SIDHU J. - This is an application under art. 226 of the Constitution of India for the issue of directions, orders or writs in the nature of certiorari, prohibition and mandamus to the ITO, Central Circle I, Jaipur, the IAC (Assessment)-I, Jaipur, and the Union of India, respondents Nos. 1, 2 and 3, respectively, for bringing up the record of the proceedings of reassessment of the petitioners income for the assessment year 1977-78, held under s. 147 of the I.T. Act, 1961 (hereinafter called 'the Act'), and quashing, (i) the reassessment order, dated February 12, 1981, made thereunder, (ii) the notice dated April 11, 1980, issued under s. 148 of the Act, and (iii) three separate orders of provisional attachment dated August 11, 12 and 23, 1980, passed under s. 281B of the Act, and also restraining the respondents from taking any action against the petitioner, or in relation to his property, to enforce these notices and orders. In addition to this multiple relief, the petitioner also prayed for a declaration that ss. 147 and 148 of the Act and s. 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948, are unconstitutional and, therefore, null and void.
The facts which are necessary for the disposal of this writ petition may be shortly stated here. The petitioner, Vimal Chandra Golecha, is carrying on the business of sale and purchase of precious stones. He filed a return of his income, for the assessment year 1977-78, on August 29, 1977. According to him, his total income chargeable to tax was Rs. 73,580. The ITO made an assessment order on October 29, 1977, computing the total assessable income of the petitioner at Rs. 81,550.
The petitioners brother, Hem Chandra Golecha, deceased, had been working for a firm, M/s. Sales S.A. of Geneva, in 1969. In due course, he became general manager of a firm called M/s. Ashlyn & Co., Frankfurt. He went to Brazil and disappeared there in 1976. He has not been heard of since July 7, 1976. The petitioner and his family suspected that Hem Chandra Golecha had been murdered and that John Ashlyn (of M/s Ashlyn & Co. Frankfurt) had a hand in his murder. John Ashlyn caused a notice, dated December 6, 1977, to be served on M/s. Golecha Exports Private Ltd., of which the petitioner is a director, demanding payment from the said company of a sum of one million dollars as damages for the alleged wrongful acts of the company and its officers. He is said to have supplied to the respondents photostat copies of certain documents, purporting to have been signed by the petitioner, with a view to involving the petitioner in such proceedings as may be started on that basis by the authorities concerned in India. According to the petitioner, all these documents have been fabricated and forged by John Ashlyn to blackmail the petitioner in an attempt to stop him from taking action for solving the mystery of the disappearance of his brother, Hem Chandra Golecha, in 1976.
The petitioners grievance is that acting on those false and fabricated documents, the ITO (respondent No. 1) served the impugned notice dated April 11, 1980, on him under s. 148 of the Act, stating that he proposed to reassess his income as he had 'reason to believe that your income chargeable to tax for the assessment year 1977-78 has escaped assessment within the meaning of s. 147 of the I.T. Act, 1961', and calling upon him to furnish a return of his income for the assessment year 1977-78. The petitioner sent a written reply to this notice on May 22, 1980, stating that the return originally filed by him which formed the basis of the assessment order dated October 29, 1977, may be treated as return filed in pursuance of this notice. The petitioner further requested the ITO to let him know the reasons which made him believe that the petitioners income had escaped assessment.
On August 21, 1980, respondent No. 2 wrote a letter (Ex. F) to the petitioner disclosing therein the information in his possession showing that the petitioner had been exporting precious stones from India to/through M/s. Sales S. A. Geneva, and that the books of the latter showed that a total amount of 8,21,514.92 Swiss francs had been credited to the petitioners account between May 7, 1976, and February 2, 1977. He further told the petitioner that he had information in his possession that the petitioner had written in his own hand two letters showing that he had instructed his bankers in Switzerland to transfer $ 11,000 and $1,20,000 to the account of M/s. Sales S. A. Geneva, and that the books of this firm showed that they had credited the amount of $1,20,000 to the account of the petitioner in their books. The petitioner was thus called upon to explain why his income from this business be not estimated for the assessment years 1977-78 and 1978-79.
