Albert Walker Christopher Smart vs Reserve Bank of India

Umesh Chandra Banerjee, J.—The Court''s arbitrary refusal to grant permission for remittance of the petitioner''s retiral benefits is the substance of the writ application under consideration whereas the petitioner contended that whim and caprice are the two dominant features in refusing remittance of the retiral benefits so far as the petitioner is concerned, the respondents being the governmental agencies contended that by reason of outstanding dues against the petitioner, no permission for remittance of the retiral benefits can be granted to a foreigner. On the factual score it appears that the petitioner joined Indian Steamship Company as a probationer in November 1947. In May 1948, however, the petitioner was confirmed and there was a contract for three years renewable upon expiry. From 1948 to 1973 the petitioner was working with the Indian Steamship Company in terms of the contract services. In May 1973 the petitioner was asked to go to Spain to attend I.P.D.C. Conference on behalf of the Indian Steamship Company. After attending the same, the petitioner, however, proceeded to the United Kingdom on home leave and in August 1973, the petitioner tendered resignation from the service of the Indian Steamship Company. On 21-9-1973 the petitioner''s resignation was accepted by the Board of the Indian Steamship Company effective from 1-10-1973. Certain correspondence thereafter were exchanged between the petitioner and his banker in regard to the remittance of the retiral benefits. On 27-12-1974 the company sought the income tax clearance for the petitioner from the Commissioner. On 26-3-1975 Indian Steamship Company made a written request to the RBI for permission to remit the petitioner''s provident fund, gratuity and leave salary totalling Rs. 3,19,564.71 in full and final settlement of his dues from the company. All necessary forms were sent along with the letter was required under the law. But by reason of a prior intimation by the Enforcement Directorate in regard to a pending proceeding under the Foreign Exchange Regulation Act, the RBI on 11-4-1975 wrote to the company or certain information and documents including the up-to-date tax clearance certificate in respect of the petitioner. The company in its turn duly forwarded all the informations required by the RBI. In the meantime, however, on 9-5-1975 the ITO certified that the petitioner has been assessed up to the assessment year 1975-76 and all dues being fully paid. On 11th May the petitioner replied to the company''s letter and on 26th May the company also furnished all the required information to the RBI. Subsequently on 13-6-1975 further particulars were sought for from the company in regard to the petitioner and the company duly furnished all necessary informations required to be furnished.

At this juncture it would be convenient to note two letters dated 9-7-1975 and 18-7-1975. By the first letter, the RBI informed the Enforcement Directorate that the application of the petitioner has been examined and the remittance applied for may be allowed on receipt of the clearance from the Enforcement Directorate and necessary advice was sought for at an early date. On 18-7-1975, the Enforcement Directorate wrote to the RBI in reply to its letter dated 9-7-1975 that a show-cause notice has already been issued on 26-3-1975 to Indian Steamship Company, its Directors and its executive including the petitioner who was the Operation Manager, for violation of the Foreign Exchange Regulation Act involving an amount of � 4,89,742 and final reply to the show-cause notice from Mr. Smart, the petitioner herein, has not been received and the departmental proceeding can only be completed on receipt of respective replies including the petitioner. The RBI was, however, informed that as soon as the departmental proceeding would conclude, necessary intimations would be sent to the bank for further action in the matter. In that view of the matter on 31 -7-1975 the RBI intimated the company that no permission can be granted for remittance to the petitioner until certain enquiries regarding the affairs of the company being conducted by the Enforcement Directorate are complete.

The Enforcement Directorate''s proceedings, however, were completed by about April 1977 in favour of the Indian Steamship Company and its executive officers including the petitioner, by reason wherefor, on 23-4-1977 the petitioner sought the information as to the remittance of his dues from the Enforcement Directorate and the RBI. The Indian Steamship Company also on 3-5-1977 asked for permission to remit the retiral dues to the petitioner.

