B.N. Banerjee, J.
1. For the assessment years 1938-39, 1939-40, 1940-41, 1941-42. 1942-43 and 1943-44, the petitioner was assessed to income-tax by the respondent No. 2 Income-tax Officer, under the Income-tax Act, 1922, on the basis of returns filed by him. The demands made on the basis of such assessments were all paid by him.
2. It now appears, however, that the petitioner had not made full and complete disclosure of his income for the several years mentioned above.
3. On May 21, 1951, there was published, in the Statesman, a press note concerning a concessional scheme for speeding up collection of income-tax in arrears, coupled with the allurement that persons making voluntary or quasi voluntary disclosures of secreted income, before a prescribed date, would be allowed immunity from prosecution. A copy of the press note was forwarded to the Solicitor for the petitioner by Mr. S.K. Mondal, Central Government Solicitor. The press note reads as follows:
'New Delhi, May 20--The Government of India have decided to introduce immediately a concessional scheme under which income-tax assessees will be allowed to pay their arrears according to an agreement instalment plan.
The concession, which will be in operation for a limited period, will apply provided the outstanding taxes are paid by March 31, 1952.
In the meantime, properties of assessees, which are under 'attachment' by the authorities, will not be sold.
The concessional scheme of arrears payment will, however, not apply to cases in which settlement has been made by the Income-tax Investigation Commission.
The scheme announced today, forms part of a special drive by the Government to speed up disposal of pending cases and realisation of tax arrears. Plans for the drive were considered at a recent conference of the Commissioners of Income-tax held in New Delhi, under the chairmanship of Mr. Mahabir Tyagi, Minister of State for Finance.
According to a recent assessment, the announcement said, the tax arrears on April 1, this year stood at Rs. 152.32 crores and the number of pending assessments at about 541.000.
It has also been decided that persons making voluntary or quasi-voluntary disclosures, before August 31, 1951, will he allowed immunity from prosecution.
The entire amount of arrears of Rs. 152.32 crores, it is pointed out, does not, however, represent recoverable demand, as quite a substantial part involves cases which are pending settlement of relief claims, disposal of appeals and completion of certificate proceedings, and also includes amounts due from persons who have no assets, have left India, or gone into liquidation.
REMISSION OF PENALTIES
The special drive is intended to collect the arrears which are immediately realisable. The concessional payment scheme has been evolved in view of difficulties of assessees in paying in lump sum accumulated arrears of a long period.
According to further details of the scheme, if payments are made punctually under the agreed instalment plan, any penalty imposed for nonpayment of taxes (but not any penalty imposed for concealment or income) will be reduced or remitted according to the circumstances of the case after the taxes have been fully paid.
The concessional scheme further provides that assessees will be allowed to bring into their accounts so much cash as represents an estimated intangible addition to the income declared. This will involve no penalty, prosecution or further tax. Thus cash representing the difference between the assessed income and the income determined by the department according to the assessee's accounts (by disallowance of sums appearing in accounts) will be allowed to be introduced without further taxation, provided the cash introduced is utilised for payment towards outstanding demands and the grounds of appeal or revision against such estimated addition are withdrawn.
In respect of voluntary disclosures, it has also been decided that, in imposing any penalties, the department will take into account all the mitigating circumstances including the speed with which such disclosures are made and the extent of co-operation received from the assessee.
The assessees' capacity to pay both the arrears and the current tax liabilities will be taken into account while fixing the period allowed for payment and also the rate of instalment.
Other measures envisaged relate to improvement of the administrative organization of the department and rationalisation and simplification of the existing procedure with a view to ensuring that the emphasis is laid on the broader and more important aspects of a case rather than on a meticulous security (sic) of minor issues.'
4. Apprehending detection of concealed income and prosecution for such concealment, the petitioner took advantage of the voluntary disclosure procedure, under the scheme quoted above, and made a disclosure. The disclosure petition together with list of assets supplied by the petitioner was scrutinised by an Inspecting Assistant Commissioner. The disclosure of secreted income, as made, was accepted by the Inspecting Assistant Commissioner, on June 26, 1953, and the amount disclosed was spread over seven years. In accordance with the allocation of secreted income, as made by the Inspecting Assistant Commissioner year by year, it Is stated in the affidavit in opposition, the petitioner filed voluntary returns before the respondent No. 2 Income-tax Officer, on July 24, 1953. On that basis the respondent No. 2 Income-tax Officer completed the assessments for the years 1938-39 to 1944-45 and determined the income as hereinafter stated:
1938-39...Rs. 95,729/-1939-40...Rs. 92,368/-1940-41...Rs. 92,907/-1941-42...Rs. 103,377/-1942-43...Rs. 94,802/-1943-44...Rs. 100,758/-
He further ordered as follows:
'Work out tax and issue challans as per I. T. 30 in F. File after imposing 25 per cent penalty.'
