1965 (9) TMI 42 - HC - VAT and Sales Tax

Summary

Issues:
- Validity of notice issued under section 21 of the U.P. Sales Tax Act for assessment year 1959-60
- Whether the Sales Tax Officer had reason to believe that a part of the appellant's turnover had escaped assessment

Analysis:
The judgment of the High Court dealt with the validity of a notice served under section 21 of the U.P. Sales Tax Act for the assessment year 1959-60. The appellant objected to the notice, claiming lack of information to justify its issuance. The Sales Tax Officer had not passed any assessment order under section 21, prompting the appellant to seek prohibition against further assessment. The primary contention revolved around whether the Sales Tax Officer had valid reasons to believe that a part of the appellant's turnover had escaped assessment.

The Court examined the legal provision of section 21, which allows the assessing authority to issue a notice if there is a reason to believe that the turnover has escaped assessment. It was noted that the notice must be issued within four years from the end of the assessment year, a requirement met in this case. The Sales Tax Officer justified his belief based on information received before issuing the notice, including discrepancies in the appellant's account books uncovered during an investigation by the Income-tax Department.

The Court emphasized that the phrase "has reason to believe" implies a subjective test, requiring a personal inquiry by the assessing authority. It was clarified that the belief must be based on facts and not arbitrary. The Sales Tax Officer's belief was deemed valid as there was no direct evidence to disprove it, and the facts available justified his belief.

Furthermore, the Court distinguished between having a reason to believe and being convinced, highlighting that a lesser standard of reason is required for belief. The Sales Tax Officer's actions, including seeking additional information, were considered indicative of his bona fides and fairness in the assessment process. The Court concluded that the Sales Tax Officer had valid reasons to believe that a part of the turnover had escaped assessment, dismissing the appellant's appeal.

In summary, the judgment affirmed the validity of the notice issued under section 21 of the U.P. Sales Tax Act for the assessment year 1959-60. It established that the Sales Tax Officer had sufficient reasons to believe that a part of the appellant's turnover had escaped assessment based on the information available before issuing the notice. The Court's analysis emphasized the subjective nature of the belief requirement and the importance of factual justification in such cases.