1. The writ petition is for a certiorarified mandamus to call for the records of the first respondent, in assessment order PAN-47/005-PT-5341/81-82, dated October 10, 1984, and quash the same and direct the respondents to dispose of the case of the petitioner in accordance with law and render justice.
2. Pending the writ petition, the writ miscellaneous petitions were taken up for the stay of the operation of the said order. Though in an interlocutory proceeding detailed orders are not desirable as it is likely to affect the parties in the final disposal of the writ petition, I have heard very elaborate arguments from Mr. V. P. Raman, learned counsel appearing for the petitioner, and Mrs. Nalini Chidambaram, learned counsel appearing for the Income-tax Department.
3. I will briefly set out the following facts as stated by the learned counsel appearing for the Income-tax Department which according to her are borne out by records. But, Mr. V. P. Raman, learned counsel appearing for the petitioner, does not admit the correctness of the statement. However, these are only events leading to the impugned order.
4. July 31, 1981, is the due date for filing the income-tax return for the assessment year 1981-82, under section 139(1) of the Income-tax Act. But no return was filed. Therefore, on January 2, 1982, a notice under section 139(2) of the Act was issued to the petitioner calling upon him to file a return of income within 30 days from the receipt of notice issued along with the summons. On January 10, 1982, the notice was served on the assessee's assistant. On January 20, 1982, a letter together with summons was issued to the assessee to produce the account books and documents by February 10, 1982, but the same was returned by the postal authorities with the endorsement 'not available'. Thereafter, on March 25, 1982, a fresh notice under section 139(2) was issued to the assessee calling for a return of income. Along with the said notice, summons under section 131 was also issued to the assessee for personal appearance. The notice under section 139(2) was served by affixture. On April 16, 1982, a search under section 132 of the Act was conducted at Madras at the business and residential premises of the petitioners. Summons under section 131 of the Act was issued to the petitioner calling for books of account and keys of the godown on May 21, 1982, at the Income-tax Office, Madras. This was on May 14, 1982. Again on May 22, 1982, summons under section 131 was issued fixing May 28, 1982, as the date for compliance. On September 13, 1982, summons under section 131 was issued to the petitioner calling upon him to produce the keys of the various godowns and books of account and stock on September 18, 1982. On September 17, 1982, the reports of the Income-tax Inspector duly supported by reports from two witnesses stating that the petitioner pretended as one Mahendar and even after being identified by two witnesses, he refused to accept the summons issued by the Department. On January 10, 1983, the petitioner was called upon to produce the keys of godowns on January 20, 1983, but the said letter was returned undelivered. On April 22, 1983, an application for extension of time was filed in Form No. 6, for the assessment years 1978-79 to 1982-83. On May 24, 1983, a search was made under section 132 at the business and residential premises of the petitioner at Madras when he posed as his younger brother, Pawan Kumar. On July 27, 1983, a search at the residence of the petitioner at Madras was made when again he posed as Pawan Kumar, but his identity was established with the help of the CB Inspector who had taken him into custody early in November, 1982. On August 18, 1983, a letter was sent to the petitioner calling upon him to produce on August 25,1983, the keys of all the godowns to enable the Department to vacate the prohibitory order. This was acknowledged on August 23, 1983. On August 26, 1983, the petitioner sent a letter to the Department stating that he is suffering from hypertension and low pressure and, therefore, he wants the hearing after 20 days. However, in September, 1983, the jurisdiction over the petitioner's case was transferred to the Income-tax Officer, Central Circle III, Madras. Thereafter, a letter dated October 26, 1983, to the petitioner again calling upon him to produce on November 14, 1983, all the keys of the godowns and to supply details to enable the Department to vacate the prohibitory orders was issued. This was acknowledged on October 30, 1983. On February 4, 1984, a letter was issued to the petitioner calling for separate applications for each assessment year to consider the request on merits. On February 4, 1984, the assessee was informed that he is permitted to inspect the seized documents. Thereafter, on February 4, 1984, again a letter was issued to the assessee calling upon him to file his return. On February 15, 1984, the petitioner was informed of the date o which permission to inspect the seized documents was given, but the petitioner did not avail of this opportunity. On February 24, 1984, the assessee informed the Department of the filing of an application before the Settlement Commission and requested the Department to keep the assessment pending. On February 25, 1984, a reply was sent to the assessee requiring him to file the return immediately as orders regarding the admissibility of the petition by the Settlement Commission had not been received. On the same date, a notice under section 142(1) was issued to the assessee calling upon him to produce the books of account and posting the case for hearing on March 5, 1984. On March 5, 1984, the assessee filed a 'Nil' return with a covering letter without any statement, details, etc. On the same day, the assessee sent a letter