The petitioner gave a written reply to the letter, Ex. F, mentioned above, denying that he had written any such letter as alleged instructing the bankers in Switzerland to transfer any amount to the account of M/s. Sales S. A. Geneva. He did not specifically deny that a sum of 8,21,514.92 Swiss francs had been credited to his account.
On December 5, 1980, respondent No. 2 sent a letter to the petitioner, giving further details of the information in his possession and of the material gathered on the basis of the enquiry held by him and thus giving him an opportunity of being heard in respect of that material in accordance with the provisions of s. 142(3) of the Act.
By his letter dated December 15, 1980, the petitioner made a lengthy reply (Ex. H/2) to the aforementioned notice under s. 142(3). He denied the allegations contained in the notice. Thereafter, he wrote a few more letters (Ex. I/1, dated December 22, 1980, Ex. I/2, dated December 27, 1980, Ex. I/3, dated January 1, 1981, Ex. I/4, dated January 3, 1981, Ex. J, dated January 5, 1981 and Ex. K, dated January 15, 1981), requesting respondent No. 2 for the supply, inter alia, of certified copies of his own statements, recorded during the enquiry under s. 142 of the Act, photo copies of various documents shown to him during the enquiry and other documents on which the revenue wanted to rely. It appears that respondent No. 2 proceeded to make the impugned assessment order (Ex. L) dated February 12, 1981, without supplying these copies to the petitioner. He reassessed his income at Rs. 50,13,500 as against the original assessment of Rs. 81,550 for the assessment year 1977-78.
Aggrieved by the aforementioned assessment order and other notices, etc., issued earlier preparatory to the making of the said order, the assessee filed this writ petition on March 16, 1981, for various reliefs as mentioned at the outset of this judgment. He has challenged the assessment order and other orders and notices on the following grounds:
(1) Sections 147 and 148 of the Act on which the respondents rely to sustain the impugned orders and notices contain delegation of arbitrary and uncontrolled power to the ITO to reopen an assessment and thus visit the assessee with drastic action entailing serious consequences. These sections are, therefore, unconstitutional, being inconsistent with the provisions of arts. 14, 19(1)(g) and 21 of the Constitution.
(2) In issuing the notices under s. 148 and making the assessment order under s. 147 of the Act, the respondents relied on photo copies of certain documents which purport to have been attested by one of the Indian Consular Officers abroad acting under s. 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948. The said s. 3 is violative of arts. 14, 19(1)(g) and 21 of the Constitution.
(3) The assessing authority passed the impugned order of assessment, dated February 12, 1981, in violation of the principles of natural justice. The order is, therefore, illegal and invalid.
On notice of motion being served on the respondents, they entered appearance through their counsel and filed a counter-affidavit dealing one by one with all the averments in the writ petition and denying the material allegations contained therein. They pleaded that if the petitioner had any real and genuine grievance against the impugned order of re-assessment, he should be left to seek his remedy by way of appeal within the ambit of the Act and that the remedy provided by the Act is adequate and efficacious. They referred in this connection to the relevant provisions of the Act providing remedy against wrong assessment or reassessment. They pleaded that the petitioner had already filed an appeal before the Commissioner of Income-tax (Appeals) challenging the order of reassessment, dated February 12, 1981, and that the said appeal is still sub judice. According to the respondents, the writ petition is liable to be dismissed on the short ground that an adequate alternative remedy was available to the petitioner and he has in fact already approached the appellate authority for appropriate relief.
