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Issues: (i) Whether the Assessing Authority had a valid basis to reopen the assessment under Section 21 of the U.P. Sales Tax Act on the ground that turnover had escaped assessment; (ii) whether the reassessment order and notice of demand based on such reopening were liable to be quashed.
Issue (i): Whether the Assessing Authority had a valid basis to reopen the assessment under Section 21 of the U.P. Sales Tax Act on the ground that turnover had escaped assessment.
Analysis: Section 21 permits reassessment only where the authority has reason to believe, founded on relevant and germane material, that whole or part of the turnover has escaped assessment. Such belief must be formed in good faith and cannot rest on mere suspicion or extraneous information. On the record, the petitioner had already produced its account books in the original assessment, and the reopening was initiated only on the basis of a letter from the Sales Tax Officer (S.I.B.). No other material was shown to justify a prima facie belief that turnover had escaped assessment. The material before the authority did not establish a legally sustainable basis for invoking the reassessment power.
Conclusion: The reopening under Section 21 was without valid basis and was not sustainable.
Issue (ii): Whether the reassessment order and notice of demand based on such reopening were liable to be quashed.
Analysis: Once the jurisdictional foundation for proceedings under Section 21 failed, the reassessment order could not stand. The record showed that the assessment had been reopened after completion of the regular assessment without relevant material supporting escaped turnover. Proceedings initiated in such circumstances were outside the intended scope of the reassessment provision and could not be maintained.
Conclusion: The reassessment order and notice of demand were liable to be quashed.
Final Conclusion: The challenge to the reassessment succeeded because the statutory condition precedent for reopening was absent, and the impugned demand could not survive.
Ratio Decidendi: Reassessment for escaped turnover can be initiated only on the basis of relevant, bona fide material giving rise to a reason to believe; mere suspicion or post-assessment information without such foundation does not confer jurisdiction.
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