Khanna, J. - (1.) This appeal by special leave by the Commissioner of Sales Tax Uttar Pradesh is directed against the judgment of Allahabad High Court whereby it answered the following two questions referred to it under S. 11 of U. P. Sales Tax Act (hereinafter referred to as the Act) in the negative:"(I) 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 (II) Whether the aforesaid two preliminary notices asking for the production of accounts can be taken to be notices under Sec. 21 for the starting of the proceedings so as to warrant passing of the assessment within one year of the service thereof -
(2.) The matter relates to the assessment year 1957-58. The respondent assessee, Bhagwan Industries (P) Ltd., carries on the business of selling atta, maida and sooji. Its business comprises various units including Venkateshwar Flour Mills, Lucknow. It was assessed on December 26, 1958 for the purpose of sales tax for the year 1957-58 under rule 41 (5) of the U. P. Sales Tax Rules. The estimated turnover was determined to be Rs. 46,00,000, out of which the net turnover of Venkateshwar Flour Mills for atta, maida and sooji was estimated at Rs. 43,00,000. The assessment was ex parte and the respondent did not produce the account books.
(3.) On account of food shortage the Government banned the purchase of wheat by rolling flour mills from the open market in August 1958. The Government further fixed quota of wheat to be supplied by the Central Government for each such mill on the basis of average of grinding done in the past three years. The quota of Venkateshwar Flour Mills was fixed at 1,192 tons, i.e. 32,000 maunds per month. With that quota the respondent in the assessment year 1958-59 disclosed a turnover of Rs. 75,70,840. On September 13, 1961 the Sales Tax Officer issued the following notice to the respondent: " Certain items of sales and purchases made by you during the year 57-58 and 58-59 have come to my notice which need verification. You are required to appear before me on 27-9-61 with all your account books of the year 57-58 and 58-59 for the above mentioned verification. 2. Please note that in case you fail to appear it will be presumed that the Sales and Purchases under reference are not entered in your books and action under Section 21 of the U. P. Sales Tax Act may be taken against you." The above notice was served upon the respondent on September 19, 1961. Appearance was put in on behalf of the respondent in pursuance of the notice, but the account books were not produced. On March 13, 1962 the Sales Tax Officer sent the following memorandum to the respondent: " M/s. Bhagwan Industries Private Ltd., Aishbagh Lucknow deal in attas, maida and sooji which are manufactured by them in their rolling flour mills Shree Venkateshwar Flour Mills. They have been finally assessed for the years 1956-57 and 1957-58 on estimated turnover of Rs. 42,75,000/- (tax assessed Rs. 98,046-94) and Rs. 45,00,000 (tax assessed Rs. 72,875.00) respectively. Both these assessment orders were passed ex parte. The case of the year 1956-57 was reopened under S. 21 on the basis of certain information and an escaped turnover of Rs. 35,532/- was again assessed under section 21 of the U.P. Sales Tax Act. At the time of this assessment also the account books were not produced. 2. The above mentioned firm is on record for the last many years. The sale of atta, maida and sooji was exempt under Section 4 of the U. P. Sales Tax Act upto 31-3-56 but was declared taxable with effect from 1-4-56. According to the assessment order of the year 1955-56 their sales of atta, maida and sooji had amounted to Rs. 58,18,425-15-6. The assessment case of the firm for the year 1958-59 has also been completed and during that year according to the account books the turnover of atta, maida and sooji had amounted to Rs. 75,70,840/-. Keeping in view the turnover according to the account books during the year 1955-56 and 1958-59 it appeared that the turnover determined in the ex parte orders of the years 1956-57 and 1957-58 was estimated at a lesser amount and thus some turnover escaped assessment during each of these two years. It was, therefore, considered necessary that the actual position be ascertained from the assessee. Some information received from other Sales Tax Officers regarding the sales made by this firm during the year 1957-58 also needed verification as was done in the year 1956-57 resulting in the assessment of the firm under Section 21 during that year. 3. A notice was, therefore, issued to the firm on 13-9-61 for the production of the account books of the year 1957-58 but the firm failed to produce the account books. Again summons were issued under rule 78 of the U. P. Sales Tax Rules to Shri Kesheo Pd. Vaid, Managing Director of the firm requiring him to appear in person and to produce the account books of the firm for the year 1956-57 and 1957-58 but again neither the account books were produced nor Shri Vaid appeared in person. One application dated 27-12-1961 was, however, received from one of the directors of the firm informing that Shri Kesheo Pd. Vaid was out of station and requesting that the summons be issued in the name of the concern M/s. Bhagwan Industries Private Ltd. rather than in the name of any individual. This application has been kept on record. 4. The hesitation on the part of the firm to produce the account books and even to disclose their actual turnover during the years 1956-57 and 1957-58 as per their account books confirms the presumption that they have been under-assessed for these two years. They are, however, given an opportunity to produce their account books of these years on 19-3-62 and disclose their sales of the above mentioned two years as per their account books failing which their case of the year 1957-58 will be reopened under S. 21 of the U. P. Sales Tax Act and penalty or prosecution proceedings as permissible under the U. P. Sales Tax Act shall be started for the year 1956-57 the assessment of which has already become time barred. 5. A copy of this order shall be kept in the file of the dealer pertaining to the year 1956-57 and another shall be kept in the file pertaining to the year 1957-58." The memorandum was received by the respondent on March 16, 1962, but the account books were not produced by the respondent. On March 24, 1962 the following notice was issued under Section 21 of the Act to the respondent and the same was served on March 26, 1962: " As I have come to know that a part of your sale proceeds relating to the assessment year 57-58, has been left over from being taxed, therefore, I order that you should furnish supplementary statement of the sale-proceeds in the form attached herewith in respect of the year ending 31-3-58 within 15 days. 2. You are further informed that you should be present at the Sales Tax Office, Golaganj on 27-4-62 at 10.30 O'clock, along with all the account books and your other business papers in respect of the year the sale proceeds whereof are mentioned by you in the above mentioned statement. If you fail to turn up on the fixed date tax shall be levied on you ex parte.";