requesting for one more opportunity. On March 13, 1984, the assessee was informed that the return filed by him was defective and that he should rectify the defects. The above letter was served by affixture. On March 28, 1984, the Department was informed by a letter from Sri A. K. Dey advocate, that the income-tax proceedings have been stayed by the Calcutta High Court. On May 4, 1984, the Supreme Court vacated the interim injunction granted by the Calcutta High Court. On July 20, 1984, a letter was _issued to the petitioner informing him of the materials on which the assessment was proposed to be completed under section 144 and calling for his objections by July 31, 1984, but this letter was returned as 'unclaimed' and, therefore, served by affixture. On August 22, 1984, a letter to the assessee was sent giving him time to file his objections for the proposals given in the letter dated July 20, 1984, by August 31, 1984. The assessee filed his objections to the proposes by his letter dated August 29, 1984. On September 5, 1984, the High Court issued an injunction order restraining the Department from taking further proceedings in pursuance of the letter dated Duly 20, 1984. The injunction was vacated by the High Court on October 8, 1984. On October 10, 1984, the assessment proceedings concluded and the assessment order was issued. There were certain writ proceedings in the High Court of Calcutta between the petitioner and the Department, against which special leave petitions have also been preferred by the Income-tax Department. The assessment is questioned on various grounds set out in the writ petition. or the purpose of making out a prima facie case o hold that the petitioner is entitled to an injunction as prayed for by way of an interlocutory relief, Mr. V. P. Raman would urge that this is a case in which the writ jurisdiction of the High Court is not barred at all. prima facie, the order is barred by limitation in view of section 153(a)(iii) and so long as the petitioner's application before the Settlement Commission is pending which has not been given a disposal yet, it would fall Under section 153 which prescribes the limitation for completion of the assessment and reassessment. It cannot be contended that under Explanation 1, clause (v), there is an extension of the limitation. On the contrary, it is merely an exclusion of limitation. Therefore, till that application is imposed of either way, the Department cannot proceed to assess stating that it was getting time barred on March 31, 1984. Even then when the Petitioner sought inspection of the records on February 15, 1984, the letter addressed by the Department reached him on February 18, 1984. The anxiety of the Department that the assessment was getting time-barred 1vas obvious in view of the letter dated February 25, 1984, issued to him. that apart, a specific request was made by the petitioner to await the orders of the Settlement Commission on his application. If the Department's interpretation were to be accepted, what would happen is that the assessee would suffer an assessment and will have to pay as per the orders of assessment and ultimately seek refund of the excess after (receipt of) the orders of the Settlement Commission. That certainly is an improper interpretation of the section. The second aspect of this case which requires interference by this court under article 226 is that the order is clearly mala fide. It was the very same Income-tax Officer who passed the impugned assessment order and who conducted the raid during April, 1982 - July 1983. The petitioner was informed of the transfer to which immediately objection was taken. When there are several Income-tax Officers, there is absolutely no justification for not conceding the request of the petitioner that the case may not be dealt with by him. Then again, when a stay was asked for against the impugned order, the Commissioner of Income-tax rejected the said petition. A huge amount is sought to be recovered from the petitioner by way of tax which is nearly Rs. 8 crores. The figure is not only astronomical but also wholly imaginary. No assessee in India could ever have a turnover attracting this huge tax liability of nearly Rs. 8 crores. It cannot be contended on behalf of the Department that this is a case to which section 271(1)(c) would apply because the impugned order clearly shows that those proceedings are to be initiated yet. Besides, by the very letter of the petitioner dated March 5, 1984, he made it very clear that he was filing the return only to save the period of limitation and not to enable the Department to initiate penal proceedings under section 271(1)(c) of the Act. Where, therefore, the anxiety of the petitioner was to help the Department, it cannot now be contended that he was trying to conceal the particulars of his income or was furnishing inaccurate particulars of
5. such income. The 'Nil' return was to see that limitation is saved. Beyond that, the petitioner cannot be blamed in any manner. The Further request of the petitioner is that the earlier proceedings between the parties should not be taken into account for safeguarding the liberty of the petitioner. Of course, every effort must be made to safeguard the interests of the Revenue but it will be impossible to comply with the order of assessment because the normal commission that is available in the business is 0.25%. That has now been put at 25% which is unknown in this particular type of business. Lastly, it is added that without prejudice to the arguments of law, the petitioner is prepared to place all his assets at the disposal of the Department and is willing to give an undertaking that the properties will not be alienated and the appeal pending before the Department may be taken up at an early date.
