Reassessment initiation upheld where seized material gave bona fide basis for escaped turnover; exemption plea reserved for reassessment stage.

Authorisation and notices for reassessment under Section 21 of the U.P. Trade Tax Act, 1948 were supported by searches, seizure of incriminating material, investigation and information communicated to the assessing authorities, providing a rational basis for bona fide belief that turnover had escaped assessment. The High Court held that the existence of such belief can be examined, but not the adequacy or sufficiency of the material. The assessee's plea that the goods were exempt, and other merits-based objections, were matters for determination in the reassessment proceedings, not at the stage of reassessment initiation. The challenge to the reassessment initiation therefore failed.

---

---

Issues: Whether the authorisation and notices issued for reassessment under Section 21 of the U.P. Trade Tax Act, 1948 were valid on the basis of material in possession of the Assessing Authority, and whether the exemption plea could be examined at the stage of reassessment initiation.

Analysis: The writ petition challenged the authorisation granted for reassessment on the ground that the petitioner's goods were exempt and that the proceedings lacked application of mind. The record showed searches, seizure of incriminating material, investigation, and communication of information to the assessing authorities, on the basis of which a proposal was sent for approval under the proviso to Section 21(2). The governing principle is that the Assessing Authority must have a rational basis and relevant material giving rise to a bona fide belief that turnover has escaped assessment. The existence of such belief can be examined, but not the adequacy or sufficiency of the material. The question whether the goods were exempt and other merits-based objections were held to be matters for determination in the reassessment proceedings.

Conclusion: The authorisation and notices under Section 21 of the U.P. Trade Tax Act, 1948 were upheld and the challenge failed.

---