On 16-5-1977 the RBI by reason of the letter from the Indian Steamship Company wrote to the Enforcement Directorate as to whether application for transfer of retiral benefits can be granted in favour of the petitioner. Subsequently, however, by a letter dated 15-7-1977, the Enforcement Directorate recorded the ''No objection'' as regards transfer of retiral benefits to the petitioner, if the petitioner was otherwise eligible. However, on 1-9-1977 Enforcement Directorate further informed the RBI to the effect that since certain other enquiries are still pending, clearance to transmit the retiral benefits to the petitioner ought not to be allowed and on 20-9-1977, the RBI informed the company, about its inability to consider the matter for the present, as further information was yet to be received from the Enforcement Directorate, reminder from the petitioner as well as the company has led to a letter dated 1-2-1978 from Enforcement Directorate to the RBI, wherein it has been stated the matter is receiving attention, correspondence proceeded thereafter from the petitioner to the Ministry of Finance, Government of India as also to the Central Office of the RBI, Bombay. Eventually on 25-10-1978 Enforcement Directorate informed the RBI, Calcutta, that the former has no objection to the release of a total sum of Rs. 3,19,564.71P. to the petitioner in the usual manner. In the meantime, however, Enforcement Directorate on 25-9-1978 informed the Commissioner that the petitioner had received payments abroad. Upon the clearance from the Enforcement Directorate on 25-10-1978, the petitioner again pursued the matter, but as appears with no effect on 3-11 -1978, however, the ITO informed the RBI that since a number of proceedings under the income tax Act, 1961 (''the Act''), are pending against the petitioner and the different amounts payable were yet to be ascertained; all payments to the petitioners should be held up pending further intimation from the income tax Department. By that letter, it was informed that a formal attachment order u/s 201B of the Act was being sent separately. On 12-12-1978 by reason of the persistent communications from the petitioner, the RBI wrote to the ITO as to the present position regarding the income tax assessment proceedings against the petitioner on 23-2-1979, however, the ITO recorded the reasons for issuing notice u/s 148 of the Act and on 3-3-1979 notice u/s 148 was issued to the petitioner. Incidentally it is to be noted that for the assessment years 1970-71 to 1974-75 a notice was sent to the petitioner''s former employer, viz., the Indian Steamship Company and the original notice was sent to the petitioner by registered post at London, though, however, the same was returned from London Postal Department as ''unserved''. On 17-4-1979 the Indian Steamship Company forwarded a copy notice u/s 148 to the petitioner. On the same date, the company, however, informed the concerned ITO that it had no authority to accept the notice on behalf of the petitioner. Correspondence thereafter followed and on 25-4-1979 the petitioner sent a letter to the ITO admitting the receipt of the notice u/s 148 on 24-4-1979 and on 7-6-1979, as a matter of fact, authorised representative of the petitioner attended the office of the ITO with the written authority dated 4-5-1979. On 19-9-1980 the Tribunal passed its order on the Indian Steamship Company''s appeal before the Tribunal in regard to the undisclosed income. The Tribunal categorically held that it was not possible to conclude on the basis of the unsigned certificate that payments had been made to the petitioner. As a matter of fact, Indian Steamship Company has been completely exonerated. The Directorate of Enforcement, however, filed a petition on 29-9-1980 for review of the order dated 22-4-1977. The petition for review, however, was subsequently dismissed on 30-9-1982. On 8-1-1981 the CBDT informed that the Commissioner, West Bengal, has no objection for release of the petitioner''s dues against a guarantee. Subsequently, however, the entire money was transmitted to the petitioner upon a bank guarantee being furnished by the petitioner for the entire sum and thereafter the writ petition was moved before this Court.

Mr. Ginwalla appearing for the petitioner based his submissions on three counts:

(a) There exists collusion and conspiracy between the Enforcement Directorate, RBI and the income tax Authorities and the issuance of notice is wholly mala fide, arbitrary and contrary to all recognised principles of law;

(b) The issuance of the notice under sections 147 and 148 of the income tax Act are wholly without jurisdiction;

(c) Notice being a condition precedent u/s 149 of the Act original notice must be served and since admittedly a copy notice was sent by the employer, notice cannot be termed to be good service and as such, intimation of proceedings by the income tax Authorities is, therefore, bad in law.