6. Apart from the facts narrated by her earlier, Mrs. Nalini Chidambaram also took me through the various proceedings between the parties in the Calcutta High Court and the Supreme Court. I may even now say that I am not concerned with those (proceedings or matters) for the purpose of deciding whether I should make the interim injunction absolute or not.
7. Be that so. The first objection is that this court should not entertain this petition under article 226 of the Constitution of India. Even if it is a question of limitation, when there is adequate remedy available to the petitioner under the Act, which remedy has been availed of by the petitioner himself admittedly, it is not open to him to come before this court under article 226 of the Constitution. In support of this submission, reliance was placed On C. A. Abraham v. lTO : 41ITR425(SC) , Shivrarn Poddar v. ITO : 51ITR823(SC) , Gita Devi Agarwal v. CIT : 76ITR496(SC) , Champalal Binani v. CIT : 76ITR692(SC) , Singam Chetty Ateendrooloo Chetty Charities v. Addl. CIT : 86ITR262(Mad) , Isha Beevi v. TRO : 101ITR449(SC) and Titahugr paper Mills Co. Ltd. v. State of Orissa : 142ITR663(SC) . The further submission of the learned counsel for the Department is that this is a case to which section 153(1)(b) would apply. If that be so, there is a period of 8 years for assessment. The impugned order clearly shows that the petitioner had concealed income and, therefore, to such a case, clause (c) of section 271(1) would apply. At no point of time, the petitioner ever co-operated with the assessment proceedings. Merely because, he has filed a 'nil' return, he is not absolved of the liability under section 271(1)(c). This is the interpretation placed by the Madras High Court on the corresponding provisions of the old Income-tax Act in T. B. Hanuantharaj v. CIT : 111ITR414(Mad) . The Allahabad High Court has also taken the same view in Mir Suba Hari Bhaka v. ITO : 39ITR617(All) . The ratio of these judgments would squarely apply.
8. As regards mala fides, the argument is that though an earlier Writ Petition No. 8915 of 1984 was moved in this court, this was never raised, in which event the petitioner's request could have been complied with but if he remained obstinate and non-co-operative, he has to blame himself. Merely because an officer who passed the assessment order conducted the raid, it does not disqualify him. Assuming for a moment it is mala fide, that can be set right in the appeal. Just to avoid payment of tax, he cannot resort to writ jurisdiction. However, it is added by the learned counsel for the Department that should the court be inclined to make the interim order absolute, the petitioner may be put on terms which, according to her, would be Rs. 2 crores worth of goods removed from the godown in pursuance of the interim orders of the Calcutta High Court and by deposit of Rs. 26 lakhs which amount he took away taking advantage of the interim order issued by the Calcutta High Court and the goods worth crores, which, according to her, would be to put a moderate estimate of Rs. 2 crors. I should add at this stage that Mr. V. P. Raman, learned counsel for the petitioner, disputes this statement. According to him, his client took away only Rs. 1.5 Lakhs in cash and goods worth about Rs. 1 lakh which he represents he is willing to recompense the Department for making the interim order absolute.
9. Having regard to the above arguments, three questions arise for my determination; (1) Is the writ petition maintainable (2) What is the period of limitation and (3) Is the order vitiated by mala fides
10. Two substantial points as the arguments would disclose are : (1) limitation, and (2) mala fides. Admittedly against the impugned order of assessment, the petitioner has gone up in appeal to the Commissioner of Income-tax on October 20, 1984. The prayer for stay was dismissed on October 24, 1984. Thereafter a certificate under section 222 of the Act for the collection of tax was issued on October 26, 1984. The petitioner moved the Tribunal against the order of the Commissioner of Income-tax. If this be the position, as to whether the impugned order is one which is barred by limitation under section 153 is a matter which can easily be decided by the appellate authority. However, what Mr. V. P. Raman, learned counsel for the petitioner, would say is that that error is so apparent on the face of the record that the writ jurisdiction of this court is not barred. I am unable to accept this argument. Even if the error is apparent on the face of the record, the appellate authority is capable of granting the relief. The learned counsel for the Department is right in relaying upon the various rulings to the effect that with regard to points of limitation, this court under article 226 of the Constitution should not interfere. As a matter of fact in C. A. Abraham v. ITO : 41ITR425(SC) . it was held by the Supreme Court that the Income-tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the income-tax authorities, the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. The same view is reiterated in Shivram Poddar v. ITO : 51ITR823(SC) . It cannot be contended for a moment that the remedy provided under the Act is in any way less efficacious. The other question that is required to be dealt with will be mala fides. Even on this ground, if the appellate authority can grant the relief, I do not think the court should interfere at all.
