Escaped turnover reassessment fails where survey facts lack a rational nexus to suppressed sales in an automatic plant

Reassessment for escaped turnover under section 21 of the U.P. Trade Tax Act, 1948 cannot be sustained on conjecture alone. Where the original assessment had accepted the dealer's accounts and the only survey-based fact was a higher number of employees, the authority must show a rational nexus between that fact and any alleged suppression of turnover. In an automatic plant, the absence of evidence of additional raw material purchases, additional sales, or any explained increase in production makes an inference of escaped turnover speculative. The reassessment was therefore held legally unsustainable and liable to be quashed in favour of the assessee.

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Issues: Whether the reassessment under section 21 of the U.P. Trade Tax Act, 1948 could be sustained when the alleged basis was only an excess number of employees found in survey, without any incriminating material showing additional purchases, sales, or likely increased production in an automatic plant.

Analysis: The original assessment had accepted the dealer's accounts after proper examination. The reassessment was founded on the fact that more employees were found during survey than those declared earlier. However, the plant was automatic, and neither the assessing authority nor the Tribunal explained how the additional employees could have led to higher production. No additional purchases of raw material or additional sales were found in the survey. In these circumstances, the inference of escaped turnover rested on speculation rather than on material showing that any turnover had in fact escaped assessment.

Conclusion: The reassessment under section 21 was not legally sustainable and was liable to be quashed in favour of the assessee.

Ratio Decidendi: Reassessment for escaped turnover cannot be upheld on conjecture alone and must rest on material showing a rational nexus between the discovered facts and the alleged suppression of turnover.

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