Turning on to the last contention first, let us now analyse section 149 of the income tax Act on which strong reliance has been placed by Mr. Ginwalla. It was contended that on a proper reading of section 149 service of notice is a mandatory requirement of law and in this context referred to the decision of this Court in the case of SEWLAL DAGA Vs. COMMISSIONER OF Income Tax, CALCUTTA., . In that decision this Court upon reference to the decision of the Supreme Court in the case of Y. Narayana Chetty and Another Vs. The Income Tax Officer, Nellore and Others, observed:

In view of these clear observations by the Supreme Court, I do not think there is any scope for any further argument in this matter. The notice which was issued and served in the instant case was obviously invalid and the proceedings before the income tax Officer were, consequently illegal and void. The service of notice on the assessee was a condition precedent to the assumption of jurisdiction by the income tax Officer u/s 34. No consent can confer jurisdiction upon a Court if the Court has no jurisdiction. The failure to give a requisite notice deprives the income tax Officer of his jurisdiction to assess u/s 34." (p. 409)

But in order to appreciate that true context of such an observation, the factual aspect of the decision ought to be noted. It appears that the notice u/s 34 of the Indian income tax Act, 1922 was issued to Sewlal Daga, the assessee''s son. In the notice the assessee was described as Chandrabhan Johurmal ("karta Shivlal Daga"). The notice did not state that it was issued to Sewlal Daga as the legal representative of Chandrabhan Johurmal, the deceased and as such, it was illegal. On the wake of the facts, the above observation was made by this Court. The decision, therefore, is clearly distinguishable on facts and does not lend any assistance to the contention raised in the matter under consideration.

Mr. Ginwalla next placed reliance on a decision of this Court in the case of B. K. GOOYEE Vs. COMMISSIONER OF Income Tax, WEST BENGAL., , wherein this Court reiterated the earlier view that section 34(1) makes it incumbent upon the ITO to give a notice in writing to the assessee. This Court observed:

A notice u/s 34 cannot be issued mechanically or as a matter of routine, for it seeks, inter alia, to disturb the assessment already made and finalised. Hence it imposes upon the income tax Officer to apply his mind to the matter before seeking to unsettle the matter to the detriment of the assessee... The signature along with the seal below the notice, or may be without it, would be a guarantee beyond doubt that the income tax Officer had exercised his mind over the points mentioned in section 34(1). If the notice does not bear his signature, it may be that it was issued from his office by mistake or it may be that he had not applied his mind to the points involved u/s 34. Therefore, in my opinion; on a consideration of the second part of section 63(1) read with Order5, rules 1 and 10, the signature on a notice is not only necessary but an integral part of the notice.

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In the present case there was more than a mere irregularity or a clerical mistake for, in my view, a notice without the signature lacks an essential and/ or an integral and/or inseparable vital part or requirement of a notice u/s 34, a notice in terms of which is a condition precedent to the assumption of jurisdiction by the income tax Officer. It is notice with a body but without a soul. Hence, it is invalid notice and consequently equivalent to no notice." (pp.114,115-119)

In this context reference may be made to a recent decision of the Supreme Court in the case of R.K. Upadhyaya Vs. Shanabhai P. Patel, . In that decision the Supreme Court observed:

