Krishan Chand Girdhari Lal and Co. vs Commissioner of Income Tax and Another

M.A. Shah, J.—This writ petition is filed by the petitioner-firm praying for a writ of certiorari for the quashing of the order passed by

Commissioner of Income Tax, Amritsar-1, on January 31, 1976, and for a writ of mandamus against respondent No. 2 praying for determination

and the assessment of Income Tax payable by the petitioner with respect to the years 19-58-59, 1959-60, 1960-61 and 1961-62 relating to the

working of lease known as "" Killar Forest "", Jammu and Kashmir State, in the province of Jammu or any other writ or direction as may be deemed

necessary under the circumstances of the case.

It has been stated in the petition that the petitioner is a partnership firm carrying on the business of exploiting forest produce as a Government

lessee in the State of Jammu and Kashmir having its principal place of business at Jammu. It is not disputed that the petitioner-firm is assessed to

Income Tax under the jurisdiction of the Income Tax Officer, "" B "" Ward, Jammu. In the month of December, 1956, it is stated by the petitioner

that it entered into a contract with the State of Jammu and Kashmir through the Forest Department of the Government for exploiting the forest

known as "" Killar Forest "" for a period of 10 years. The royalty payable to the Government under the terms of the lease was of the order of Rs.

1,37,00,402. Pursuant to the said contract, on completion of the formalities, the petitioner commenced its business in timber extraction and sale

thereof.

It is further alleged that the petitioner submitted its return of income for the assessment year 1957-58 showing a loss from business of the order

of Rs. 1,33,850. For the assessment year 1958-59, the petitioner submitted a return of total income amounting to Rs. 9,160. Respondent No. 2,

the Income Tax Officer, by his order dated August 20, 1962, provisionally levied the assessment by applying a flat rate of gross profit and applied

provisional rate of 33-1/3% as against 5% adopted by the petitioner. Similarly for the assessment year 1959-60, respondent No. 2 applied a Hut

rate of 15% against the rate of 10.1% offered by the petitioner. For the assessment year 1960-61 again, respondent No. 2 applied a rate of 20%

provisionally as against 10.1% offered by the petitioner for arriving at the annual income for this year. It is stated that the Income Tax Officer

completed the assessments in a provisional manner subject to reassessment and to revision later on. Thus, for the previous years, the petitioner did

not choose to go in appeal against the provisional assessments. However, after the assessment order was passed for the assessment year 1960-

61, the petitioner found that for a number of successive years, the Income Tax Officer was resorting, even if provisionally, to arbitrarily high rates

for computing the income and the petitioner, under these compelling circumstances, tiled an appeal against the orders for the assessment year

1960-61 to the Appellate Assistant Commissioner, Jammu.

The Appellate Assistant Commissioner on hearing the appeal reduced the aforesaid provisional rate of 20% to 12%. Being aggrieved against the

said order of the Appellate Assistant Commissioner, the petitioner went in further appeal to the Income Tax Appellate Tribunal. The Tribunal by its

order dated September 1, 1966, with certain observations, confirmed the order passed by the Appellate Assistant Commissioner on August 21,

1965. For the next assessment year 1961-62, on the same pattern, it is alleged that the flat rate offered by the petitioner was 5% ; whereas the

Income Tax Officer preferred to apply the rate of 12 1/2%. It is further submitted that the petitioner thereafter made an application to the Income

Tax Officer, when he passed the order with respect to the assessment year 1962-63 praying for reassessment and modification revising the earlier

provisional determination of the assessable income for the assessment years 1958-59, 1959-60, 1960-61 and 1961-62 to bring it in conformity

with the overall rate of profit of 10.1%. The grievance of the petitioner started from here when respondent No. 2, Income Tax Officer, rejected the

aforesaid prayer of the petitioner for reassessment and modification or alteration on the technical plea that the assessments for the abovenoted

years up to 1960-61 had become final and could not be revised at any point of time beyond the period of four years from the date on which the

original assessments for these years were made. He also declined to assess and revise the provisional assessment for the year 1961-62, though the

same was capable of revision.

After the order was passed by respondent No. 2 on February 27, 1971, declining to revise the assessment for the years referred to

hereinabove, the petitioner was left with no alternative except to make an application to respondent No, I, Commissioner of Income Tax, invoking

his jurisdiction u/s 264 of the Income Tax Act, 1961 (hereinafter called the Act), and revise/modify the assessment in the light of the findings and

grant the relief to the petitioner available to him under law. Respondent No. 1 dismissed the said petition by his order dated December 26, 1975,

for the assessment years 1958-59 and 1959-60 on the ground of limitation. With regard to the assessment year 1960-61 followed by the order

passed on January 31, 1976, on the assessment for the years 1960-61 and 1961-62, which is impugned in the present petition (sic). For the

quashing of that order, the petitioner pressed into service the order passed by the Central Board of Direct Taxes, Ministry of Finance, Government

of India, under the provisions of Section 119 of the Act issued on January 17, 1974, the gist of which is as follows :

You should file fresh revision petitions for the assessment years 1958-59, 1959-60 and 1961-62 before the Commissioner of Income Tax,

Patiala, to whom suitable instructions have been issued.

However, in the case of the assessment year 1960-61, the Board declined to interfere as the decision of the Income Tax Appellate Tribunal is

conclusive and binding.

It is thus submitted that respondent No. 1 failed to implement in letter and spirit the directions of the Central Board of Direct Taxes while

disposing of the revision petitions of the petitioner u/s 264 of the Act for the assessment years 1958-59, 1959-60, 1960-61 and 1961-62. The

orders, being repugnant to law and the canons of natural justice, are liable to be quashed.