The order (Annexure C to the petition) bears the date July 24, 1953. On the basis of the above assessment, if is stated in the affidavit in opposition, income-tax, as hereinafter mentioned, was computed and imposed upon the petitioner. The petitioner did not pay the tax. Thereupon, there were six certificate cases started against the petitioner, for realization of tax as stated below:
1938-39...Rs. 22,649.94 nP.1939-40...Rs. 28,528.56 nP.1940-41...Rs. 31,091.12 nP.1941-42...Rs. 41,995.56 nP.1942-43...Rs. 44,013.84 nP.1943-44...Rs. 51,937.37 nP.Total...Rs. 2,20,236.49 nP.
It does not appear that demands for these taxes, under Section 29 of the Income-tax Act, 1922, had been served upon the petitioner before the certificate cases were started.
5. Upon service of the notice of the certificate demands upon him, the petitioner filed several objections in the several certificate proceedings and also challenged the validity thereof before this Court, under Article 226 of the Constitution. He obtained six Rules being Civil Rule Nos. 1842 to 1847 of 1956. Those Rules were made absolute by J.P. Mitter, J. on March 3, 1959, and the certificate proceedings were quashed.
6. Thereafter, on June 4, 1959, the respondent No. 1 Income-tax Officer, to whom, in the meantime, the Income-tax files of the petitioner had been transferred, sent six notices of demand, calling upon the petitioner to pay certain sums on 'ad hoc assessment' basis. The petitioner challenged the validity of the said notices of demand before this Court, under Article 226 of the Constitution, and obtained six Rules being Civil Rule Nos. 2151 to 2156 of 1959. Those Rules were made absolute on December 4, 1962, with liberty to the respondent No. 1 Income-tax Officer suitably to amend the demand notices and to proceed on the basis thereof.
7. Pursuant to the order made in Civil Rule Nos. 2151 to 2156 of 1959, the respondent No. 1 Income-tax Officer served six fresh notices of demand dated May 7, 1963, upon the petitioner. In this Rule, I am concerned only with the notice of demand for the year 1938-39, which reads as follows:
'This is to give you notice that for the assessment year 1938-39 a sum of Rs. 22,649.94 nP as specified in the attached form being penalty under Sections 18A(9), 25(2), 28, 44E and 44F has been determined to be payable by you.
2. * * * * * 3. The amount is payable on or before the 12-6-63 to the Treasury Officer/Sub-Treasury Officer/Agent, State Bank of India/Reserve Bank of India--at Calcutta when, if paid you will be granted a receipt. A chalan is enclosed for the purpose.
4. If you do not pay the amount on or before the date specified above you will be liable under Section 46(1) to a penalty which may be as great as the tax due from you.
5. Unless that total amount due, includingthe penalty, is paid on or before 19, you will be liable to a further penalty (and awarrant of distress may be issued for the recoveryof the whole amount due with cost).
6. The assessment has been made under Sub-section (4) of Section 23 of the Indian Income-tax Act, 1922, because you failed--to make a return of your income under Section 22(2): to comply with a notice under Sub-section (4) of Section 22:/to comply with a notice under Sub-section (2) of Section 23: but if you were prevented by sufficient cause from making the return or did not receive the notice (s) aforesaid, or had not a reasonable opportunity to comply, or were prevented by sufficient cause from complying with the terms of the notice (s) you may apply to me within one month from the receipt of this notice under Section 27, to cancel the assessment and proceed to make a fresh assessment.
7. If you intend to appeal against the assessment/penalty you may present an appeal under Sub-section (1) of Section 30 of the Indian Income-tax Act, 1922 to the Appellate Assistant Commissioner of Income-tax at 'D' Range, Cal. within 30 days of the receipt of this notice, in the form prescribed under Sub-section (3) of Section 30, duly stamped and verified as laid down in that form but no appeal will lie against an order under Section 46(1) unless the tax has been paid.'
I.T., S. T., S. Cs.-Rs. 18,109.94 nP.Penalty u/s 28 -Rs. 4,540.00 nP.
-Rs. 22,649.94 nP.