The respondents denied that ss. 147 and 148 of the Act and s. 3 of the Diplomatic and Consular Officer (Oaths and Fees) Act, 1948, are violative in any manner of the provisions of arts. 14, 19(1)(g) and 21 of the Constitution. They further denied that respondent No. 2 had passed the impugned order in contravention of the principles of natural justice. They mentioned that respondent No. 2 had recorded the statement of the petitioner on different dates and that, on the examination proceeded, the respondent had shown to the petitioner and his counsel the photostat copies of the various documents relied on by the department in the enquiry. They pleaded that in fact most of the documents were either in the petitioners own hand or written at his instance. They asserted that respondent No. 2 had supplied photo copies of all the documents to the petitioner and that the petitioner was thus afforded full opportunity of explaining those documents. The petitioner who was represented throughout the enquiry by a lawyer did not care to render any explanation or produce any evidence in rebuttal. Instead, he contended himself by making a blanket denial stating that all the documents in question were forged and fabricated. According to the respondents, the petitioners grievance that he was prejudiced in his defence in the absence of the original documents being shown to him is artificial and insincere, for, as they further stated, the original documents would not have made any difference in view of the fact that the petitioner had described those documents, on seeing their photo copies, as having been forged and fabricated by or at the instance of John Ashlyn. Respondent No. 2 pleaded that he was fully satisfied on evidence that the documents in question were genuine and that some of them were even in the hand of the petitioner himself. The respondents defended the impugned order of reassessment pleading that it had been passed on evidence and in accordance with law and the principles of natural justice.
After hearing the petitioners counsel at length, we find no substance at all in the petitioners challenge to the constitutionality of ss. 147 and 148 of the Act and s. 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948. It is obvious on a plain reading of the writ petition that its draftsman was itself not so sure that the aforementioned statutory provisions violated in any manner the petitioners right to equality as enshrined in art. 14 of the Constitution. It appears that the petitioner knew it too well that, but for such a challenge, there would be nothing in the petition on the basis of which he could reasonably hope to get this petition admitted. We are of the considered opinion that these statutory provisions are perfectly constitutional. We may now give our reasons briefly.
Section 147 , excluding the two Explanations appended to it, which are not relevant for our present purpose, and s. 148 of the Act, which are under challenge, may be reproduced here for convenience of reference. They read as under:
'147. Income escaping assessment.- If -
(a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the apart of the assessee, the Income-tax Officer has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for any assessment year,
he may, subject to the provisions of sections 148 to s. 153 , assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year).
'148. Issue of notice where income has escaped assessment. -(1) Before making the assessment, reassessment or recomputation under section 147 , the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under subsection (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.
(2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so.'
It will be seen that s. 147 empowers the ITO, inter alia, to reassess the income which has escaped assessment in the relevant assessment year due to the concealment of income by the assessee. Section 148 prescribes the procedure for initiation of the proceedings for reassessment. Sub-section (1) of s. 148 lays down that before making the reassessment the ITO shall serve on the assessee a notice requiring him to furnish a return of his income in the prescribed form. It is noteworthy that sub-s. 2 of s. 148 further enjoins the ITO to record his reasons in every case before issuing a notice under sub-s. (1). Section 149 prescribes the time-limit within which a notice under s. 148(1) may be issued. Section 151 lays down that no notice under s. 148(1) shall be issued after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied, on the reasons recorded by the ITO under s. 148(2) , that it is a fit case for the issue of such notice. It further lays down that if such notice is to be issued after the expiry of 8 years from the end of the relevant assessment year, it would require the prior sanction at a higher level, i.e., of the CBDT, instead of the Commissioner. Section 153(2) provides another safeguard in that it requires that such reassessment must be made within four years from the end of the assessment year in which notice under s. 148(1) was served.
The setting of sub-s. (2) of s. 148 in the group of sections (i.e. ss. 147 to 153 ) clearly indicates that the reason behind the requirement in this sub-section enjoining the ITO to record his reasons for initiating action for reassessment is purely administrative in character, so as to enable the higher administrative authorities, i.e., the Commissioner and the CBDT, to exercise proper control over and supervision of such action by the ITO and to restrain it, if necessary, in appropriate cases. That is why the Madras High Court, while dealing with s. 34, Indian I.T. Act, 1922, which was in similar terms to ss. 147 and 148 of the Act, held in Presidency Talkies Ltd. v. First Addl. ITO : 25ITR447(Mad) , that the reasons recorded by the ITO for initiating action for reassessment need not be communicated to the assessee and that the only object of the requirement as to the recording of reasons is to safeguard the interest of the assessee against any hasty action on the part of the ITO or action without any justification. The Supreme Court approved this ruling in S. Narayanappa v. CIT : 63ITR219(SC) repeating that there is no requirement in any of the provisions of the Act that the reasons recorded under s. 148(2) must be communicated to the assessee as a condition for the initiation of action against him for reassessment of his income.
