9911796707
TMI Blog1965 (8) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... he records on 20th March, 1965, but as the Sales Tax Officer was out of station no order was passed on the application. On 6th June, 1964, the petitioner received a notice requiring it to produce the relevant account books. On 30th June, 1964, the Accountant of the petitioner appeared before the Sales Tax Officer and raised a preliminary objection to the effect that the notice under section 21 was vague and did not disclose the material upon which the Sales Tax Officer had reason to believe that any part of the turnover had escaped assessment. According to the counter-affidavit, the material upon which the notice under section 21 had been issued was disclosed to the Accountant. It appears that the Sales Tax Officer of the Special Investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the assessing authority may, after issuing notice to the dealer, and making such enquiry as may be necessary, assess or reassess him to tax..............." Before the assessing authority can exercise his jurisdiction under section 21, he must have reason to believe that the whole or any part of the turnover of the dealer has escaped assessment to tax. In cases under the Income-tax Act, it is well-settled that when an Income-tax Officer initiates proceedings for the assessment of escaped income on the basis that he has reason to believe that income has escaped assessment, he must have material in his possession on the basis of which he comes to that belief. He cannot proceed from mere suspicion. He must bana fide and honestly believe that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, which apply to the law of income-tax, apply equally to proceedings under section 21 of the U.P. Sales Tax Act. What is the material upon which the Sales Tax Officer issued notice under section 21? On 26th March, 1964, the Sales Tax Officer of the Special Investigation Branch wrote informing him that the account books of the petitioner for the years 1957, 1958 and 1959 along with the challans had been seized and impounded by the Income-tax Department and the case was being investigated by the Special Investigation Circle, Kanpur. He further reported that the Income-tax Officer had, from an examination of the account books for the year 1957, which related to the assessment year 1958-59, found that sales had been suppressed by the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer of the Special Investigation Branch was incomplete and no conclusion could legitimately be reached from that information. It is urged moreover that the Sales Tax Officer, who issued the notice under section 21, was not entitled to proceed on the basis of the information received by the Income-tax Officer, and that he could have reason to believe that turnover had escaped assessment only if he had himself examined the account books and other documents and deduced the inferences which the Income-tax Officer had come to. Finally, it is submitted that whatever may have been found in respect of the accounting year 1957, that could not lead to the conclusion that the petitioner had adopted the same practices during the accounting peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can be drawn from these facts is another matter. The facts, being primary facts, could be employed by the Sales Tax Officer for drawing his own conclusions, even though he had not looked into the account books himself. The facts disclosed by the Income-tax Officer related to the accounting year 1957, and the question is whether they could form the basis for the Sales Tax Officer believing that what had been done in that year could also have been done in the year 1958-59. It appears clearly from the facts reported by the Income-tax Officer that a pattern of activity was followed throughout the accounting year 1957 designed for suppressing the sales effected by the petitioner. That pattern was not isolated to particular transactions or cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1959-60 had escaped. It may be emphasised that it was not necessary that the Sales Tax Officer should have before him material referring to transactions for the accounting year 1957-58 in order that he may come to the belief that turnover of that year has escaped assessment. That is a consideration which is relevant when he actually proceeds to make the assessment for that year. The notice under section 21 is issued at a time when he is merely required to have reason to believe that turnover has escaped assessment, and for that, I think, it is possible for him to rely upon material arising in an earlier or subsequent period. See A.N. Lakshmana Shenoy v. Income-tax Officer[1958] 34 I.T.R. 275 (S.C.). Whether that material can legitimat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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