1972 (7) TMI 85 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of notices under section 21 of the U.P. Sales Tax Act for the assessment year 1966-67.
2. Interpretation of "reason to believe" under section 21 of the U.P. Sales Tax Act.
3. Comparison with similar provisions in the Income-tax Act.
4. Application of legal precedents in determining the validity of reopening assessments.
5. Assessment of whether the Sales Tax Officer had sufficient grounds to believe turnover had escaped assessment.

Detailed Analysis:
The judgment pertains to a petition under article 226 of the Constitution challenging the validity of two notices issued by the Sales Tax Officer under section 21 of the U.P. Sales Tax Act for the assessment year 1966-67. The petitioner had been assessed under both the Central Sales Tax Act and the U.P. Sales Tax Act. The notices sought to reopen these assessments based on the Sales Tax Officer's belief that some turnover liable to tax had escaped assessment. The petitioner contended that the reasons provided by the Sales Tax Officer did not constitute valid material for initiating the proceedings under section 21 of the Act.

The court examined the concept of "reason to believe" as outlined in section 21 of the U.P. Sales Tax Act, drawing parallels with similar provisions in the Income-tax Act. Referring to the Supreme Court's interpretation in Sheo Nath Singh v. Appellate Assistant Commissioner, the court emphasized that the belief must be that of an honest and reasonable person based on reasonable grounds, not mere suspicion. The court highlighted the necessity for tangible material or facts to support the belief, as opposed to opinions or beliefs of other departments.

Drawing from legal precedents, the court analyzed cases where assessments were challenged based on the sufficiency of reasons for reopening. The court cited Chhugamal Rajpal v. S.P. Chaliha and Allahabad Milling Co. Pvt. Ltd. v. Sales Tax Officer to underscore the requirement of concrete material forming the basis for initiating reassessment proceedings. The court distinguished cases where detailed reports or expert opinions provided factual grounds for the assessing authority to have a valid reason to believe that income had escaped assessment.

Ultimately, the court concluded that the Sales Tax Officer lacked sufficient grounds to believe that any part of the dealer's turnover had escaped assessment for the relevant year. The notices issued were deemed to be without jurisdiction, leading to the quashing of the impugned notices. The judgment favored the petitioner, highlighting the importance of substantial and factual grounds for initiating reassessment proceedings under the U.P. Sales Tax Act.

In summary, the judgment delves into the intricacies of statutory provisions governing reassessment, emphasizing the need for concrete material and valid reasons to support the belief that income or turnover has escaped assessment. Legal precedents and interpretations from related cases were instrumental in guiding the court's decision to quash the notices issued by the Sales Tax Officer, thereby upholding the petitioner's challenge to the validity of the reassessment proceedings.