Now, as already stated, the attack on the constitutionality of ss. 147 and 148 of the Act is based on the argument that they vest the ITO with uncontrolled and arbitrary power to reopen an assessment once made according to law, and thus visit the assessee with drastic action entailing serious consequences on him. It is argued that dispensing with the communication of reasons, recorded under s. 148(2) , to the assessee, is a serious matter affecting the rights of the assessee and that for this reason alone this section must be struck down as unconstitutional. It is further submitted that ss. 147 and 148 suffer from another vice in that they enable the ITO to make up his mind and thus decide to reopen an assessment without affording the assessee an opportunity of being heard in that behalf.
All these arguments, in our opinion, are wholly devoid of force. We have already surveyed the provisions of the Act relating to reassessment in order to highlight the fact that there is nothing arbitrary about any of these provisions and that rigorous checks and controls have been provided by Parliament on the exercise of the power by the ITO to initiate an action for reassessment. In the forefront of these checks and controls is the requirement of s. 148(2) enjoining the ITO to record (his) reasons for initiating action for reassessment. Such reasons can be scrutinized by the higher administrative authorities to ascertain if the action initiated is justified or not. Since at the stage of initiating action for reassessment, the assessee is not a party to the proceedings, the Supreme Court held in S. Narayanappas case : 63ITR219(SC) that the reasons recorded for initiating such action need not be communicated to the assessee. The assessee becomes a party to the proceedings, so ruled the Supreme Court in that case, only after service of the notice under s. 148(1) is effected on him. In other words, there is no a finality about the reasons recorded under s. 148(2) so far as the assessment is concerned. Section 148(1) itself provides that for making a valid order of reassessment, the assessing authority shall have to comply with all the requirements of the Act relating to the making of an order of assessment. One of the requirements of making of an order of assessment is the holding of an enquiry in accordance the provisions of s. 142. Sub-section (3) of s. 142 of the Act lays down that the assessee shall be given an opportunity of being heard in respect of any material gathered on the basis of any enquiry held under that section.
It will thus be seen that s. 148 of the Act contains a build-in safeguard for the assessee in that it makes it obligatory on the assessing authority to disclose to the assessee the material on the basis of which it proposes to reassess his income and then give him an opportunity of being heard and explaining that material. The other checks and controls on the power of the assessing authority are enacted in ss. 149 to 153 of the Act. We cannot, therefore, accept the argument that ss. 147 and 148 contain delegation of arbitrary and uncontrolled power to the ITO to re-open an assessment without any reason.
Though ss. 147 and 148 of the Act contain all the necessary safeguards ensuring fair play to an assessee, we are not unmindful of a situation wherein an ITO, if he is determined to act in an arbitrary manner, may record reasons which are no reasons in the eye of law and thus issue notice to the assessee initiating action for reassessment of his income. Now, if that be so, one cannot condemn the statute as unconstitutional merely because the ITO has ignored the principles enunciated therein for regulating the exercise of his discretion. What should be is truck down in such a situation is the action of the ITO rather than the statute which he ignored in taking an illegal action.
The challenge to the constitutionality of ss. 147 and 148 of the Act therefore, fails.
Similarly, there is no force in the argument that s. 3, Diplomatic and Consular Officers (Oaths and Fees) Act, 1948, is unconstitutional. Section 3(1) confers power on the Indian diplomatic and consular officers in foreign countries to administer any oath and do any notarial act which any notary public may do within a State and every oath so administered and notarial act so done shall be as effectual as if duly administered or done by any lawful authority in a State. Section 3(2) lays down that a document purporting to have been authenticated in the manner prescribed and bearing a seal of such diplomatic or consular officer shall be admitted in evidence without proof of the seal or signature of the Officer concerned or of the official character of that person. Counsel for the petitioner attacked the constitutionality of this section mainly on the ground that it arbitrarily dispenses with the formal proof of a document, as required by the Indian Evidence Act, and thus enables a court to admit an unproved document merely on the strength that it bears the authenticating seal and signatures of a diplomatic or consular officer. We find no force in this argument. Section 3 does not dispense with the proof of a document according to law if it is to be used as evidence in a court of law. All that the section does is to enable a court to dispense with the proof of the genuineness of the seal and signatures of a diplomatic or consular officer on a particular document. If the document is otherwise relevant and proved according to law, its photo copy can be admitted in evidence provided such copy is duly authenticated in the manner prescribed by the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948.
