Tinwari Automobile, Vs. Union of India (Uoi) and ors. - Court Judgment

SooperKanoon Citationsooperkanoon.com/771872
SubjectDirect Taxation
CourtRajasthan High Court
Decided OnSep-23-2002
Case NumberS.B.C.W.P. Nos. 3559-61 of 2002
Judge Sunil Kumar Garg, J.
Reported in[2004]265ITR484(Raj)
ActsIncome Tax Act, 1961 - Sections 131, 131(1A), 158B and 158BC
AppellantTinwari Automobile, ;hindustan Auto Traders and Vraj Traders
RespondentUnion of India (Uoi) and ors.
Appellant Advocate J.P. Joshi, Adv.
Respondent Advocate Sandeep Bhandawat, Adv. for Respondent Nos. 5 and 6
Excerpt:
- sunil kumar garg, j.1. heard on stay application.2. the stay applications in the above three writ petitions are being decided by this common order as in all of them, a common question is involved.3. s. b. civil writ petition no. 3559 of 2002 :this writ petition has been preferred by the petitioner with a prayer that by an appropriate writ, order or direction the notice dated august 21, 2002 (annexure 6), issued by respondent no. 6 (the assistant commissioner of income-tax, central circle-ii, income-tax department, jodhpur) under section 158bc of the income-tax act, 1961 (hereinafter referred to as 'the act of 1961'), by which the petitioner was requested to prepare a true and correct return of his total income including the undisclosed income in respect of which he as individual is assessable for the block period mentioned in section 158b(a) of the act of 1961 and further respondent no. 5 (the deputy director (investigation), income-tax, rajaswa bhawan, statue circle, jaipur) and respondent no. 6 (the assistant commissioner of income-tax, central circle-ii, income-tax department, jodhpur) may be restrained from taking any proceedings under chapter xiv-b of the act of 1961 against the petitioner till the question as to who exercises jurisdiction over the petitioner as assessing officer is decided by this court in s. b. civil writ petition no. 1946 of 2002.4. the case of the petitioner is that in pursuance of warrants of arrest, issued on april 5, 2002, issued by respondent no. 3 (the director (investigation), income-tax, rajaswa bhawan, statue circle, jaipur), a search was carried out of the residential premises of the petitioner on april 10, 2002, and that search was completed on may 6, 2002, and a panchnama (annexure 1) was prepared.5. the further case of the petitioner is that the authorised officer served a notice dated april 22, 2002 (annexure 4), to the petitioner after conclusion of the search under section 131(1a) of the act calling upon him to furnish information with regard to sundry depositors as also complete addresses of all trade creditors as on march 31, 2002, and march 31, 2002 (sic). the petitioner was also required to furnish the information with regard to closing stock as on march 31, 2002, as per her books of account and to explain the physical stock as on march 31, 2002. the petitioner was also required to furnish the complete addresses of all the salesmen working in her firm, m/s. tinwari automobiles, jodhpur.6. the further case of the petitioner is that while the writ petition was pending before this court, the petitioner received a notice dated august 21, 2002 (annexure 6), from the assistant commissioner of income-tax, central circle-ii, jodhpur (respondent no. 6), issued under section 158bc of the act of 1961 calling upon the petitioner to submit true and correct returns of her total income including the undisclosed income in respect of which the petitioner is assessable for the block period mentioned in section 158b(a) of the act of 1961. this notice (annexure 6) has been challenged in this writ petition on various grounds and the ground of jurisdiction has also been taken.7. one of the grounds taken by the petitioner is that two parallel authorities were claiming jurisdiction over the petitioner. on the one hand, the deputy director (investigation), respondent no. 5, in the reply to the writ petition filed by the petitioner, was claiming that he exercises jurisdiction over the petitioner as an assessing officer and, therefore, he was required to make enquiries under section 131(1a) and was also competent to exercise jurisdiction in terms of sub-section (8) and sub-section (9) of section 132 of the act. the question whether the deputy director (investigation) is competent to exercise jurisdiction over the petitioner as the assessing officer is still pending consideration before this court and the said question has not been decided finally by this court, however, in the meantime, the petitioner has received another notice dated august 21, 2002 (annexure 6), issued under section 158bc of the act of 1961 by the assistant commissioner (respondent no. 6) calling upon him to file return under section 158bc without waiting for the decision of this hon'ble court. therefore, in the stay application, the petitioner has prayed that operation of notice dated august 21, 2002 (annexure 6), issued by respondent no. 6 may be stayed.8. it may be stated here that through notice dated august 21, 2002 (annexure 6), a show cause notice was issued to the petitioner under section 158bc of the act of 1961. section 158bc reads as under :'158bc. procedure for block assessment.