M.M. Dutt, J.
1. In this appeal, the appellant, M/s. Jeewanlal (1929) Ltd., has challenged the propriety of the judgment of a learned single judge of this court dated March 9, 1976 (Jeewanlal (1929) Ltd. v. ITO : 112ITR906(Cal) ), whereby the learned single judge discharged the rule nisi obtained by the appellant on its application under Article 226 of the Constitution.
2. The appellant is an assessee under the I.T. Act, 1961. For the assessment year 1970-71, the appellant filed an estimate of its income Under Section 212 of the I.T. Act at Rs. 10 lakhs and the income-tax payable thereon was estimated at Rs. 5,50,000. After adjusting the amount of income-tax deductible under Sections 192 to 195 of the I.T. Act, the balance amount of tax was estimated by the appellant at Rs. 5,06,950. On December 6, 1969, the appellant filed another estimate of its income under Section 212 of the I.T. Act, estimating its income at Rs. 7 lakhs and the income-tax payable thereon was Rs. 3,85,000, after adjusting the amount of tax deductible under the provisions of Sections 192 to 195 of the I.T. Act. After the appellant had filed the said second estimate of its income, on March 18, 1970, the ITO for the first time held that import entitlement was revenue receipt in connection with the return filed by the appellant for the assessment year 1965-66. The appellant, thereafter on September 28, 1970, filed its return of income for the assessment year 1970-71, declaring its income at Rs. 9,79,411 and computed the balance amount of income-tax payable thereon after adjusting the advance income-tax at Rs. 1,23,922.50 which it paid on October 26, 1970. In the meantime, the appellant had preferred an appeal against the assessment made by the ITO for the year 1965-66, holding, inter alia, that import entitlement was a revenue receipt. The AAC by his order dated February 3, 1972, came to the finding that import entitlement receipts were revenue receipts while dealing with the appeal preferred by the appellant relating to the assessment year 1965-66. On August 23, 1972, the appellant filed a revised return showing an income of Rs. 7,11,240. The second revised return was filed by the appellant because the appellant had included in the original return a sum of Rs. 2,52,120 being the cash assistance received by the appellant from the Govt. of India on the export of goods. According to the appellant, the said cash assistance was not taxable income. In the revised return filed by the appellant, the appellant deducted a sum of Rs. 2,54,830 on account of receipt from sale of import entitlements and the said sum of Rs. 2,54,120, being the receipt by way of cash assistance from the Govt. of India. The said two receipts were disclosed by the appellant in its return in Part ' D ' thereof as not being taxable.
3. The ITO, in the course of the proceeding for the assessment year in question, i.e., assessment year 1970-71, issued the impugned notice under Section 273(1)(a) read with Section 274 of the I.T. Act, 1961, calling upon the appellant to show cause why penalty should not be imposed on the ground that the appellant had filed an estimate of advance tax which it knew or had reason to believe the same to be untrue. Thereupon the appellant moved this court under Article 226 of the Constitution and obtained the rule nisi out of which this appeal arises.
4. At the hearing of the rule nisi, it was contended on behalf of the appellant that import entitlement and cash receipts were not revenue receipts and, as such, the same were not taxable. The appellant had challenged the jurisdiction of the ITO to issue the impugned show-cause notice for imposing penalty on the appellant. It was the case of the appellant that it bona fide believed that the said two receipts were not revenue receipts and, accordingly, not taxable. It was contended on behalf of the appellant that the ITO had not any material before him to come to a prima facie finding that the appellant had filed an estimate of advance tax which it knew or had reason to believe the same to be untrue.
5. The learned judge has taken the view that there were materials before the ITO before he issued the said show-cause notice. It has been pointed out by the learned judge that the materials that were available to the ITO were the findings of the AAC in the appeal preferred by the appellant relating to the assessment year 1965-66, to the effect that the said amounts were revenue receipts and were, therefore, taxable. Further, the learned judge points out that in the auditor's report of the appellant-company it was also opined by them that the said amounts were revenue receipts. In the circumstances, the learned judge was of the view that sufficient materials were before the ITO before he issued the said show-cause notice under Section 273 of the I.T. Act. Further, the learned judge was of the view that it was for the ITO to consider whether the appellant had bona fide believed that the same were not taxable. So, according to the learned judge, the appellant was to show cause to the impugned notice issued by the ITO. In that view of the matter, the learned judge discharged the rule. Hence this appeal.
