Gaurhari Singhania Vs. Wealth-tax Officer and ors. - Court Judgment

N.D. Ojha, J.

1. Writ Petition No. 543 of 1984 relates to the proceedings for assessment of wealth-tax against Padampat Singhania (individual) in respect of the year 1974-75. Writ Petition No. 551 of 1984 relates to the assessment of wealth-tax in respect of the assessment years 1973-74 and 1974-75 of Dr. Gaurhari Singhania (Hindu undivided family), whereas Writ Petition No. 552 of 1984 relates to the assessment of wealth-tax in respect of the assessment years 1973-74 and 1974-75 of Govind Hari Singhania (Hindu undivided family). All the three assessees mentioned above are admittedly partners of JK Bankers, a partnership firm. The admitted facts are that the proceedings for assessment of wealth-tax for the assessment years 1967-68 to 1972-73 were pending against Padampat Singhania (Hindu undivided family) and one of the questions which arose in those proceedings was in regard to the value of the assets of Padampat Singhania (Hindu undivided family) vis-a-vis his share in the partnership firm, JK Bankers. A reference was made by the Wealth-tax Officer to the Valuation Officer under Section 16A of the Wealth-tax Act. The order of reference was challenged by M/s. JK Bankers and Padampat Singhania (Hindu undivided family) in a writ petition before this court which was dismissed. The matter was taken up before the Supreme Court in Civil Appeal No. 816 of 1978. One of the questions which was canvassed before the Supreme Court was whether the interest of a karta of a Hindu undivided family in a firm was assessable to wealth-tax. This question was answered by the Supreme Court in the affirmative and it was held that the Wealth-tax Officer was justified in making the reference to the Valuation Officer. The decision of the Supreme Court is dated December 16, 1983, and is reported in Juggilal Kamlapat Bankers v. WTO : [1984]145ITR485(SC) .

2. It appears that the proceedings for assessment in respect of the aforesaid years of the petitioners remained stayed and after the decision of the Supreme Court, notices were issued to the petitioners in May, 1984, for continuing the pending proceedings. The petitioners thereafter instituted these writ petitions asserting that the proceedings had become barred by time and consequently the Wealth-tax Officer had no jurisdiction to make any order of assessment. Reliance in these writ petitions was placed on a letter of the Wealth-tax Officer dated June 16, J984, wherein he had taken the view that the proceedings had not become barred by time. In these writ petitions, it has, inter alia, been prayed that a writ of mandamus be issued to the Wealth-tax Officer to withdraw and recall the notices issued for continuing the proceedings and to restrain him from proceeding any further in the matter of assessment.

3. A preliminary objection was raised by Sri Bharatji Agarwal, senior standing counsel appearing for the Income-tax Department, that these writ petitions were not maintainable. We have heard counsel for the parties at some length on this preliminary objection. Reliance has been placed by counsel for the Income-tax Department on two decisions of the Supreme Court in Lalji Haridas v. ITO : [1961]43ITR387(SC) and Lalji Hari-das v. R. H. Bhatt : [1965]55ITR415(SC) , where it was held that whether assessment proceedings initiated against a person are barred by limitation under Section 34(3) of the Indian Income-tax Act, 1922, can and ought to be raised by him before the Income-tax Officer and that is not a point which can be legitimately agitated in writ proceedings. Reliance was also placed by him on a decision of a Division Bench of this court in Padampat Singhania v. Asst. CED : [1976]102ITR701(All) . Relying on the decision of the Supreme Court in Lalji Haridas v. R. H. Bhatt : [1965]55ITR415(SC) , it was held that the question as to whether the notices issued to the assessee by the Assistant Controller of Estate Duty-cum-Income-tax Officer were barred by limitation or not could conveniently be dealt with by the appellate authority and this was not a fit case for interference in writ jurisdiction.

4. For the petitioners on the other hand, reliance was placed on the decision of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . In that case, notices under Section 34 of the Indian Income-tax Act, 1922, had been issued to the assessee and the validity of those notices was challenged by the assessee. It was pointed out by the Supreme Court that the scheme of the law clearly was that where the Income-tax Officer had reason to believe that an underassessment has resulted from non-disclosure, he shall have jurisdiction to start proceedings for reassessment within a period of 8 years and where he had reason to believe that an underassessment had resulted from other causes, he shall have jurisdiction to start proceedings for reassessment within 4 years. It was further pointed out that both the conditions must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiry of 4 years. The argument that the court ought not to investigate the existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that underassessment has resulted from non-disclosure of material facts, was repelled. It was held that such an argument could not be accepted. In regard to the question of maintainability of the writ petition, it was held (p. 207):

