Reassessment on bona fide belief and account book rejection on positive material: initiation upheld, but suspicion alone was insufficient.

Reassessment under section 21 of the U.P. Sales Tax Act may be initiated on material sufficient to create a bona fide belief that turnover has escaped assessment; a positive finding of escapement is not required at the initiation stage, and the disparity in electricity consumption with the expert report was enough to sustain initiation. Rejection of account books, however, cannot rest on suspicion or conjecture alone; absent positive material showing specific evasion or unreliability, and where the books had earlier been accepted in regular assessment, rejection was not justified. The reassessment proceedings were upheld, but rejection of the books failed.

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Issues: (i) Whether proceedings for reassessment under section 21 of the U.P. Sales Tax Act were validly initiated on the material available; (ii) whether the assessee's account books could be rejected in those proceedings on the basis of the material relied upon by the assessing authority.

Issue (i): Whether proceedings for reassessment under section 21 of the U.P. Sales Tax Act were validly initiated on the material available.

Analysis: Section 21 required only that the assessing authority have reason to believe that turnover had escaped assessment. The disparity between the assessee's electricity consumption and the expert report showing normal consumption levels furnished sufficient material to entertain such a belief. A positive finding of escapement at the stage of initiation was not necessary.

Conclusion: The initiation of proceedings under section 21 was valid and was in favour of the department and against the assessee.

Issue (ii): Whether the assessee's account books could be rejected in those proceedings on the basis of the material relied upon by the assessing authority.

Analysis: Account books cannot be rejected on mere suspicion or conjecture. Although high electricity consumption may raise suspicion of suppressed production and understatement of sales, the record contained no positive material pointing to any specific instance of evasion. The fact that the accounts had earlier been accepted in regular assessment also weighed against rejection on the existing material alone.

Conclusion: The rejection of the account books was not justified and was in favour of the assessee and against the department.

Final Conclusion: The reassessment proceedings survived, but the rejection of the books of account failed for want of material beyond suspicion. The reference was answered accordingly with success shared by both sides.

Ratio Decidendi: For initiation of reassessment, the authority need only possess material giving rise to a bona fide belief of escaped turnover, but rejection of regularly kept accounts requires positive material showing unreliability or evasion and cannot rest on suspicion alone.

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