1. By means of this petition under Article 226 of the Constitution, the petitioner, M/s. Juggilal Ramlapat Cotton Spinning and Weaving Mills Co. Ltd., Kanpur, primarily challenged the legality of a notice dated 20th March, 1975, issued to it by the respondent, the ITO, Central Circle 'V', Kanpur, and the follow up action taken consequent thereto.
2. The petitioner is a public limited company incorporated under the Indian Companies Act, 1913, and owns several industrial undertakings, including a cotton spinning and weaving mills for the manufacture of different varieties of cloth including medium 'A' and medium 'B' categories. The cloth manufactured by the petitioner is liable to the levy of excise duty in accordance with the effective rates for each variety as fixed under the Central Excise Tariff from time to time. The production and distribution of cloth by the petitioner is subject, inter alia, to the various orders and/or notifications issued by the Textile Commissioner from time to time under the Cotton Textile Control Order, 1948 (hereinafter referred to as 'the order'), promulgated under the provisions of Essential Commodities Act.
3. Admittedly in the year 1964 an order for the statutory control on production and pricing of controlled cloth including the fixation of minimum obligation for the production of such controlled cloth was issued by the Textile Commissioner under the provisions of the order. This scheme was subsequently revised in May, 1968, in respect of the specifications of controlled cloth and statutory orders specifying the minimum quantity of controlled cloth of the specified varieties required to be packed were issued separately for each mill in respect of each quarter beginning from May, 1968. The petitioner claims that in accordance with the above statutory orders it manufactured and packed controlled cloth and sold the same at the ex-mill prices calculated in accordance with the formula of multipliers as laid down by the Textile Commissioner. The non-controlled cloth continued to be sold at the market price obtainable for the same. It is alleged that according to the directions of the Textile Commissioner, the petitioner stamped in bold letters on each piece of controlled cloth packed by it the above ex-mill price and the excise duties payable on them as well as the maximum retail price at which the cloth could be sold to the consumers' Admittedly no such stamping of prices was required on the non-controlled cloth marketed by the petitioner.
4. In July, 1972, the local excise authorities raided the premises of the petitioner and seized and removed its records and documents relating to the production and sale of cloth and, it is claimed, that no lists of such records and documents were delivered to it in spite of requests made. It is alleged that in the year, 1973, the excise authorities in an attempt to realise excise duties in excess of what they were entitled to, raised a dispute in respect of certain varieties of controlled printed shirting, cleared during the year 1969 to 1972, alleging the same being not in accordance with the specifications of controlled cloth. According to the petitioner, the said information was also apparently communicated to the ITO some time in February 1973. We are not concerned with 1he proceedings that were or are being taken against the petitioner by the excise authorities and consequenlly the details of such action, furnished in the petition, it is unnecessary to make a mention of any further.
5. The petitioner is an income-tax assessee and had filed its return of income as required under Section 139 of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 1972-73. Before the assessment proceedings culminated on the 20th March, 1975, the respondent issued to the petitioner a notice purporting to be under Section 142(1) of the Act, a true copy of which has been filed as annex. I to the writ petition. The notice was sent as an enclosure along with a communication giving details of theparticulars required to be furnished, relevant portion of which runs as follows :
'Information has come to my possession that certain cotton fabrics were cleared by you under the garb of control fabrics which were as follows :
(a) Fabrics wherein average count of yarn used was more than 25.49 Ave. counts and the difference of Read Pick was less than 16 (Med. 'A' falsely cleared as Med. 'B' controlled) = 88,78,797 Mtrs.
(b) Fabrics wherein the difference of Read & Pick was less than 16 (Med. 'B' non-controlled falsely cleared as Med. 'B' controlled)--6,99,965 Mtrs. Total -95,78,762 Mtrs. or 68,67,072 sq. Mtrs.
Value of these goods is shown at Rs. 1,56,005-49 and Rs. 12,18,202. For the purpose of your assessment you are required to kindly give the following information :
(i) Trade name of fabrics.
(ii) Sale rate if to be sold as controlled cloth.
(iii) Sale rate if to be sold as uncontrolled cloth.
(iv) Sale rate at which actually sold,
(v) Difference between Cols. Nos. (iii) and (iv).
Above information should be given for the period 1-1-1969 to 12-4-1972.
This information is required with respect to the following qualities as at (a), (b) and (c) :
(a) Shirting between period from 1-1-1969 to 12-4-1972 (6,99,965 linear meters or 5,17,986 Sq. Metres).
Factory's stamping No.
(b) Following 45 varieties of shirtings measuring 88,78,797linear metres or 63,49,087 sq. metres between 1-1-1969 to 12-4-1972.
Factory's stamping No.
It has come to my notice that the above fabrics were medium 'A' category but they were declared as medium 'B' category. You are, therefore, requested to give the information about sale rates in the prescribed pro forma and make categorical statement and give specific information and the amounts to show as to whether the above qualities were sold at market rates available for medium 'A' category or medium 'B' category.