--where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132a, in the case of any person, then,- (a) the assessing officer shall-- (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of june, 1995, but before the 1st day of january, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days ; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of january, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days ; as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period :provided that no notice under section 148 is required to be issued for the purpose of proceeding under this chapter :provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return ;(b) the assessing officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158bb and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply ;(c) the assessing officer, on determination of the undisclosed income of the block period in accordance with this chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment;(d) the assets seized under section 132 or requisitioned under section 132a shall be dealt with in accordance with the provisions of section 132b.' 9. the notice dated august 21, 2002 (annexure 6), passed by respondent no. 6 (the assistant commissioner) can be termed as statutory notice under section 158bc of the act of 1961 by which the petitioner was called upon to submit reply to respondent no. 6 (the assistant commissioner).10. service of a notice is a condition precedent for the making of an order under the provisions of the income-tax act. the assessee is in law entitled to rebut the material placed before him if he so chooses and any material placed on record without notice to the assessee cannot be relied upon by the revenue being violative of principles of natural justice. the importance of issuing notice in income-tax proceedings is so much so that even an order of rectification which has the effect of enhancing the income-tax liability of an assessee becomes invalid in law if passed without issuing notice and affording opportunity of hearing. if notice has been issued prior to making a decision, it would not amount to violation of principles of natural justice.11. in the present case, since the show cause notice dated august 21, 2002 (annexure 6), was issued by respondent no. 6 (the assistant commissioner of income-tax, central circle-ii, jodhpur), therefore, it cannot be said that there was non-compliance of principles of natural justice. learned counsel for the respondents has relied on a decision of the supreme court in the case of nilesh hemani v. cit : [2002]255itr267(sc) in which the hon'ble supreme court declined to stay the impugned notice issued under section 158bc of the act of 1961. similar is the position before this court.12. during the course of argument on a point of jurisdiction, learned counsel for respondents nos. 5 and 6 has frankly admitted that now the whole proceedings against the petitioner would be conducted by respondent no. 6 (the assistant commissioner of income-tax, central circle-ii, jodhpur) and not by respondent no. 5 (the deputy director (investigation), income-tax department, aaykar bhawan, jodhpur).13. looking to the above facts and circumstances of the case, staying the operation of the show cause notice dated august 21, 2002 (annexure 6), passed by respondent no. 6 (the assistant commissioner) is not proper unless there is a case of grave injustice. in the present case, it cannot be said that it is a case of grave injustice because the petitioner would be at liberty to file its submissions before respondent no. 6 (the assistant commissioner) while submitting reply to the show cause notice dated august 21, 2002 (annexure 6), issued by respondent no. 6 (the assistant commissioner of income-tax). thus, it will be open to the petitioner to take such pleas along with the return as are open to her in law before respondent no. 6 (the assistant commissioner of income-tax) including the propriety, legality and validity of impugned notice dated august 21, 2002 (annexure 6).14. so far as the decision of the supreme court in the case of cit v. k.v. krishnaswamy naidu and co. : [2001]249itr794(sc) is concerned, this authority would not be helpful to learned counsel for the petitioner at this juncture.15. for the reasons mentioned above, the stay application by which prayer for staying operation of notice dated august 21, 2002 (annexure 6), issued by respondent no. 6 (the assistant commissioner of income-tax, central circle-ii, income-tax department, jodhpur) stands rejected.16. writ petition no. 3561 of 2002 and writ petition no. 3560 of 2002 :the stay applications in the above two writ petitions raises the same controversy as involved in the stay application in s. b. civil writ petition no. 3559 of 2002 and, therefore, the stay applications in writ petitions nos. 3561 of 2002 and 3560 of 2002 also stand rejected.17. office to proceed. issue notice of writ petition to respondents nos. 1 to 4. learned counsel for respondents nos. 5 and 6 wants time to seek instructions from respondents nos. 1 to 4. time prayed for is granted. put up after two weeks.
Judgment:

Sunil Kumar Garg, J.