8. The petitioner objected to the demand and called upon the respondent No. 1 to withdraw or cancel the same, inter alia, on the ground that the alleged assessment of tax had not been made under any provision of Income-tax Act and was, therefore, irrecoverable. The respondent No. 1, Income-tax Officer, did not uphold the objection. Similar notices served upon the petitioner, in respect of the year 1939-40 to 1943-44, were similarly objected to and the objections received similar rebuffs.
9. Thereupon, the petitioner moved this Court again, under Article 226 of the Constitution, challenging the notices and obtained a Rule, being Matter No. 260 of 1963. During the pendency of the Rule, he obtained an order for inspection of the returns which, it was alleged in the affidavit in opposition in that Rule, he had filed after the voluntary disclosure made by him. The petitioner now states that the signature appearing on the returns, allegedly filed by him, were procured from him in the circumstances hereinafter stated. After obtaining inspection, as stated above, the petitioner applied before the Writ Bench of this Court for withdrawal of the application in which that Rule had been issued with liberty to him to bring another application on fresh materials. That prayer was granted.
10. In these circumstances, the petitioner moved this Court afresh, under Article 226 of the Constitution, praying for a Writ of Certiorari for the quashing of the notice of demand for the year 1938-39, for a Writ of Mandamus calling upon the respondent to withdraw the demand and for a Writ of Prohibition restraining the respondent from taking further steps pursuant to the notice of demand and obtained this Rule.
11. Mr. Ranadeb Chowdhuri, learned advocate for the petitioner, argued three points in support of the Rule. In the first place, Mr. Chowdhuri disputed that the petitioner had knowingly filed a return for the year 1938-39, after voluntary disclosure of secreted income made by him, and no assessment could be made on the basis of such returns. In support of this contention he read out portions of paragraph 35 of the petition, which I set out below:
'35, Your petitioner states-
(i) that the Returns, under Section 22 of the said Act, for the said six assessment years 1938-39 to 1943-44, purported to have been filed again, under an alleged signature of your petitioner, appeared to have been filled in by the hand or one Shri Kanupada Bhowmick, a Chartered Accountant, who solely stood charged with the duty of writing your petitioner's Accounts, filing in Income-tax Returns etc., while his father, one Shri Sashi Bhusan Bhowmick, Pleader Income-tax Practitioner, stood solely charged with the Income-tax Assessment-Cum-Appeal matters of your petitioner, at all material times;
(ii) that the said Shri Kanupada Bhowmick, who used to get your petitioner to sign, from time to time, some blank Return Forms, on the plea of having to file Revised Returns before the Respondent No. 2--Income-tax Officer, Howrah, might have filled in the said Return Forms and filed them up before the Respondent No. 2--Income-tax Officer, Howrah, without your petitioner's instructions and/or authority, far less without your petitioner's knowledge or consent, in flagrant betrayal of the grave trust reposed in him by your petitioner, and with the sole object of aggrandising himself, even though at the serious expense of the best interests of your petitioner, as will appear from what follows:
(iii) that so soon as your petitioner scented evil in the activities of the said Shri Kanupada Bhowmick your petitioner dispensed with his professional services some time in 1957 * * * * *
12. The story in paragraph 35 of the petition is disputed in paragraph 27 of the affidavit-in-opposition, which I set out below:
'I deny that the returns in question filedbefore the respondent No. 2 were so filed without the petitioner's instruction and/or authorityor without the petitioner's knowledge or consentas alleged or at all. ******It is not possible for me, regard being had to thenature of the allegations in the pleadings, andwithout more, to accept the petitioner's versionthat the fresh returns were filed, under his signature, but without his knowledge, consent andauthority.
13. Mr. Chowdhury contended, in the next place, that the fresh assessment of income for the year 1938-39 was barred on the date the same was made, because of the limitation contained in Section 34 of the Income-tax Act, 1922. This argument is misconceived because the fresh assessment was not made under Section 34.
14. Mr. Chowdhury lastly contended that the press note (Ex. A) dealing with concessional scheme for payment of income-tax arrears and for voluntary disclosure of income was of no legal force inasmuch as the scheme was not made under the provisions of the Income-tax Act or under any other law. As such, Mr. Chowdhury contended, the tax demanded on the basis of such voluntary disclosure was not enforceable. In support of this contention Mr. Chowdhury sought inspiration from a judgment of the Allahabad High Court Ved Prakash Gupta v Commissioner of Income-tax. U. P. : 32ITR133(All) . That judgment does not directly support the argument of Mr. Chowdhury, in the form made. What was observed in that case was:
'In our opinion, the press notifications issued by the State Government have no legal force. They do not appear to have been passed under the provisions of the Income-tax Act or any other law and secondly the petitioners are not entitled to any relief by way of mandamus directing the opposite parties to enforce the provisions of the press notification.'