'Mr. Sastri next pointed out that at the stage when the Income-tax Officer issued the notices, he was not acting judicially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well-settled however that though a writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well-settled, will issue appropriate orders or directions to prevent such consequences. '

5. Reliance was also placed by counsel for the assessees on the decision in Jiyajeerao Cotton Mills Ltd. v. ITO : [1977]107ITR253(Cal) of Hon'ble Sabyasachi Mukharji J., of the Calcutta High Court. There too, a notice issued to the assessee had been challenged by it on the ground that it has been issued beyond the period of limitation. On behalf of the Revenue, reliance was placed on the two decisions of the Supreme Court in the cases of Lalji Haridas v. ITO : [1961]43ITR387(SC) and Lalji Haridas v. R. H. Bhatt : [1965]55ITR415(SC) in aid of the submission that the question of limitation should be raised before the authorities concerned and was not a matter to be adjudicated in a writ petition under article 226 of the Constitution. It was held that:

'Where the question, whether any particular proceeding has become barred by lapse of time, depends upon investigation of certain facts or determination of certain facts, then it is proper that such a question should be agitated before the forum created under the particular statute. But, where the action of an officer is barred on admitted facts or on the face of it, then as the jurisdiction of the officer to act depends on initiation of the proceeding within the time, in such a case resort to art. 226 for obtaining relief is not inappropriate provided the other conditions for seeking relief under art. 226 are fulfilled.'

6. Reliance was also placed on the decision of a single judge of this court in Nirmal v. Rent Control and Eviction Officer [1983] ALJ 905, where it was held:

'Prohibition as is well known is a preventive rather than a corrective remedy. On establishing that even on the facts admitted or found by an authority entitled to adjudicate upon the rights of a subject, the said authority has no jurisdiction to proceed in the matter, a citizen is entitled to the issue of a writ of prohibition in order to save himself from unnecessary harassment at the hands of such an authority.'

7. Reliance in that case was placed on the decision of the Supreme Court in East India Commercial Co. Ltd, v. Collector of Customs, : 1983(13)ELT1342(SC) , where it was held that a writ of prohibition is an order directed to an inferior tribunal forbidding it from continuing with a proceeding therein on the ground that the proceeding is without or in excess of jurisdiction or contrary to the laws of the land, statutory or otherwise.

8. In regard to the issue of a writ of prohibition, it, therefore, seems to be the settled law that in case, on the admitted facts or on facts as found by the authority concerned, the said authority has no jurisdiction to proceed, a writ of prohibition or a direction in the nature of prohibition, as the case may be, can be issued restraining the said authority from proceeding in the matter in which it has no jurisdiction.

9. Shri Bharatji Agarwal, counsel for the Revenue, then urged that in the instant case, three disputed questions of fact were involved and consequently it was not a fit case where a writ of prohibition could be issued. According to him, these three disputed questions were: (1) whether reference to the Valuation Officer by the Wealth-tax Officer was in regard to the assessment years 1973-74 and 1974-75 also as asserted by the Income-tax Department or the same was confined to 1967-68 to 1972-73 only as asserted by the petitioners, (2) whether the said reference was only with regard to Padampat Singhania (HUF) or also in regard to the petitioners in these three writ petitions, and (3) whether the applications which, according to the Revenue, had been made on behalf of the assessees on March 6, 1979 and February 29, 1980, copies whereof have been filed along with the counter-affidavit and supplementary counter-affidavit, had the effect of estopping the petitioners from raising the question of limitation.

10. In our opinion, none of these three questions raises disputed questions of fact. In regard to the answer to the first two questions, no disputed facts are to be investigated nor a finding is needed thereon. Their answer would depend on the language of the order of reference. Since that order has not been produced before us so far, it is not possible to say that any dispute arises in regard to the nature of the order of reference. As regards the third question, its decision is not relevant for the determination of the preliminary objection. Whether or not those two letters will estop the petitioners from raising the question of limitation is a question which can appropriately be dealt with while considering the merits of the case at the time of the final hearing of the writ petitions. In our opinion, the petitioners have succeeded in making out a prima facie case for the issue of a direction restraining the Wealth-tax Officer from continuing the assessment proceedings. We, however, hasten to add that we should not be deemed to have expressed any final opinion on the merits of the controversy as to whether the impugned proceedings for assessment are barred by time nor not.

11. In view of the foregoing discussion the preliminary objection is overruled. These three writ petitions are admitted and connected.

12. Issue notice in each of these three writ petitions.