1. Heard on stay application.

2. The stay applications in the above three writ petitions are being decided by this common order as in all of them, a common question is involved.

3. S. B. Civil Writ Petition No. 3559 of 2002 :

This writ petition has been preferred by the petitioner with a prayer that by an appropriate writ, order or direction the notice dated August 21, 2002 (annexure 6), issued by respondent No. 6 (the Assistant Commissioner of Income-tax, Central Circle-II, Income-tax Department, Jodhpur) under Section 158BC of the Income-tax Act, 1961 (hereinafter referred to as 'the Act of 1961'), by which the petitioner was requested to prepare a true and correct return of his total income including the undisclosed income in respect of which he as individual is assessable for the block period mentioned in Section 158B(a) of the Act of 1961 and further respondent No. 5 (the Deputy Director (Investigation), Income-tax, Rajaswa Bhawan, Statue Circle, Jaipur) and respondent No. 6 (the Assistant Commissioner of Income-tax, Central Circle-II, Income-tax Department, Jodhpur) may be restrained from taking any proceedings under Chapter XIV-B of the Act of 1961 against the petitioner till the question as to who exercises jurisdiction over the petitioner as Assessing Officer is decided by this court in S. B. Civil Writ Petition No. 1946 of 2002.

4. The case of the petitioner is that in pursuance of warrants of arrest, issued on April 5, 2002, issued by respondent No. 3 (the Director (Investigation), Income-tax, Rajaswa Bhawan, Statue Circle, Jaipur), a search was carried out of the residential premises of the petitioner on April 10, 2002, and that search was completed on May 6, 2002, and a panchnama (annexure 1) was prepared.

5. The further case of the petitioner is that the authorised officer served a notice dated April 22, 2002 (annexure 4), to the petitioner after conclusion of the search under Section 131(1A) of the Act calling upon him to furnish information with regard to sundry depositors as also complete addresses of all trade creditors as on March 31, 2002, and March 31, 2002 (sic). The petitioner was also required to furnish the information with regard to closing stock as on March 31, 2002, as per her books of account and to explain the physical stock as on March 31, 2002. The petitioner was also required to furnish the complete addresses of all the salesmen working in her firm, M/s. Tinwari Automobiles, Jodhpur.

6. The further case of the petitioner is that while the writ petition was pending before this court, the petitioner received a notice dated August 21, 2002 (annexure 6), from the Assistant Commissioner of Income-tax, Central Circle-II, Jodhpur (respondent No. 6), issued under Section 158BC of the Act of 1961 calling upon the petitioner to submit true and correct returns of her total income including the undisclosed income in respect of which the petitioner is assessable for the block period mentioned in Section 158B(a) of the Act of 1961. This notice (annexure 6) has been challenged in this writ petition on various grounds and the ground of jurisdiction has also been taken.

7. One of the grounds taken by the petitioner is that two parallel authorities were claiming jurisdiction over the petitioner. On the one hand, the Deputy Director (Investigation), respondent No. 5, in the reply to the writ petition filed by the petitioner, was claiming that he exercises jurisdiction over the petitioner as an Assessing Officer and, therefore, he was required to make enquiries under Section 131(1A) and was also competent to exercise jurisdiction in terms of Sub-section (8) and Sub-section (9) of Section 132 of the Act. The question whether the Deputy Director (Investigation) is competent to exercise jurisdiction over the petitioner as the Assessing Officer is still pending consideration before this court and the said question has not been decided finally by this court, however, in the meantime, the petitioner has received another notice dated August 21, 2002 (annexure 6), issued under Section 158BC of the Act of 1961 by the Assistant Commissioner (respondent No. 6) calling upon him to file return under Section 158BC without waiting for the decision of this hon'ble court. Therefore, in the stay application, the petitioner has prayed that operation of notice dated August 21, 2002 (annexure 6), issued by respondent No. 6 may be stayed.