11. As regards the first point of limitation, I will set out the relevant portion of section 153 :
'153. Time limit for completion of assessments and reassessments. - (1) No order of assessment shall be made under section 143 or section 144 at any time after -
(a) the expiry of...
(iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or (b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within clause (c) of sub-section (1) of section 271; or...'
12. These are the two provisions which are relied on. Mr. V. P. Raman, learned counsel for the petitioner, would contend that in view of clause (v) of Explanation I which reads as follows :
'In a case where an application made before the Income-tax Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section....'
13. there is no extension of limitation but only exclusion. If, therefore, according to him, admittedly the petitioner had filed an application under section 245C(1) on October 24, 1983, before the Settlement Commission, till the disposal of the appeal, the hands of the assessing authorities are stayed, while the contrary contention is urged on behalf of the Income-tax Department. But on a very careful reading of the section extracted above, I am of the view that the jurisdiction of the assessing authority is not in any way fettered merely because there is an application under section 245C. Proceedings under section 245C are totally different from the assessment proceedings. This is very clear by an extract of the very section :
'Application for settlement of cases. - (1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner and containing such particulars as may be prescribed to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided.'
14. What actually this section means is, in the event of an assessee wanting to defeat an order of assessment stating that it is time-barred, the Income-tax Department can say that the application of the assessee under section 245C was pending and, therefore, that period will have to be excluded for the purpose of computation. Therefore, ultimately it boils down to this. Sub-section (1) talks of the period of limitation while Explanation 1 talks of computation of the period of limitation after exclusion; one such exclusion being an application under section 245C. There is nothing to indicatein the Act that merely because an assessee files an application before the Settlement Commission, the jurisdiction of the assessing authority in any way gets arrested or taken away. It still remains there. There is no fetter on the right of the assessing authority in exercise of its powers on completing the assessments either in section 143 or in section 144. The only restriction or bar is the limitation contained in sub-section (1). Therefore, for my part, I am unable to accept the argument of Mr. V. P. Raman, learned counsel for the petitioner. As a matter of fact in T. B. Hanumantharaj v. CIT : 111ITR414(Mad) , on the corresponding provisions in the old Act, what was held was as follows (headnote);
'(1) In view of the non-disclosure of the share income from the firm in the return and the addition of the cash credit in the assessment, this was a case where the provisions of section 28(1)(c) would apply.
(2) It was immaterial whether penalty was ultimately leviable or not as the question to be considered for the purpose of section 34(3) was only whether the provisions of section 28(1)(c) applied.
(3) The question as to whether any penalty could be levied is different from the question as to whether the assessee is one to whom the provisions of section 28(1)(c) would apply.'
15. Turning to the question of mala fides, the petitioner filed no doubt a 'nil' return. He also stated in his letter dated March 5, 1984, that he was submitting a return, that in the absence of the books of account, the income cannot be estimated and that this will not enable the Department to initiate penal proceedings under section 271(1)(c). The mere filing of a 'nil' return without even stating the admitted income would certainly attract penal proceedings, one such being section 271. Under those circumstances, where the petitioner has not been co-operating with the Department in any manner, if the Officer thinks it is high time the assessment be completed, I do not think this is a case of mala fides at all. The fact that the Officer who passed the impugned order was in charge of the raid or he also participated in the raid cannot disable him. No doubt, the petitioner objected to the transfer of the case but that cannot weigh in view of his filing a 'nil' return and adopting throughout an unhelpful attitude. The petitioner landed himself in this situation by his own deeds. Even otherwise. as I said above, the appellate authority if it finds that the order of assessment has been passed mala fide and without any basis, that is a matter which can be rectified. In the absence of materials to the contrary, the fact that the petitioner has been assessed to nearly 8 crores of rupees will have no bearing as far as questions of law which I have decided purely as the issues arising uninfluenced either by the enormity of the tax involved or by the earlier proceedings between the parties. So looked at, in any view, I do not see that this is a fit case in which the interim injunction should continue. Accordingly, the interim order will stands vacated.
16. After I pronounced this order, both the learned counsel are agreed that this will be the order in the writ petition also. It shall be So. The writ petition is dismissed. No costs.