Reassessment notices upheld where material supported escaped turnover belief and sale taxability was left to assessment

The Allahabad HC noted that reassessment notices under the U.P. Trade Tax Act and Entry Tax Act were supported by recorded reasons based on material showing unauthorisedly extracted gas and tampered meters, so the extension of limitation was not without bona fide basis. It further held that, in writ proceedings, the court was not required to finally decide whether the disputed gas supply constituted a sale; that question of taxability and turnover escaping assessment was left to the assessing authority in reassessment. On that footing, the challenge to the limitation extension and reassessment notices was upheld in favour of the revenue.

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Issues: Whether the extension of limitation and issuance of notices for reassessment under the U.P. Trade Tax Act and Entry Tax Act were jurisdiction or without bona fide basis, and whether the question whether the disputed gas supply amounted to sale could be finally decided at the writ stage.

Analysis: The notices were issued after the competent authority recorded reasons based on material that bills had been raised for unauthorisedly extracted gas following tampering of meters at the buyer's premises. On the contractual arrangement, gas was supplied against consideration through a measured delivery system, and the fact that the quantity was disputed or not admitted did not, at this stage, negate a reasonable belief that turnover had escaped assessment. The court held that it was not required in writ proceedings to finally determine whether the unmeasured supply constituted sale under the taxing statute. The question of taxability and the nature of the transaction was left for the assessing authority in reassessment. The court further observed that the authority had acted on sufficient grounds and that the decision to extend limitation and issue reassessment notices did not suffer from lack of bona fides.

Conclusion: The extension of limitation and the reassessment notices were upheld; the challenge failed.

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