execution of a contract by the petitioner to book a residential flat/unit. The Supreme Court in the case of K. Raheja Development Corporation (supra), found that ordinarily the builder/developer/assessee in that case had entered into agreements for sale of constructed units with intended purchaser/s at pre-construction stage. The agreements (in that case) further provided that on completion of the construction the residential units or commercial complex would be handed over to the purchasers who would also get an undivided interest in the land on which such constructions were standing. It was in this factual background that the Supreme Court held as below:-

"17. We have heard the parties, perused the various documents and considered the cases cited at the bar. As has been rightly submitted by Mr. Hegde the definition of the term 'works contract' in the said Act is an inclusive definition. It does not include merely a works contract as normally understood. It is a wide definition which includes "any agreement" for carrying out building or construction activity for cash, deferred payment or other valuable consideration. The definition does not make a distinction based on who carries on the construction activity. Thus even an owner of the property may also be said to be carrying on a works contract if he enters into an agreement to construct for cash, deferred payment or other valuable consideration. We, therefore, do not need to go into the question whether the Appellants are owners as even if the Appellants are owners to the extent that they have entered into Agreements to carry out construction activity on behalf of somebody else for cash, deferred payment or other valuable consideration, they would be carrying out a works contract and would become liable to pay turnover tax on the transfer of property in the goods involved in such works contract. Further under the said Act there is no distinction between construction of residential flats or commercial units. Thus, a works contract, within the meaning of the term in the said Act, can also be for construction of commercial units. For the purposes of considering whether an agreement amounts to a works contract or not, the provisions of the Karnataka Ownership Flats (Regulation of Promotion of Construction, Sales, Management and Transfer) Act, 1972 will have no relevance."

(emphasis supplied)

27. Then having considered the terms of the agreement with reference to the fact noted above, the Supreme Court held as below:-

"20. Thus the Appellants are undertaking to build as developers for the prospective purchaser. Such construction/development is to be on payment of a price in various instalments set out in the Agreement. As the Appellants are not the owners they claim a "lien" on the property of course, under clause 7 they have right to terminate the Agreement and to dispose off the unit if a breach is committed by the purchaser. However, merely having such a clause does not mean that the agreement ceases to be a works contract within the meaning of the term in the said Act. All that this means is that if there is a termination and that particular unit is not resold but retained by the Appellants, there would be no works contract to that extent. But so long as there is no termination the construction is for and on behalf of purchaser. Therefore, it remains a works contract within the meaning of the term as defined under the said Act. It must be clarified that if the agreement is entered into after the flat or unit is already constructed, then there would be no works contract. But so long as the agreement is entered into before the construction is complete it would be a works contract."

(emphasis supplied)

28. Thus, the Supreme Court had made it clear in that case itself if the agreement for sale of flat etc. is entered into after the flat or unit is already constructed then there would be no works contract. Consequently, there would not arise a case of deemed transfer of construction material. The correctness of the aforesaid judgment in the case of K. Raheja Development Corporation (supra) had been doubted and reference made to a larger bench of the Supreme Court in the case of Larsen and Toubro (supra) wherein the Supreme Court held as below:-

"105. The argument on behalf of the developers that the flat purchaser is entitled to transfer of flat and conveyance of fraction of land only when all installments have been fully paid and that shows that the agreement between the developer and the flat purchaser is the sale of flat and not to appoint the developer as the contractor of the flat purchaser for the purposes of carrying out the construction of the flat for and on behalf of the flat purchaser has no merit. The submission overlooks the typical nature of the development agreement which is followed by a tripartite agreement between the owner of the land, the developer and the flat purchaser. Effectively and de facto it is the developer who constructs the building for the flat purchaser. The developer does so for monetary consideration. The label of payment is not decisive but the factum of the payment is. The construction is done on payment of price as agreed upon between the developer and the flat purchaser. It is not necessary to recapitulate all clauses of the agreement under KOFA or for that matter under MOFA. Raheja Development 1 takes note of relevant clauses of the recitals and the agreement under KOFA. We need not repeat them. Similarly, Form VST of the Maharashtra Ownership Flat Rules contains recital such as, 'as a result of the Development agreement the promoters are entitled and enjoined upon to construct buildings on the said land'. One of the relevant clauses (omitting unnecessary portion) in Form VST reads,

"1. the promoter shall construct the said building/s....in accordance with the plans, designs, specifications .....which have been seen and approved by the flat purchaser with the owner, such variations and modifications as the promoter may consider necessary or as may be required by the concerned local authority/the government concerned.....

provided that the promoter shall have to obtain prior consent in writing to the flat purchaser in respect of variations or modifications which may adversely affect the flat of the purchaser".

29. It is, thus, not correct to say that the work is undertaken by the developer for himself and for the owner and the construction is not carried for and on behalf of the purchaser.