8. It may be stated here that through notice dated August 21, 2002 (annexure 6), a show cause notice was issued to the petitioner under Section 158BC of the Act of 1961. Section 158BC reads as under :

'158BC. Procedure for block assessment.--Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under Section 132A, in the case of any person, then,-

(a) the Assessing Officer shall--

(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days ;

(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days ;

as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under Clause (i) of Sub-section (1) of Section 142, setting forth his total income including the undisclosed income for the block period :

Provided that no notice under Section 148 is required to be issued for the purpose of proceeding under this Chapter :

Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return ;

(b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of Section 142, Sub-sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply ;

(c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment;

(d) the assets seized under Section 132 or requisitioned under Section 132A shall be dealt with in accordance with the provisions of Section 132B.'

9. The notice dated August 21, 2002 (annexure 6), passed by respondent No. 6 (the Assistant Commissioner) can be termed as statutory notice under Section 158BC of the Act of 1961 by which the petitioner was called upon to submit reply to respondent No. 6 (the Assistant Commissioner).

10. Service of a notice is a condition precedent for the making of an order under the provisions of the Income-tax Act. The assessee is in law entitled to rebut the material placed before him if he so chooses and any material placed on record without notice to the assessee cannot be relied upon by the Revenue being violative of principles of natural justice. The importance of issuing notice in income-tax proceedings is so much so that even an order of rectification which has the effect of enhancing the income-tax liability of an assessee becomes invalid in law if passed without issuing notice and affording opportunity of hearing. If notice has been issued prior to making a decision, it would not amount to violation of principles of natural justice.

11. In the present case, since the show cause notice dated August 21, 2002 (annexure 6), was issued by respondent No. 6 (the Assistant Commissioner of Income-tax, Central Circle-II, Jodhpur), therefore, it cannot be said that there was non-compliance of principles of natural justice. Learned counsel for the respondents has relied on a decision of the Supreme Court in the case of Nilesh Hemani v. CIT : [2002]255ITR267(SC) in which the hon'ble Supreme Court declined to stay the impugned notice issued under Section 158BC of the Act of 1961. Similar is the position before this court.

12. During the course of argument on a point of jurisdiction, learned counsel for respondents Nos. 5 and 6 has frankly admitted that now the whole proceedings against the petitioner would be conducted by respondent No. 6 (the Assistant Commissioner of Income-tax, Central Circle-II, Jodhpur) and not by respondent No. 5 (the Deputy Director (Investigation), Income-tax Department, Aaykar Bhawan, Jodhpur).

13. Looking to the above facts and circumstances of the case, staying the operation of the show cause notice dated August 21, 2002 (annexure 6), passed by respondent No. 6 (the Assistant Commissioner) is not proper unless there is a case of grave injustice. In the present case, it cannot be said that it is a case of grave injustice because the petitioner would be at liberty to file its submissions before respondent No. 6 (the Assistant Commissioner) while submitting reply to the show cause notice dated August 21, 2002 (annexure 6), issued by respondent No. 6 (the Assistant Commissioner of Income-tax). Thus, it will be open to the petitioner to take such pleas along with the return as are open to her in law before respondent No. 6 (the Assistant Commissioner of Income-tax) including the propriety, legality and validity of impugned notice dated August 21, 2002 (annexure 6).

14. So far as the decision of the Supreme Court in the case of CIT v. K.V. Krishnaswamy Naidu and Co. : [2001]249ITR794(SC) is concerned, this authority would not be helpful to learned counsel for the petitioner at this juncture.

15. For the reasons mentioned above, the stay application by which prayer for staying operation of notice dated August 21, 2002 (annexure 6), issued by respondent No. 6 (the Assistant Commissioner of Income-tax, Central Circle-II, Income-tax Department, Jodhpur) stands rejected.

16. Writ Petition No. 3561 of 2002 and Writ Petition No. 3560 of 2002 :

The stay applications in the above two writ petitions raises the same controversy as involved in the stay application in S. B. Civil Writ Petition No. 3559 of 2002 and, therefore, the stay applications in Writ Petitions Nos. 3561 of 2002 and 3560 of 2002 also stand rejected.

17. Office to proceed. Issue notice of writ petition to respondents Nos. 1 to 4. Learned counsel for respondents Nos. 5 and 6 wants time to seek instructions from respondents Nos. 1 to 4. Time prayed for is granted. Put up after two weeks.