6. We may now consider whether really there were any materials before the ITO for his prima facie satisfaction that the appellant had filed an estimate of advance tax for the assessment year in question which the appellant knew or had reason to believe to be untrue. The two materials stated to have been in existence at the time the ITO issued the show-cause notice have been pointed out by the learned judge. One of the materials is the finding of the AAC in the appeal preferred by the appellant relating to the assessment year 1965-66. The learned judge, it appears, has completely overlooked that when the appellant had filed its revised estimate of advance tax on December 6, 1969, the appeal that was preferred by the appellant relating to the assessment year 1965-66 was not then disposed of by the AAC. The said appeal was disposed of by the AAC on February 3, 1972, i.e., long after the appellant had filed its revised estimate of advance tax. Therefore, that material was not present before the ITO as the learned judge thought. The second material that has been pointed out by the learned judge to have been present before the ITO is the auditor's report in which they had expressed an opinion that cash assistance and import entitlements were revenue receipts and hence taxable. It is true that in 1964, the auditors of the appellant in their report expressed an , opinion like that, but, at the same time, it appears from the directors' report that the directors could not accept the opinion of the auditors that the said two amounts were revenue receipts and were, accordingly, taxable. In the subsequent years also, the directors disagreed with the opinion of the auditors. The question is whether the appellant had filed an estimate of advance tax knowing or believing the same to be untrue. From the facts stated above, it is manifestly clear that the appellant had bona fide believed in good faith that the said two amounts were not revenue receipts and, as such, they were not taxable. Indeed, the learned counsel appearing on behalf of the revenue could not point out any material justifying the prima facie satisfaction of the ITO that the appellant knew or had reason to believe that the estimate of advance tax filed by it was not correct. In this connection, it may be pointed out that an appeal was filed by the appellant to the Income-tax Tribunal against the order of the AAC passed by him in the appeal relating to the assessment year 1965-66. Thereafter, a reference has been made to this court on the question whether import entitlements and cash receipts are revenue receipts or not. The question is a debatable one and, in the facts and circumstances of the case, we are of the view that the appellant had bona fide believed in good faith that the said two sums were not revenue receipts.
7. It is, however, urged on behalf of the revenue that it is for the ITO to consider the bona fides of the appellant after it answers to the impugned show-cause notice. It is submitted by the learned counsel appearing on behalf of the revenue that this court should not interfere with the show-cause notice issued by the ITO. Dr. Pal, learned counsel appearing on behalf of the appellant, had placed reliance on a decision of my Lord the Chief Justice (as he then was) in Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. ITO : 112ITR592(Cal) . In that case, the ITO issued a show-cause notice Under Section 271(1)(c) of the I.T. Act. A similar question was also, raised in that case, namely, that this court should not quash the impugned show-cause notice issued by the ITO but should afford an opportunity to the ITO to decide the bona fides of the assessee concerned. My Lord the Chief Justice took the view that though an assessee aggrieved by an order of imposition of penalty might have his remedy under the I.T. Act, yet, in an appropriate case, the court might interfere in its writ jurisdiction with the penalty proceedings, provided the court is satisfied that the facts and circumstances of the case require and justify the interference by the court in the interests of justice. Further, it has been observed that if on a consideration of all the relevant materials, facts and circumstances of a case, the court is of opinion that the ends of justice require interference, the court may interfere and stop the proceeding by issuing appropriate writs. In our opinion, the same principles as laid down in that case will apply. In this connection, we may also refer to a decision of the Supreme Court in Cement Marketing Co. of India Ltd. v. Asst. CST : 124ITR15(SC) . That was a case under the Sales Tax Act where it was alleged that a false return was filed by the dealer by omitting to include in the return of turnover the amount 'of freight included in the price of sugar in the bona fide belief that it was not taxable. The Supreme Court observed as follows (p. 19) :
' If the view canvassed on behalf of the revenue were accepted, the result would he that even if the assessee raises a bona fide contention that a particular item is not liable to be included in the taxable turnover, he would have to show it as forming part of the taxable turnover in his return and pay tax upon it on pain of being held liable for penalty in case his contention is ultimately found by the court to be not acceptable. That surely could never have been intended by the legislature.'
8. In view of the said observations made by the Supreme Court and also of the principles of law as laid down by my Lord the Chief Justice in the decision referred to above, we are of the view that the ITO was not justified in issuing the show-cause notice.
9. For the reasons aforesaid, the judgment of the learned judge is set aside and the rule is made absolute. The impugned show-cause notice is quashed and all subsequent proceedings taken under the impugned notice are set aside. The respondents are directed not to give any effect to the said impugned show-cause notice or any order that might have been passed by them on the basis of the said notice. Let appropriate writs in that regard issue. The security that has been furnished by the appellant with the Registrar, original side of this court, is discharged and be released. The appeal is allowed, but there will be no order for costs.
10. The learned counsel appearing on behalf of the revenue prays for a certificate for appeal to the Supreme Court under Article 134A of the Constitution. In our opinion, no substantial question of law of general importance is involved in this case. In the circumstances, the prayer for a certificate is disallowed.
A.N. Sen, C.J.
11. I agree.