Section 34 conferred jurisdiction on the income tax Officer to reopen an assessment subject to service of notice within the prescribed period. Therefore, service of notice within limitation was the foundation of jurisdiction. The same view has been taken by this Court in J.P. Jani, Income Tax Officer, Circle IV, Ward G, Ahmedabad and Another Vs. Induprasad Devshanker Bhatt, as also in COMMISSIONER OF Income Tax, BOMBAY CITY I Vs. ROBERT J. SAS AND OTHERS. S. SEETHAI ACHI : INTERVENER., .The High Court in our opinion went wrong in relying upon the ratio of Banarasi Devi Vs. Income Tax Officer, Calcutta, in disposing of the case in hand. The scheme of the 1961 Act so far as notice for reassessment is concerned, is quite different. What used to be contained in section 34 of the 1922 Act has been spread out into three sections being sections 147,148 and 149 in the 1961 Act. A clear distinction has been made out between ''issue of notice'' and ''service of notice'' under the 1961 Act. Section 49(149) prescribes the period of limitation. It categorically prescribes that no notice u/s 148 shall be issued after the prescribed limitation has lapsed. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitations, jurisdiction becomes vested in the income tax Officer to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction in the income tax Officer to deal with the matter but it is a condition precedent to making of the order of assessment. The High Court in our opinion lost sight of the distinction and under a wrong basis felt bound by the judgment in Banarasi Devi Vs. Income Tax Officer, Calcutta, . As the income tax Officer had issued notice within limitations, the appeal is allowed and the order of the High Court is vacated. The income tax Officer shall now proceed to complete the assessment after complying with the requirements of law. Since there has been no appearance on behalf of the respondents, we make no orders for costs. (p. 1379)

Let us now, however, consider as to whether service of the notice was in fact affected on the factual backdrop as above. There is no dispute that a copy notice was sent to the employer and the original notice was sent to the petitioner as appears from the counter-affidavit of the income tax Department at his last known address at London, viz., 47, Park Street, 49, Kings Bridge, London WI but the same was returned ''unserved''. The address itself as stated in the counter-affidavit, however, seem to have been given in a fashion in which no communication can ever be served and with that address nothing better can be expected. The Indian Steamship Company, however, received the notice and did send a photostat copy thereof to the petitioner as appears from the letter dated 17-4-1979 from the Indian Steamship Company to the ITO. The company however, did send the blank forms and photostat copies of the affidavits to the petitioner at the latter''s London address. While it is true that the company had not had any authority to accept the notice on behalf of the petitioner, but the facts remain that the agency being the ex-employer did send the notice along with all necessary documents and the petitioner duly filled in the forms and issued a letter of authority to his lawyer to represent the case before the income tax authority. In my view, the facts in the matter under consideration do not lend any support to the contention of Mr. Ginwalla that the notice cannot even be deemed to have been issued or served so as to foist the jurisdiction of the ITO to proceed with the matter. The two decisions in Sewlal Daga''s case (supra) and B.K. Gooyee''s case (supra) in my view, thus do not lend any assistance to the petitioner''s contention. A notice has been issued and has been received by the person concerned and the latter has acted on the basis of the notice through a lawyer - the chain of events in my view, do not justify the submission of Mr. Ginwalla in any event, assuming there is certain irregularity - the irregularity cannot be said to go to the root of the matter, but a mere irregularity which can always be waived by the petitioner and in fact, has been waived by the petitioner. In that view of the matter, I am unable to accept the contention of Mr. Ginwalla on this score.

The principal contention of Mr. Ginwalla in support of the writ petition, however, is the collusion and conspiracy between the three agencies, viz., Enforcement Directorate, RBI and the income tax Authorities and it is on this score Mr. Ginwalla contended that the action is the resultant effect of a concerted move of the three agencies which is utterly malafide and totally arbitrary. In order to appreciate the contention, the factual backdrop ought to be looked into through within a shorter compass.

During the period of stay in India, the petitioner was assessed under the Act. The petitioner was given a personal Account Number and admittedly the petitioner during this period has had no other income other than the emoluments from the Indian Steamship Company which was declared in the returns and on the basis of which the petitioner was duly assessed. Certain proceedings were initiated both against the company as well as the petitioner - by the Enforcement Directorate under the Foreign Exchange Regulation Act for an alleged contravention of section 10(1)(b) show-cause notices were issued, a hearing was given to the parties and the final order, however, was passed on 11-1-1977 under which the proceedings were dropped against the company is also its directors and executive officers.

It is to be noted, however, that after about three and half years, the respondent filed an application for review of the order in September 1980 before the Foreign Exchange Regulation Appellate Board which, however, by an order dated 30-10-1982 dismissed the application for review and while dismissing the Chairman of the CBDT noted the following:

I am satisfied that the order of the Adjudicating Officer does not suffer from any infirmity, legal or factual, so as to call for interference u/s 54(4) of the 1973 Act.

