Reason to believe requires tangible material before reassessment; mere coal allotment information could not sustain reopening.

Reassessment under section 21 of the U.P. Trade Tax Act was held invalid where it was initiated only on information that coal had been allotted to the assessee, without cogent material showing that the allotment was actually utilised or that any taxable sale, purchase or import had occurred. The record did not contain a recorded reason to believe based on material, which was a necessary precondition for reopening. The assessee's unrebutted affidavit stated that the allotment was not used and that business had closed, shifting the burden to the Department to produce positive evidence. As no such material was produced, the Allahabad HC set aside the Tribunal's order and held the reassessment unsustainable.

---

---

Issues: Whether reassessment proceedings under section 21 of the U.P. Trade Tax Act, 1948 were validly initiated on the basis of information that coal had been allotted to the assessee, and whether the reassessment could be sustained when no cogent material showed utilisation of the allotment.

Analysis: The assessing authority had earlier accepted the assessee as non-taxable for the relevant assessment year. The reassessment under section 21 was commenced only on the basis of information regarding allotment of coal, without any material showing that the allotment had been utilised, or that any sale, purchase or import had actually taken place against it. The record did not disclose any recorded reason to believe founded on material, which was a necessary precondition for invoking section 21. The assessee had also filed an unrebutted affidavit stating that the allotment was not utilised and that business had been closed. Once that affidavit was filed, the burden shifted to the Department to controvert the assertion with positive material, but no investigation or evidence was produced to show utilisation of the allotment.

Conclusion: The initiation of proceedings under section 21 was invalid, the reassessment was unsustainable, and the order of the Tribunal was set aside in favour of the assessee.

---