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TMI Blog2006 (8) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 21 of the Act was issued which was duly served on the assessee. In reply to the notice the assessee appeared and filed his reply. The assessee objected to very initiation of proceedings on the ground that there was no material to come to the conclusion that any turnover has escaped assessment. The Trade Tax Officer vide his order dated September 27, 1990 passed reassessment order imposing tax liability of Rs. 35,800. Against the said order dated September 27, 1990 an appeal was filed before the Assistant Commissioner (Judicial) being Appeal No. 822 of 1990. The appellate authority confirmed the reassessment order and dismissed the appeal. Against the order of first appellate authority Second Appeal No. 458 of 1991 was filed by the assessee which has been allowed by the Tribunal against which order the present revision has been filed. The question which has been raised in this revision is whether, on the facts and circumstances of the case, the learned Tribunal was justified to hold that the proceedings initiated under section 21 of the U.P. Trade Tax Act were not justified . The facts giving rise to revision No. 828 of 1995 are: The assessee-respondent w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiated came for consideration before this court on several occasions. The legal position in this regard has been enunciated by the Division Bench of this court in M. L. Shukla Co. v. Sales Tax Officer, Sector 17, Kanpur [1981] UPTC 396. The Division Bench held that section 21 empowers the assessing authority to assess or reassess a dealer if he has reason to believe that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment. Following has been laid down in paragraph 5: 5. This provision empowers the assessing authority to assess or reassess a dealer if he has reason to believe that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment. Dealing with the key words in the provision 'reason to believe' the Supreme Court in Commissioner of Sales Tax v. Bhagwan Industries (P.) Ltd. [1973] 31 STC 293 observed thus: '. . . In our opinion, these words convey that there must be some rational basis for the assessing authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If such a basis exists, the assessing au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe that the whole or any part of the turnover of a 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 enquiries as may be necessary, assess or reassess him to tax.' The proviso and the Explanation to this sub-section are not relevant for the present purpose. It would be seen that the key words of this sub-section are 'reason to believe' and these words came up for consideration before the Supreme Court in Commissioner of Sales Tax v. Bhagwan Industries (P.) Ltd. [1973] 31 STC 293. The view taken was that reasonable grounds necessarily postulate that they must be germane to the formation of belief regarding escaped assessment. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under the 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 grounds are adequate or not is not a matter which would be gone into by the High Court or the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. v. Sales Tax Officer, Sector 17, Kanpur [1981] UPTC 396 the initiation of proceedings under section 21 were fully justifiable. No positive finding has been recorded by the Tribunal that the sale of 342 kg of mentha oil with regard to which information was received was verifiable from the account books of the assessee of the relevant assessment year. The Tribunal has observed that only short opportunity was allowed to the assessee. In the present case the information of sale of 342 kg of mentha oil to M/s. Ajmani Chemicals, Rampur, was brought to the notice of the assessee. The assessee was wellaware of the allegations and the case of the department which allegations were also replied by the assessee in reply to the show-cause notice. In similar set of facts the Division Bench of this court in Commissioner of Sales Tax, U.P. v. Shah Kamraj Sumer Mal and Co., Agra [1976] 38 STC 459; [1976] UPTC 317 repelled the argument of breach of natural justice. In the aforesaid case section 21 proceedings were initiated on the basis of extracts of another firm namely, M/s. Kunji Lal Har Dayal which was made in favour of the assessee. The argument of the assessee regarding noncompliance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng authority is erroneous and has rightly been set aside by the first appellate court. The order (1)See at page 461 of [1976] 38 STC. of the Tribunal has been supported by the learned counsel for the respondent. Reliance has been placed on Division Bench judgments of this court in Sivalik Collulose Ltd., Gajraula, District Moradabad v. State of U.P. [1992] UPTC 1, Jitendra Oil Mills, Farrukhabad v. State of U.P. [1994] UPTC 950 and Commissioner of Trade Tax v. Jitendra Oil Mill, Farrukhabad [1998] UPTC 712. The Tribunal held that the assessing authority was not right in cancelling the recognition certificate with retrospective effect. The order of first appellate authority setting aside the order of assessing authority cancelling the recognition certificate with retrospective effect has been upheld by the Tribunal. The Division Bench of this court in Jitendra Oil Mills, Farrukhabad v. State of U.P. [1994] UPTC 950 laid down following in paragraphs 3 and 4: 3. The fate of these writ petitions hinges on the reply of the question as to whether by means of an order, which is not a piece of legislation, the recognition certificate granted earlier can be cancelled with retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X
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