Relevant sale bills should be produced, (c) Medium A wrongly declared as category 'B' :--
The information has come to my possession to show that the above fabric was manufactured by you so as to fall in the category of medium 'A' but you declared it as medium 'B'. It was a mercerised and sanforised and printed fabric. This clearance was also done during the period from 1-1-1969 to 12-4-1972. The quantity cleared was 7,96,211 linear metres or 5,89,196 sq. metres. (4) Above information is required Under Section 142(1). You are required to submit the information in the prescribed pro forma as given above and produce your sale bills and sale registers relevant in the present context.
Formal notice Under Section 142(1) is enclosed. Time is allowed up to 25-3-1975.'
6. The petitioner asked for extension of time for compliance of the notice to the extent possible but the request was turned down. By means of a letter dated 26th March, 1975, a true copy of which has been filed as annex. II to the petition, the petitioner again expressed its inability to comply with the notice dated 20th March, 1975, the relevant portions of which are as follows :
'Without going into factual allegations, we may point out that the allegations made by you in your notice is wholly irrelevant for the purpose of the above income-tax proceedings as no question of addition of any income arises on account of the allegations made by you. According to your allegations, certain cotton fabrics were allegedly cleared in the garb of controlled fabrics. If cotton fabrics are cleared as controlled fabrics, only controlled price can be realised and the controlled price represents the actual amounts received in respect thereof. These amounts are fully accounted for while computing the income.
The stamped varieties of fabrics mentioned in your letter dated 20th March, 1975, were sold as controlled cloth. They were not sold as uncontrolled cloth. Thus there could not be three different sale rates of these varieties as suggested by you, nor any such question could arise.'
7. On the 25th March, 1975, itself, the respondent passed the assessment order purporting to be under Section 144 of the Act which was served at 4 p.m. on the assistant secretary of the petitioner-company. The assessment order, referred to above, was challenged by the petitioner by means of a writ petition in this court which was dismissed in limine on the ground that the petitioner had an alternative remedy under Section 146 of the Act. The dismissal of the writ petition was followed up by the petitioner by its presenting an application under Section 146 before the respondent on the 26th April, 1975, praying for the cancellation of the assessment order under Section 144 and for making a fresh assessment in accordance with the provisions of the Act. On the 28th August, 1975, the respondent passed an order under Section 146 of the Act, cancelling the assessment earlier made under Section 144. Anappeal which had been preferred by the petitioner before the AAC against the assessment order dated 25th March, 1975, became infructuous in view of the order passed by the respondent under Section 146 of the Act and it was ordered to be filed by the AAC. Simultaneously with the passing of the order under Section 146, on 28th August, 1975, itself, the respondent, referring to its earlier notice served on the petitioner under Section 142(1) of the Act dated 20th March, 1975, called upon the petitioner to comply with it by the 30th September. In response to this communication, the petitioner addressed to the respondent a letter dated 10th October, 1975, stating therein that,
'The allegation and insinuations relating to non-controlled cloth or medium 'A' category fabrics having been sold as controlled cloth or medium 'B' category fabrics are denied. For income-tax purposes particular items have been actually sold and whether the sale proceeds have been correctly accounted for in the books (sic).
In regard to the information sought for as per pro forma in the notice for various qualities specified in the said notice, we have to state that the sale rates were the rates at which the goods were actually sold and are given in the relative sale bills which are being produced as desired. The sale proceeds were duly and correctly recorded in the account books......'
8. To cut the story short, the petitioner never complied with the notice served on it under Section 142(1) of the Act and the subsequent reminders but instead presented this writ petition in this court on the 1st December, 1975. The writ petition was admitted to hearing and an interim order was passed on the same day by a Bench of this court directing that 'the petitioner may not comply with the letters of the Income-tax Officer dated 20th March, 1975, 15th October, 1975, 25th October, 1975, and 13th November, 1975.' The letters dated 15th October, 1975, 25th October, 1975, and 13th November, 1975, mentioned in the interim order were reminders issued to the petitioner by the respondent to comply with the notice dated 20th March, 1975, Subsequently, after hearing counsel for the parties, a Bench of this court directed stay of the assessment proceeding for the year 1972-73 in relation to the petitioner during the pendency of this writ petition.