Before concluding the discussion on this point, we may add that in making an assessment, the ITO does not act merely on what is technically described as 'evidence' in the Indian Evidence Act. It will be seen from ss. 142 and 143 of the Act that he may also act on 'the material gathered' by him. The word 'material clearly shows that the ITO is not fettered by the technical rules of evidence and the like and that he may act on material which may not, strictly speaking, be accepted as evidence in a court of law.
Thus, the challenge to the constitutionality of s. 3, Diplomatic and Consular Officers (Oaths and Fees) Act, 1948, also fails.
Lastly, we take up the petitioners plea to the effect that the impugned order of assessment was made by the assessing authority in violation of the principles of natural justice. We have carefully examined the material on record and find that this plea is groundless. We have seen the reasons recorded by the ITO under s. 148(2) of the Act for the initiation of the proceedings for reassessment. We find that the reasons recorded are relevant, and, if correct, would, lead to the legitimate inference that the assessees income had escaped assessment by reason of its concealment by him. The substance of these reasons was communicated to the assessee during the enquiry, vide detailed letter, Ex. F, dated, August 21, 1980, from respondent No. 2 to the petitioner. The petitioner made a detailed reply, Ex. G, dated September 1, 1980, to the said communication. Thereafter, the entire material gathered by the assessing authority on the basis of his enquiry and which was proposed to be utilised for the purpose of the reassessment was disclosed to the assessee, vide letter, Ex. H, dated December 5, 1980, with a view to giving him an opportunity of being heard in accordance with the provisions of s. 142(3) of the Act. The assessing authority (i.e., respondent No. 2) has sworn to an affidavit to the effect that photo copies of all the documents required by the petitioner were supplied to him during the enquiry and that the assessee was thus afforded an opportunity of explaining those documents. It is true that the original documents, of which photo copies were supplied to the petitioner, were not shown to the petitioner at any stage of the enquiry. They could not possibly be shown to him for the simple reason that the assessing authority was himself not in possession of the original documents.
It will thus be seen on the facts, as established on record, that the petitioner was afforded full opportunity of being heard before the impugned order of assessment was made. Natural justice which is said to have been violated is not so rigid and inflexible a concept as to insist invariably that the person concerned must be shown the original documents which are required to be explained by him. It is well settled that the requirements of natural justice depend on the circumstances of the case, the nature of the enquiry, the statute under which the Tribunal is acting and the subject-matter to be dealt with. We are satisfied that, in the context of the Act, the nature of the enquiry under s. 142 and the fact that the original documents are said to be in the possession of a foreigner residing in a foreign country, the demands of natural justice were fully met by supplying the assessee with photo copies of the documents in the possession of the assessing authority. He denied the genuineness and correctness of these documents by seeing the photo copies. Had he seen the originals, he could have done no better than denying their genuineness and correctness. What is the value of these photo copies as 'material' for the reassessment of the petitioners income is a question which had better be left at this stage to the professional judgment of a hierarchy of I.T. authorities, with the Income-tax Appellate Tribunal at the apex. As stated earlier, the petitioner has already filed an appeal against the order of reassessment, which is pending. If still not satisfied, he would be entitled to appeal to the Appellate Tribunal. If the decision of the Appellate Tribunal also fails to satisfied him, he would be entitled to apply to the Tribunal for a reference on questions of law to the High Court. If the Tribunal refuses to make a reference, he would be entitled to apply directly to the High Court for an order to the Tribunal directing it to state a case. This was the view expressed by a Division Bench of this court in Firm Rasulji Buxji Kathawala v. CIT . We entirely agree and see no reason to entertain this writ petition at this stage.
For all these reasons, this writ petition is wholly unsustainable, and is, therefore, dismissed in limine.