106. In the development agreement between the owner of the land and the developer, direct monetary consideration may not be involved but such agreement cannot be seen in isolation to the terms contained therein and following development agreement, the agreement in the nature of the tripartite agreement between the owner of the land, the developer and the flat purchaser whereunder the developer has undertaken to construct for the flat purchaser for monetary consideration. Seen thus, there is nothing wrong if the transaction is treated as a composite contract comprising of both a works contract and a transfer of immovable property and levy sales tax on the value of the material involved in execution of the works contract. The observation in the referral order that if the ratio in Raheja Development is to be accepted then there would be no difference between works contract and a contract for sale of chattel as chattel overlooks the legal position which we have summarized above.

107. The argument that flat is to be sold as a flat and not an aggregate of its component parts is already negated by the Constitution Bench in Builders' Association. As a matter of fact, in Builders' Association, this argument was advanced on behalf of the States. Repelling the argument, the Constitution Bench observed that:

"39... it was difficult to agree with the contention of the States that the properties that are transferred to the owner in the execution of a works contract are not the goods involved in the execution of works contract, but a conglomerate, that is the entire building which is actually constructed.

108. Yet another argument advanced on behalf of the appellants is that in Raheja Development, it is noticed that the builder has a lien on the property but incorrectly states that lien is because they are not owners. It is argued that lien is because if the monies are not recovered from the prospective flat purchasers, the lien can be exercised and this would show that the contract is a contract of an agreement to sell immovable property. The argument is insignificant because if the developer has undertaken to build for the prospective purchaser for cash or deferred payment or a valuable consideration pursuant to a contract then to that extent, the contract is works contract and there is deemed sale of material (goods) used in the construction of building and merely because the builder has a right of lien in the event due monies are not paid does not alter the character of contract being works contract.

109. In Article 366 (29-A) (b), the term "works contract" covers all genre of works contract and it is not limited to one specie of the contract. In Raheja Development, the definition of "works contract" in KST Act was under consideration. That definition of "works contract" is inclusive and refers to building contracts and diverse construction activities for monetary consideration viz; for cash, deferred payment or other valuable consideration as works contract. Having regard to the factual position, inter alia, Raheja Development 1 entered into development agreements with the owners of the land and it also entered into agreements for sale with the flat purchasers, the consideration being payment in installments and also the clauses of the agreement the Court held that developer had undertaken to build for the flat purchaser and so long as there was no termination of the contract, the construction is for and on behalf of the purchaser and it remains a "works contract". The legal position summarized by us and the foregoing discussion would justify the view taken by the two Judge Bench in Raheja Development.

110. It may, however, be clarified that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government."

emphasis supplied)

30. Thereafter, the larger bench declined to take different view in the case of K. Raheja Development Corporation (su

Please Login To View The Full Judgment!

pra) it was clarified as below:- "112. The submission of Mr. K.N. Bhat that the view in Raheja Development 1 that when a completed building is sold, there is no work contract and, therefore, no liability to tax is not correct statement of law, does not appeal to us. If at the time of construction and until the construction was completed, there was no contract for construction of the building with the flat purchaser, the goods used in the construction cannot be deemed to have been sold by the builder since at that time there is no purchaser. That the building is intended for sale ultimately after construction does not make any difference." (emphasis supplied) 31. That being clear position in law, the fact situation of the present case admits of no doubt that the taxable event of deemed transfer of construction material never occurred during the A.Y. 2008-09. Though the petitioner admitted to have started making the constructions in that assessment year but the petitioner denied existence of any contract to either book or sell any flat/apartment or unit etc. during the assessment year in question. Being a negative fact, the petitioner could not have lead any evidence in support thereof. In any case being reassessment proceedings, the burden was on the revenue to disclose material to establish otherwise. The assessing authority does not have any material to prove or allege otherwise. Therefore, the revenue cannot assert that any taxable event occurred. Consequently, in absence of taxable event having occurred, the revenue could not have also alleged that any turnover ever escaped assessment at the hands of the petitioner in that year. 32. Then, looked from this angle, in absence of any material to establish that a taxable event had occurred and further that such taxable event had escaped assessment at the hands of the petitioner, the revenue authority could never entertain a 'reason to believe' that any turnover had escaped the assessment. Consequently, the jurisdiction to issue reassessment notice would also never arise in such this fact situation. 33. Therefore, for reasons discussed above, the reassessment issue notice in the present case dated 2.3.2017 and the sanction order dated 25.2.2017 are wholly without jurisdiction and consequently deserve to be quashed. 34. As to the objection raised by learned counsel for the parties on the basis of judgment of the another division bench M/s Express Projects Pvt. Ltd. (supra) it is seen in that case notices had been issued and assessment order has been passed, apparently for different years. However, from a plain reading of the judgment it does not appear that writ petition involved reassessment notices. In fact there is neither any mention of any fact that may indicate that the challenge in that writ petition was to reassessment notice nor there is any discussion to that effect. In that view of the matter, the discussion made in paragraphs 7 and 8 of that judgment as extracted above is wholly in-apposite. 35. In view of the discussion made by us above, these being reassessment proceeding, the assessing officer had to first disclose and when challenged establish his jurisdiction before raising any query affecting the assessment of tax itself. Since, the jurisdiction has been found to be completely lacking in the present case, we have no hesitation in quashing the reassessment notice dated 2.3.2017 and sanction order dated 25.2.2017. 36. The writ petition is allowed. No order as to costs.
O R