In the result, the application is dismissed.

At this juncture, however, two letters dated 25-10-1978, one from the Enforcement Directorate to the RBI intimating that the former has no objection to the release of the retiral benefits to the petitioner and the other dated 3-11 -1978 from the ITO to the RBI intimating that the dues of the petitioner ought not to be released by reason of the pendency of certain proceedings together with demand ought to be considered. Strong criticism has been levelled by Mr. Ginwalla on the above-noted two letters and in my view justly, so, pendency of any demand on 3-11-1978 does not have any factual support. Admittedly the notice u/s 148 was issued on 3-3-1979; prior to the issuance of notice, can it be said by any stretch that a demand was pending, more so by reason of the fact that as early as 1975 a clearance certificate was on record.

Let us now analyse the matter in little more greater detail. If no further proceeding was pending and if no demand was raised at that juncture, why and under what circumstances such an intimation was sent to the RBI. Is it procured one or have been brought into existence by the conscious efforts of the RBI or the Enforcement Directorate so as to stop the payment of the retiral benefits? Mr. Ginwalla ascribes the entire move on the machination of Enforcement Directorate and the RBI so that no transmission of retiral benefits could be effected. Incidentally it is to be noted that there was no formal order of attachment, neither there can be any, since no proceeding was pending on such a date. As such, Mr. Ginwalla submitted that the whole episode is nothing but a totally arbitrary and harassive attitude towards the petitioner. It is to be noted that it is at the instance of the Enforcement Directorate, the income tax Department initiated the notice u/s 147/148 and only after the letter that it had come to know that the petitioner had received payment abroad.

From the narration of facts as above, it therefore, appears that having failed to gain the desired objectives, necessary informations have been sent to the Commissioner so that a fresh proceeding can be initiated and the ITO in pursuance thereto issued a letter of request to withhold permission for remitting petitioner''s dues out of the country when in fact there were no reasons therefor; can it be said to be an attitude which is in consonance with law justice and equity? In my view, the answer is in the negative, Government officers are to act reasonably and fairly in dealing with the individuals. Fairness is no longer a mere conceptual idea but now a well settled principle of law and without which the action is to be declared invalid and void. The Supreme Court of New South Wales in the case of Asmand v. Public Service Board of New South Wales [1985] LR (Commonwealth) 1041, after noticing the American and English laws as also the development of the doctrine of Natural Justice in the other Commonwealth countries including India observed: "There has been a growing body or precedents and other support for the desirability of and sometime the obligations upon the Public Administrative Tribunal at least to state reasons for their decisions affecting seriously the interest of the person seeking those reasons. Sometimes this is expressed to be based on the requirements of natural justice and fairness some time it is articulated in terms of inherent necessities of the proper operation of judicial process".

The general duty of fairness as regards the administrative actions as a guiding principle has also been recognised by Maggarry, J. in the case of Bates v. Lord Hailsham [1972] (1) All ER 1201.

The observations of the Supreme Court in the case of Mrs. Maneka Gandhi Vs. Union of India (UOI) and Another, seem to be also very apposite in this context. The Supreme Court observed:

...Natural justice is a great humanising principle intended to invest law with fairness and to secure justice and over the years it has grown into a widely pervasive rule effecting large areas of administrative action.

...Thus, the soul of natural justice is fair play in action, and that is why it has received the widest recognition throughout the democratic world.... (p. 625)

The observations of this Court in the case of K.K. Majumder v. Union of India [1989] 1 CLU 92 ought also to be noted at this juncture. This Court observed:

The concept of fair play is no longer in the realm of judicial consideration, but a well settled principle of law. The fair play and fair treatment being the ''soul of natural justice'' ought to be the most accepted methodology of all governmental actions.

This Court further went on to observe:

Fair play and fair treatment ought to be given its due recognition and in the event the governmental action suffers therefrom and the Law Courts would be within its jurisdiction to extend its judicious hand to grant relief to those who have fallen a prey for reason of administrative ipse dixit.

