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TMI Blog1968 (10) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... a and A.H. Rizvi, Assistant Sales Tax Officers and a peon. According to the Sales Tax Officer, certain books of accounts relating to the assessment years 1961-62 to 1965-66 were seized as they were found to contain some suspicious entries, but they were snatched away from the hands of the peon by some persons at the instigation of the petitioner. The incident was reported to the police and the matter is now sub judice in certain criminal proceedings. It is, however, not necessary to go into that part of the case for the purpose of deciding this and the connected writ petitions. The main controversy raised in these petitions relates to the initiation by the Sales Tax Officer of proceedings against the petitioner under section 21 of the U.P. Sales Tax Act (hereinafter referred to as "the Act") relating to the assessment years 1961-62, 1962-63, 1963-64 and 1964-65. Section 21 of the Act is meant to bring to tax the turnover of an assessment year which has escaped assessment either in whole or in part. All the notices under section 21 of the Act are dated 5th March, 1966. The present writ petition relates to assessment year 1961-62 and the notice under section 21 relating to that yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was contended on behalf of the petitioner that the impugned notices had been issued out of malice and in order to harass the petitioner and to hunt out material for the criminal case pending against the petitioner instituted at the instance of the Sales Tax Officer. In other words, the contention is that there was really no material before the Sales Tax Officer upon which he could form a bona fide belief that any turnover had escaped assessment and that the notices under section 21 had been issued out of extraneous considerations. Section 21(1) of the Act under which the impugned notices have been issued, reads thus: 21.. (1) If the assessing authority has reason to believe that the whole or any part of the turnover of the dealer has, for any reason, escaped assessment to tax for any year, the assessing authority may, after issuing notice to the dealer, and making such enquiry as may be necessary, assess or reassess him to tax: 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." Section 21(1) of the Act corresponds to section 34(1)(a) of the Incometax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer acquires jurisdiction to issue a notice under the section." (Underlining* ours). It was further held in that case that sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue, but it is of course open for the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. As to what constitutes "reason to believe" and to what extent that question may be examined by the Court can best be stated in the words of the Supreme Court occurring at page 222 of the report in S. Narayanappa's case[1967] 63 I.T.R. 219.: "The expression 'reason to believe' in section 34 of the Incometax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith: it cannot be merely a pretence. To put it differently, it is open to the court to examine the question whether the reasons for the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the off-chance of finding some escapement of tax. He must have in his possession some material pointing towards the escapement of income before he can entertain a belief about the escapement and can assume jurisdiction under section 34. The same considerations will apply to proceedings under section 21 of the Act. Learned counsel for the opposite party urged that the petitioner in the instant case did not challenge the existence of the belief on the part of the Sales Tax Officer or the want of material for such a belief. We are unable to accept this submission. There is ground No. 7 in the writ petition which reads as under: "Because there was no reason at all or reason to believe for issuing a notice under section 21, No. 2326, dated 5th March, 1966, for the assessment." This ground is backed by averments made in paragraphs 19, 22 and 25 of the writ petition wherein the petitioner has clearly stated that there was no escapement of any turnover and there was no reason at all for any such belief with the opposite party "and the letters and notices of the petitioner Nos. 2321 to 2326 dated 5th March, 1966, are founded on malice and have been issued with ulterior motives." T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and that a part of his turnover for the years 1960-61 to 1964-65 had escaped assessment to tax." These averments have been controverted in the rejoinder affidavit filed on behalf of the petitioner. It is admitted that no inventory of the stock was prepared at the time of the survey on 30th January, 1966. It is difficult to understand as to how Mr. Gupta was able to estimate the stocks at Rs. 50,000 without preparing an inventory. Moreover, the value of the stock on 30th January, 1966, can have no relevancy to the escapement of turnover for the years 1960-61 to 1964-65. Had it been the case of the Sales Tax Officer that the actual stock position was different from that entered in the petitioner's books of accounts, it might have been possible for him to infer that undervaluation of the stocks in the books of accounts was being practised by the petitioner with a view to suppressing sales, but that is not the position here. Similarly Sri Gupta has not indicated as to what entries in the books of accounts had been noticed by him at the time of survey and how they were found to be suspicious. He has not given even one instance of the so-called suspicious entries. The second affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r's statement in his counter-affidavit that he formed the belief must be accepted unless it is disproved." These observations have to be read in the context of the case. It must be remembered that the observations of the learned Chief justice relied upon by Mr. Mehrotra occur in the appellate order of the Bench passed on appeal against the judgment of brother Pathak in the case reported in Allahabad Milling Co. Private Ltd. v. The Sales Tax Officer[1965] 16 S.T.C. 888. In his judgment brother Pathak had enumerated the materials on which the Sales Tax Officer had based his belief. Those materials were as under: "(i) Dealer's stock of pledges with the bank did not tally with the stocks shown in the production and issue register. The entries also did not tally with the delivery memos. and for certain sales no delivery memos. were issued. (ii) Some goods sold by the dealer and transported by M/s. Bharat Transport Co. were not found incorporated in the dealer's account books and thus the turnover was suppressed. (iii) The production ratio of bran, as shown by the dealer was found to be high; thus the production of costly and taxable wheat products like atta, maida and suji was u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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