I fully agree with the observations. But the observations are of little relevancy in the context of the present case. What is being sought to be realised in this case is the imposition of tax made under the procedure prescribed by the Income-tax Act. I have already referred to the assessment order, dated July 24, 1953, made on the basis of a voluntary return filed by the petitioner on the same day. If the respondent No. 2, Income-tax Officer, had refused to proceed on the basis of the Press Note, he could not be compelled by a Mandate so to do, as the Allahabad High Court held. Here the respondent No. 2 made an order of assessment on the basis of disclosures made by the petitioner. That makes the observation, quoted above, of irrelevant consideration.
15. In the case of Amarendra Narayan Roy v. Commissioner of Income-tax. West Bengal : AIR1954Cal271 Sinha J. (as the Chief Justice then was) had to deal with a case in which the scheme of disclosure and tax assessed on the basis thereof were challenged as invalid in law. His Lordship negatived the contention with the following observation:
'It is argued, however, that the whole sys-tem of basing liability on a disclosure petition is invalid in law. In any event, the final liability is not even based upon the disclosure petition but a modification thereof. We have therefore to travel a little further than the principles referred to above. It being settled that the assesses can waive the machinery portion, it next falls to be considered as to whether it is open to him to agree to the quantum of the liability without an assessment.
Reference has already been made to the case of W.H. Cockerline and Co. v. Commrs. of Inland Revenue (1930) 16 TC 1. The facts of that case are shortly as follows: Sir Walter Cockerline carried on the business of shipbrokers and shipowners under the name and style of W. H. Cockerline and Co. In 1925 the question arose as to whether he had made accurate returns in respect of Income-tax, Super-tax and Excess Profits Duty. The matter was gone into by two chartered accountants and it was found that there was an underpayment of pounds 107,106-0-2d. Sir Walter paid this sum as well as pounds 300,000 as penalties and these sums were accepted in full discharge of his liability. It was later on alleged that these payments without assessment being actually made were invalid. Lord Hanworth M. R. said as follows:
Another point is taken by Mr. Wilfrid Greene. He says that this right under S, 39 remained open to Sir Walter, that no effect ought to be attached to this payment of pounds 107,106 because it was paid without an assessment actually being made upon Sir Walter, and that there can be no payment without an assessment. In language which was, perhaps, coloured by a warmth of feeling about it he suggested that it was entirely wrong, and, indeed, made an inroad upon the rights of the subject that there should be any sum ever accepted from the subject in discharge of a liability in respect of which there had not been any assessment, or paper imposing the assessment, served upon him. In my view that argument is unsound. I do not think it is necessary in all cases in order to enable the Crown to receive money, that there should be an assessment actually served of that sum, which is ultimately paid . . ....... .I should be sorry to think that one was, in any way, taking away any of the liberties of the subject, but it is to be noted that it would be unfortunate if the subject were not able to make an agreement unless and until some assessment had been made.'
Since the citizen has an existing liability to pay taxes there seems to be no law preventing him from paying the taxes on all agreed basis, and for this purpose the existence of an assessment order is not essential.
* * * * * In my opinion, there is nothing illegal in the proceedings introduced by the Government of India variously known as 'Concessional Scheme' or 'Disclosure Proceeding'. The difficulties inherent in following concealed income in this country are well known. If at any given point of time the authorities tempt the assessee with concessions and induce him to come out with a voluntary disclosure of concealed income and agree to pay proper taxes upon them, I do not see how such proceedings are contrary to law or how they offend any provision of law. The fact that in the 'Cockerline case (C), (supra) the amount had been already paid seems irrelevant. The case was not decided upon that ground.'
16. That being the position in law, the assessment upon the petitioner on the basis of disclosure made by him cannot be characterized as illlegal. Nothing prevents the respondent to demand from the petitioner the tax assessed, on the basis of disclosure made by him. The last argument of Mr. Chowdhury should therefore fail
17. No other point was argued in supportof this Rule. I, therefore, discharge this Rulewith costs, hearing fee being assessed at 5 G,Ms. I made it clear that I do not express anyopinion as to the procedure by which the impugned demands may be realised.