Reason to believe for escaped turnover reassessment requires real material, and preliminary account calls do not trigger limitation.

Reassessment under section 21 of the U.P. Sales Tax Act requires material creating a genuine reason to believe that turnover has escaped assessment; mere suspicion from turnover variations or non-production of books is insufficient, so initiation on that basis was unjustified. Preliminary letters asking for account books and warning of possible section 21 action were not statutory notices under that provision and could not start limitation; only the later notice issued under section 21 had that effect. The reference was answered against the revenue, and the assessee succeeded with costs.

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Issues: (i) Whether the assessing authority had reason to believe that turnover had escaped assessment so as to validly initiate proceedings under section 21 of the U.P. Sales Tax Act; (ii) Whether the preliminary notices calling for production of account books could be treated as notices under section 21 so as to commence the limitation period for assessment.

Issue (i): Whether the assessing authority had reason to believe that turnover had escaped assessment so as to validly initiate proceedings under section 21 of the U.P. Sales Tax Act.

Analysis: The difference between the turnover figures of different assessment years and the non-production of account books may create suspicion, but section 21 requires more than suspicion. The statutory phrase "reason to believe" demands material that would lead an honest and reasonable person to conclude that turnover had escaped assessment. The facts relied upon did not furnish such material with sufficient certainty.

Conclusion: The assessing authority did not have the requisite reason to believe, and initiation of proceedings under section 21 was not justified.

Issue (ii): Whether the preliminary notices calling for production of account books could be treated as notices under section 21 so as to commence the limitation period for assessment.

Analysis: The notices of 13 September 1961 and 13 March 1962 only warned that action under section 21 might be taken if the accounts were not produced. They were not issued as notices under section 21. The first valid notice under that provision was issued later on 24 March 1962, and only that notice could start limitation.

Conclusion: The preliminary notices were not notices under section 21 and could not be counted for limitation.

Final Conclusion: The reference was answered against the revenue on both questions, with the result that the assessee succeeded and was awarded costs.

Ratio Decidendi: Reassessment proceedings for escaped turnover can be initiated only on material amounting to reason to believe, not on mere suspicion or presumption, and a preliminary call for accounts does not constitute a statutory notice unless it is issued in the form and under the authority of the relevant reassessment provision.

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