R.S. Pathak, J.
1. The assessee, M/s. Bhagwan Industries Private Limited, carries on the business of selling atta, maida and suji. It was assessed for the assessment year 1957-58 to sales tax under Rule 41(5) of the U.P. Sales Tax Rules. The net turnover was determined at Rs. 46,00,000. The assessment was made ex parte as the assessee did not produce its account books. Then, on September 13, 1961, the Sales Tax Officer issued a notice calling upon the dealer to appear with its account books on September 27, 1961. He stated that certain purchases and sales made by the assessee during the years 1957-58 and 1958-59 had come to his notice and required verification. The notice warned that in case the assessee failed to appear it would be presumed that all sales and purchases effected by it had not been entered in its books and accordingly action under Section 21 of the U.P. Sales Tax Act would be taken. The assessee did not produce its account books. Subsequently on March 13, 1962, the Sales Tax Officer issued another notice. This was in the form of a memorandum. It pointed out that the turnover assessed for the year 1955-56 was Rs. 58,18,426 and the turnover disclosed for the year 1958-59 by the assessee itself in its account books was Rs. 75,70,840. Having regard to these figures, the Sales Tax Officer said, turnover for the years 1956-57 and 1958-59 appeared to have escaped assessment. It was, therefore, considered necessary to ascertain the actual position from the assessee. It was also recited that some information received from other Sales Tax Officers regarding sales made in 1957-58 needed verification. The memorandum stated that a further opportunity was now given to the assessee to produce the account books, and again the assessee was warned that if he did not do so the case for 1957-58 would be reopened. There was no compliance by the assessee. Then a notice under Section 21 was issued on March 24, 1962, and served on March 26, 1962. It fixed April 27, 1962, for hearing. Nothing happened apparently on that date. On October 5, 1962, the accountant of the assessee made a statement before the Sales Tax Officer that the account books for the years 1956-57 and 1957-58 had been misplaced in the head office at Bombay and no books, registers or vouchers regarding the business of these years were available either in the Lucknow office or in the head office at Bombay nor could it produce the statements and copies of the profit and loss and trading account submitted to the Government. On March 19, 1963, the Sales Tax Officer made an assessment order under Section 21 of the Act for the assessment year 1957-58, estimating total net turnover for that year at Rs. 84,50,000. An appeal filed by the assessee against the assessment order was dismissed. The assessee applied in revision and contended that there was no material on which the Sales Tax Officer could have reason to believe that turnover had escaped assessment and, therefore, the proceedings initiated under Section 21 of the Act were without jurisdiction. It also urged that the notice issued on September 13, 1961, was a notice under Section 21 and as the assessment order was made on March 19, 1963, it was barred by limitation. The Judge (Revisions) referred to the circumstance that the Government had fixed the quota for 1958-59 on the basis of the average annual consumption and purchase of wheat by the assessee during the preceding three years and when the assessee itself had disclosed a turnover of Rs. 75,70,840 on the basis of that quota for the year 1958-59 it was sufficient to lead the Sales Tax Officer to believe that the assessment for the year 1957-58 at Rs. 46,00,000 was short of the true figure and that turnover had escaped assessment. He also rejected the contention that the assessment order was barred by limitation. However, being of the opinion that the quantum of the turnover needed re-determination he allowed the revision application and remanded the case. At the instance of the assessee, the Judge (Revisions) has made this reference on the following two questions :
(1) Whether the assessing officer under these circumstances could be said to have had an honest belief that the turnover had partially escaped taxation so as to start proceedings under Section 21?
(2) Whether the aforesaid two preliminary notices asking for the production of accounts can be taken to be notices under Section 21 for the starting of the proceedings so as to warrant passing of the assessment within one year of the service thereof?
2. As to the first question, we may refer to the material set out in the memorandum, dated March 13, 1962, sent by the Sales Tax Officer to the assessee. From the memorandum it appears that the circumstance which impressed the Sales Tax Officer was that the turnover assessed for the year 1955-56 amounted to Rs. 58,18,426 and the turnover for the year 1958-59, according to the account books of the assessee itself, was as high as Rs. 75,70,840. This contrasted with the figure of Rs. 46,00,000 at which the turnover for the year 1957-58 had been assessed. This was the principal factor which persuaded the-Sales Tax Officer to believe that turnover had escaped assessment for the year 1957-58.
3. We are not satisfied that this circumstance alone is sufficient for inferring that the turnover had been under-assessed. There must be material clearly leading to that inference. It seems to xis that the difference in the assessed turnovers of the various assessment years could form the basis of a suspicion-and perhaps even a profound suspicion-that the turnover had been under-assessed, but suspicion alone cannot form the basis for initiating a proceeding under Section 21 of the U.P. Sales Tax Act. There must be 'reason to believe'. These are strong words and suggest that the reason must be that of an honest and reasonable person based upon reasonable grounds. It is not sufficient that the Sales Tax Officer should have reason to suspect that the turnover has been under-assessed. In the memorandum dated March 13, 1962, the Sales Tax Officer has said that the hesitation on the part of the assessee to produce its account books and to disclose its actual turnover for the assessment year 'confirms the presumption that they have been under-assessed.' The jurisdiction to initiate proceedings under Section 21 cannot be seized upon a 'presumption' even though that presumption may be confirmed by the non-production of the account books. In the assessment order under Section 21 the Sales Tax Officer states that the non-production of the account books created 'a doubt' that the assessee had been under-assessed, and he goes on to say that this doubt was expressed in his memorandum of March 13, 1962. The Judge (Revisions) has referred to the quota allotted to the assessee in the year 1958-59 and has pointed out that on the basis of that quota the assessee itself had disclosed a turnover of about Rs. 75,00,000 for the year 1958-59. It seemed improbable to the sales tax authorities when the assessee itself had disclosed sxich a high turnover for the year 1958-59 that its turnover should be less for the preceding year 1957-58. Now, it is important to note that the quota allotted to the assessee for the year 1958-59 was fixed as an average of the consumption and purchase of wheat by the assessee for the preceding three years. The average of the figures of the preceding three years, however, does not mean that the actual figures were uniformly the same for the three years. It may have been that the figures for the first two years were much higher than the average while figures for the third year 1957-58 were correspondingly lower.
4. Upon these considerations, we are unable to hold that the assessing officer could be said to have had reason to believe that the turnover had been under-assessed, and accordingly we answer the first question in the negative.
5. There has been considerable argument on the question whether the Sales Tax Officer had jurisdiction to require the assessee to produce its account books to enable him to decide whether he should initiate proceedings under Section 21 of the Act. In the view that we are taking, we do not propose to enter into that question.
6. The second question is disposed of shortly. It is plain from the terms of the notices dated September 13, 1961, and of the memorandum dated March 13, 1962, that they cannot be construed as notices under Section 21 of the Act. The notice dated September 13, 1961, plainly states that in case the assessee does not appear and produce its account books action under Section 21 may be taken against it. The memorandum dated March 13, 1962, similary informs the assessee that if it does not produce its account books on the date mentioned therein the assessment for the year 1957-58 would be reopened under Section 21. Those notices were never intended to be notices under Section 21. In fact, it was subsequently on March 24, 1962, that a notice in the usual terms was issued under Section 21. The two preliminary notices, not being notices under Section 21, cannot be taken into consideration while computing the period of limitation for assessing the escaped turnover. The second question is answered in the negative. Accordingly, we answer the two questions as follows :
Question No. (1) : In the negative.
Question No. (2) : In the negative.
7. The assessee is entitled to its costs which we assess at Rs. 100. Counsel's fee is assessed in the same figure.