9. The petitioner alleged that the notice dated 20th March, 1975, has obviously been issued by the respondent to gather information for the excise authorities and the respondent is acting hand in glove with the excise authorities. It is further asserted that the respondent is insisting upon the petitioner to prove negative facts, although there is no material on record to show any sale of medium 'A' cloth as medium 'B'. The respondent is making a roving and fishing enquiry, according to the petitioner, merely on conjectures. It is averred that since the allegations contained in the notice under Section 142(1) of the Act were based on conjectures and were of a general nature such a reply thereto as was sent by the petitioner could not be but one of general denial,
10. A counter-affidavit has been filed by Sri K. K. Pandey, ITO, Central Circle 'I', Kanpur, to whom the petitioner's case has been transferred and before whom the assessment proceedings are now pending. It has been stated in the counter affidavit that 'according to information received by the respondent-Income-tax Officer, the petitioner packed and marked non-confcrolled cloth as controlled cloth and sold the same. The petitioner was falsifying its accounts relating to controlled and non-controlled cloth in order to make illegal gains. The respondent, Income-tax Officer, wanted to enquire into the matter but enquiries could not be completed so far on account of the stay order passed by the Hon'ble Court on 1st of December, 1975, and as modified subsequently'. It has further been averred in the counter-affidavit that according to the information with the assessing authority, the petitioner was marking non-controlled cloth also as controlled cloth and was marking the price accordingly, though the said cloth was being sold at a higher price than that marked on the cloth and profits were being suppressed. It has been denied that the petitioner has been called upon to prove negative facts and that any roving and fishing enquhy was being made on the basis of conjectures. It has been denied that the allegations of the ITO were general in nature and it has been asserted that it is clear from the letter dated 15th October, 1975, that specific enquiries were made regarding specific points. According to the counter-affidavit, the ITO was making enquiries and for the said purpose he required the production of the sale bills, etc., so that he could verify the allegation that the petitioner had wrongly marked non-controlled cloth as controlled cloth and shown a low sale price thereby understating its income. The stand taken in the counter-affidavit is that proceedings before the excise authorities and the I.T. authorities were separate and independent proceedings as the information with the ITO was that the petitioner was passing off superior cloth as inferior cloth. According to the counter-affidavit it was necessary to know the quality of the cloth manufactured and sold since the price of non-controlled cloth were higher than that of controlled cloth.
11. In the rejoinder-affidavit, the assertions made in the petition have merely been reiterated.
12. The only submission that has been made before us in support of this writ petition is that the particulars required to be produced by the petitioner by means of the notice under Section 142(1) of the Act are wholly irrelevant to the assessment proceedings pending before the respondent. Section 142 of the Act, to the extent relevant for our purpose, is as follows :
' 142, (1) For the purpose of making an assessment under this Act, the Income-tax Officer may serve on any person who has made a return under Section 139............a notice requiring him, on a date to be thereinspecified,--
(i) to produce, or cause to be produced, such accounts or documents as the Income-tax Officer may require, or
(ii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters... as the Income-tax Officer may require :......'
13. Section 142(1) of the Act arms the assessment authorities with wide powers of requiring relevant material to be furnished by an assessee who files a return under Section 139, or to whom a notice has been issued under Sub-section (2) of that provision for the purpose of completing the assessment proceedings. We see no reason to doubt the correctness of the positive assertions made by the respondent by means of an affidavit verified on oath that the ITO concerned had in his possession information that the petitioner was passing off non-controlled variety of cloth after stamping the same as controlled cloth with the price fixed for such controlled cloth on the packings. It may be noted here that it has not been specifically asserted by the petitioner in his petition that what was being stamped as controlled cloth was not in fact uncontrolled cloth which was saleable in the market at rates higher than that fixed for sale of controlled cloth. In the various communications addressed by the petitioner, copies of which had been filed by the petitioner along with the petition, also there is no unambiguous and specific assertion that what was packed and labelled as controlled cloth by the petitioner was in fact uncontrolled cloth. The letter dated 20th March, 1975, which has been quoted at some length by us in an earlier part of this judgment gave specific details of the uncontrolled varieties of cloth marketed by the petitioner though stamped as controlled cloth. The petitioner is a business house and, as is normal, manufacturing and selling cloth for gain and private profit. It has not been disputed that the prevailing sale price of uncontrolled cloth which was of a superior variety was higher than that fixed for controlled cloth. If as disclosed in the notice served on the petitioner under Section 142(1) of the Act, the petitioner was in fact passing off uncontrolled cloth as controlled cloth with fictitious stamping of the quality of cloth and the prices, it is reasonable not only to suspect but to believe that the uncontrolled cloth shown as controlled cloth would have been marketed at prices higher than that stamped on the packings bringing undisclosed profits to the petitioner not shown in the return filed by it under Section 139 of the Act. We have designedly setout the relevant portion of the letter dated 20th March, 1975. A mere perusal of it makes it self-evident that the particulars the petitioner was required to furnish by means of the notice under Section 142(1) of the Act have a direct bearing on the question of determination of the correct income earned by it through the transactions adverted to therein during the relevant assessment period. In fact hardly any attempt was made to show during the course of arguments as to in what fashion the particulars asked for are irrelevant.
14. During the course of arguments, learned counsel placed reliance on the decision of Grosvenor Place Estates Ltd. v. Roberts  1 All ER 341;  2 WLR 83(CA) and Anglo French Drug Co. (Eastern) P. Ltd. v. R.D. Tinaikar, AIR 1959 Bom 21. Neither of the two decisions mentioned above has, in our opinion, any bearing on the question we are called upon to decide. As to whether the particulars called for by means of the notice under Section 142(1) of the Act are relevant or not has to be decided on the facts of each particular case. As already discussed, a scrutiny of the notice and the accompanying list served on the petitioner on the 20th March, 1975, leaves no room for doubt that the particulars and documents that it has been asked to furnish and produce are relevant to the assessment proceedings.
15. In our opinion, there is not the slightest merit in this petition, which we hereby dismiss with costs to the respondent. Interim orders dated 1st December, 1975, and the 15th December, 1975, are hereby recalled.