Reason to believe for reassessment can rest on earlier discrepancies showing a continuing pattern of turnover suppression.
For reassessment under section 21 of the U.P. Sales Tax Act, the assessing authority must have relevant material enabling an honest and reasonable belief that turnover has escaped assessment. The court treated discrepancies in earlier account books, including stock and register mismatches, missing delivery memos, unrecorded transport entries, and understated production ratios, as sufficient material. It also held that earlier-year material could support belief of a continuing suppressive pattern into the relevant year, and that the completeness of the material or the stage of tax investigation did not defeat jurisdiction. On that basis, the notice was upheld and the challenge failed.
Issues: Whether the assessing authority had reason to believe that part of the dealer's turnover had escaped assessment so as to justify notice under section 21 of the U.P. Sales Tax Act.
Analysis: The jurisdiction under section 21 depended on the assessing authority having material on the basis of which it could honestly and reasonably believe that turnover had escaped assessment. The material relied upon consisted of discrepancies found in the dealer's earlier account books, including mismatch of stock and registers, absence of delivery memos for some sales, unrecorded transport transactions, and understatement of production ratios. The fact that the material related to an earlier accounting year did not prevent it from being used to form a belief that the same suppressive pattern had continued into the relevant year, especially where the conduct disclosed a continuing mode of turnover suppression closely preceding the assessment year in question. The court also held that the completeness of the material and the stage of the income-tax investigation did not defeat the existence of reasonable belief for issuing notice.
Conclusion: The notice under section 21 was supported by reason to believe, and the challenge to the proceedings failed.
Final Conclusion: The petition was not maintainable on the merits because the assessing authority's jurisdictional satisfaction was validly formed on relevant material.
Ratio Decidendi: For reopening or reassessment provisions framed on a "reason to believe" standard, the authority need only possess relevant material giving rise to a bona fide and reasonable belief that turnover has escaped assessment, and such material may include earlier conduct from which a continuing pattern of suppression can legitimately be inferred.
TaxTMI 
AI Drafter ✕
TaxTMI 