At this juncture one other factual support of Mr. Ginwalla''s contention ought to be noted. In the counter-affidavit of the income tax Department, it has been stated that the notices u/s 148 were issued for the assessment years 1970-71 to 1972-73 after obtaining the approval of the Commissioner on the basis of information received from the Enforcement Directorate Foreign Exchange Regulation Act, Government of India and the ITO was fully justified and was within his legal right and authority in issuing the said notice. Along with the counter-affidavit the recorded reasons for issuing the notices were also annexed. For convenience sake, the same is set out hereunder:

Information has been received from the Enforcement Directorate Foreign Exchange Regulation Act, Government of India, that the assessee was in receipt of �1500 per annum in U.K. during the relevant previous years by an arrangement of and under the authority from Indian Steamship Co., Calcutta, from the latter''s general agent in U.K. who held funds of Indian Steamship Company. This income of the assessee was not declared in the income tax return of the assessee for the year concerned and I have reason to believe that by reason of the commission of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year the income chargeable to tax has escaped assessment.

The above-noted reasons for escapement in effect, therefore, records that there was a clandestine payment by Indian Steamship Company to the petitioner. Incidentally it is to be noted that the same reasons were given for all the subsequent years. The findings of the Tribunal in the appeal of the Indian Steamship Company being Appeal Nos. 1779 and 1780 of 1979 (Assessment years 1970-71 and 1971 -72) reveal that the Indian Steamship Company has been totally exonerated from any clandestine payment to the petitioner or any other officer. Though the order of the Tribunal is subsequent to the issuance of the notice, but a fact which ought to be taken note of while dealing with the matter in issue.

The events, if we co-relate the same, are, therefore, appears to be as follows:

Petitioner retired from services - the company wanted the retiral benefits to be transmitted to the petitioner abroad certificate given by the ITO as regards payment of all dues under the Act - proceedings initiated by the Enforcement Directorate under the Foreign Exchange Regulation Act were, however, subsequently quashed: intimation sent to the RBI regarding a ''no objection'' to such a remittance from the Enforcement Directorate - information sent to the Commissioner as regards payment in foreign country - notice u/s 148 issued to the petitioner - Tribunal''s order exonerating the Indian Steamship Company for alleged clandestine payment to the petitioner on these state of facts, can it be said that initiation and continuation of the proceedings under sections 147 and 148 to be fair just and in accordance with law? I am of the view that the answer ought to be in the negative. Enforcement Directorate have made a thorough enquiry in the matter under the Foreign Exchange Regulation Act, but did not find any infraction of law by reason of which the proceedings had to be dropped. Why, therefore, an intimation would be sent to the Commissioner when there is already finding on record that there is no infraction of law? Can it not be deemed to be an effect on the part of the authority concerned to proceed on with the matter further by another agency, viz., income tax Department? Would this effort be termed to be in accordance with law or a mere attempt to create further harassment for the person concerned? In my view, it seems to be an ingenious device to put pressure on to a person rather than proceeding with the matter in accordance with law. This attitude cannot be said to be fair, reasonable and a proper methodology for working of a governmental department. The attitude is nothing but harassive and the law courts cannot stand by as a mere passive spectator on this perspective. Law Courts exist to remedy the wrong and if the Law Courts do not rise up to occasion, faith and relief in the judiciary of this country would crumble down. To remedy a wrong is a plain exercise of judicial power and the Law Courts ought not to shirk off its responsibility in the matter. After the finding of the Enforcement Directorate, why should there be a further initiation of the proceedings at the instance of the Enforcement Directorate? -Admittedly this is so in the matter in issue. In my view, initiation of further proceedings against the petitioner under the Act after the disposal of the proceedings by the Enforcement Directorate cannot be said to be in consonance with law, justice and equity. The factum of the Tribunal''s finding in the matter of quashing the proceedings against the company also lend support to the view as above. The request of the ITO to the RBI to withhold sanction for remittance of the retiral benefit on the ground of various proceedings, being pending does not have any factual support. On the date of such a request admittedly there was no proceeding is it fair on the part of a governmental authority to issue such a notice on incorrect factual basis - the attempts seem to stop the remittance at any cost. This attitude does not seem in consonance with law, justice and equity. A governmental agency cannot take recourse to an incorrect factual support in passing an order. The formal order of attachment as envisaged in the letter of the ITO did not see the light of the day as yet obviously it could not see the light of the day because the letter of law does not authorise the issuance of an order of attachment without having a proceeding pending and since there was no proceeding pending, no formal order of attachment could be issued - but the mischief was done, RBI did not allow such a remittance in spite of the clearance from the Enforcement Directorate. Can it be deemed to be fair - does the request of the ITO to the RBI stand to reason? - in my view, the answer can only be in the negative. The Act is a self-contained code in itself. The ITO has to function in accordance with the provisions of the Act and not denors the same. The Act does not authorise action which can be termed to be harassive. The Act does not authorise acting arbitrarily -neither the Act authorise the ITO to act in a manner which is opposed to the principle of fairness. In my view, the action of the ITO in the matter of issuance of the letter of request is totally unjust and contrary to all recognised principles of law.

Dr. Banerjee and Mr. Mitter appearing for the RBI and the income tax Department respectively contended that notice u/s 147 can be challenged only if there is no material before the ITO in regard to this formation of opinion that income has escaped assessment after the passing of the assessment year. It was contended that recorded reasons furnished prima facie evidence to confer jurisdiction on to ITO to issue the notice. While it is true that there cannot be any manner of doubt in that regard let us now, therefore, analyse the basis of such a formation of opinion as regards the escapement of income. Under what authority of law, the information was sent to the Commissioner? Law does not enjoin such an information. Two independent agencies have been authorised to act in their respective spheres under the provisions of the two different enactments. One agency investigates the matter under one particular enactment and finds its inability to bring home the charges. Can it be said to be justified that having failed to bring home the charge, immediate information ought to be sent to another agency? In that event, I am constrained to say, the only conclusion is that there was a desired objective and having failed to gain the desired objective, information was sent. If this be the attitude law Courts cannot be a mere passive spectator. The objective of a proceeding under the Foreign Exchange Regulation Act cannot be termed to be a harassive one, on the contrary in the event of a violation, there ought to be an investigation and if the investigation results no culpability, the officer concerned has nothing else to do excepting recording its reasons and to pass such an order as would be fit and proper under the circumstances. But that does not clothe the officer to send an information to another agency so as to create further harassment. This information by itself negates fairness which is the basic requirement of the Foreign Exchange Regulation Act. No Court of law ought to cause any hindrance for any investigation which is reasonable and in consonance with the provisions of the statute. But the Courts of Law ought not to permit any harassive attitude in the garb of discharge of statutory function. In this case it has turned out to be nothing but harassive - as if there is a ''spite'' or ''ill-will'' against the petitioner more so by reason of the existence of a clearance certificate as also termination of proceedings against the company and its officers on the self-same set of facts. Officers empowered under the Act, in my view, ought not to act with such an attitude, but as the law enjoins be fair, reasonable and to act within the four corners of the statute on this score. I find sufficient justification in Mr. Ginwalla''s submission as regards collusion, conspiracy and motive behind the issuance of the notice under sections 147 and 148 of the Act.

As regards the continuation of the proceedings under sections 147 and 148, but in view of the subsequent events, viz., dismissal of the proceedings before the Tribunal against the Indian Steamship Co., can it now be treated to be a clandestine payment to the petitioner?

Law Courts are competent and as a matter of fact ought always take note of the subsequent events to do complete justice between the parties and to avoid future litigations. On the wake of the Tribunal''s finding, in my view, no useful purpose would be served in continuing with the proceedings u/s 147 against the petitioner and the proceedings cannot also be allowed to continue to the further harassment and detriment of the petitioner. In that view of the matter, I am of the view that the continuation of the proceedings would be unfair, unjust and contrary to the known principles of law. In the premises, the rule succeeds. The rule is made absolute. Each party to pay and bear their own costs.