Contesting the petition, learned counsel for the respondents in reply referred to the counter-affidavit filed on behalf of the Department at the

outset and submitted that the entire petition is misconceived. In fact, the relief which could be granted to the petitioner-firm was granted by the

authorities and it has no cause to agitate those findings arrived at in the writ petition. Referring to the order passed by respondent No. 2 on August

20, 1962, it is contended that it is incorrect to say that the assessment was provisional. The order was passed u/s 23(3) of the Act for the

assessment year 1958-59 and that section does not speak of provisional assessment. The impressions of the petitioner about the provisional nature

of assessment are also denied. It is contended that respondent No. 2, the Income Tax Officer, being a creature of statute could not travel beyond

the limitations provided under the statute and he had no power to make the provisional assessment u/s 23(3) of the Act. Regarding the exercise of

power u/s 264 of the Act, it is contended that the powers were exercised in accordance with law and on, the basis of record and the

circumstances which were demonstrated before the respondents and the Tribunal. No directions of the Central Board of Direct Taxes have been

violated. The petition is thus liable to be dismissed and does not require any interference in the writ jurisdiction.

Great stress is laid by learned counsel for the petitioner on the provisions of Section 264 of the Act which lays down the parameters within

which the Commissioner of Income Tax is empowered to function so as to revise an order passed by any authority subordinate to him. Sub-

section (3) of Section 264 prescribes the period of limitation of one year from the date on which the order in question was communicated to the

assessee or the date on which he otherwise came to know of it, whichever is earlier. The proviso to this Sub-section empowers the Commissioner,

if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, to admit an application made

after the expiry of that period. The impugned order passed on January 31, 1976, under the said section is attacked by learned counsel for the

petitioner on the ground that it travels beyond the directions issued by the Central Board of Direct Taxes on January 17, 1974. Its validity is

attacked on a further ground that it ignores the gross profit of 10.1% as disclosed in the consolidated account submitted by the petitioner for the

period of 5 years ending with March 31, 1962. Petitioner further seeks a writ of mandamus for directions to respondent No. 2, Income Tax

Officer, to treat the assessment for the years 1958-59, 1959-60, 1960-61 and 1961-62 as provisional and temporary and decide the case finally

on reopening the said assessments.

The arguments advanced by learned counsel for the petitioner on the face of the order passed by the Commissioner of Income Tax on January

31, 1976, are fallacious. I have perused the directions of the the Central Board of Direct Taxes relied on by learned counsel, a portion of which I

have reproduced hereinabove and find that the learned Commissioner has not in any manner violated the directions while exercising the powers

conferred on him u/s 264 of the Act. The order passed by the Income Tax Officer as held by the Commissioner was passed u/s 23(3) of the

Indian Income Tax Act, 1922, which pertains to the assessment year 1958-59, passed on August 20, 1962 and the order passed on November

30, 1963, pertains to the year 1959-60, under the similar Sub-section of the 1922 Act. The Commissioner has, while disposing of the revision

against the two orders separately, taken into account the argument advanced and has taken care of the observations made by the Tribunal,

whereby the order of the Appellate Assistant Commissioner granted substantial relief to the petitioner by reducing the percentage and fixing the

same as 12 1/2%. The Commissioner in his order for the assessment year 1958-59 dealt with the objection raised and did not find any justification

for interference u/s 264 of the Act in the orders passed by the Income Tax Officer. Same is the position regarding l959-60and 1961-62, whereby

the Commissioner refused to interfere in the light of the observations made by the Tribunal and maintained the rate of 12 1/2% holding that the said

percentage applied by the Income Tax Officer is very reasonable. It is significant to note that the Central Board of Direct Taxes declined to

interfere in the case of the petitioner for the assessment year 1960-61, holding that the decision of the Income Tax Appellate Tribunal is conclusive

and binding and directed the petitioner to file fresh revisions for the assessment years 1958-59, 1959-60 and 1961-62, which were taken up for

consideration by the Commissioner only in terms of the directions of the Central Board of Direct Taxes as they were clearly barred by limitation. It

was only in terms of the directions of the Board that the revision petitions were taken up for consideration and the Commissioner, on the basis of

the record, passed the reasoned orders. I, therefore, find that the Commissioner nowhere acted in violation of the orders of the Board issued on

January 17, 1974. The contention of learned counsel for the petitioner on this count cannot thus be accepted.

Adverting to the next contention of attack on the orders on the ground that it ignores the gross profit rate of 10'1% as disclosed by the

petitioner in the consolidated accounts, suffice it to say that on that count too, the petitioner has no case for interference in the writ jurisdiction. The

petition suffers on this account from two infirmities. Firstly, it is not within the scope of the writ jurisdiction to interfere in the findings arrived at by

the Commissioner on the basis of the record and the computation done by him. It is well-settled law that the High Court in writ jurisdiction cannot

sit as a court of appeal against the findings of the Commissioner or those of the Income Tax Officer unless any error on the face of the record is

shown affecting the jurisdiction of the Commissioner or the Income Tax Officer going to the root of the case or any such patent illegality which can

be demonstrated without any further arguments from the orders impugned. Learned counsel was Unable to point out any such thing requiring

interference in the jurisdiction exercised by the Commissioner or the Income Tax Officer u/s 264 of the Act. Secondly, the petitioner clubbed

together in the same writ petition the different orders passed for the assessment years 1958-59, 1959-60 and 1960-61, all of the same date, i.e.,

January 31, 1976; whereas he should have filed separate writ petitions challenging the orders for each assessment year separately as the

Commissioner and the Income Tax Officer both dispose of the petitions and assessments by separate orders. For the two infirmities as pointed out

hereinabove, I find that the petitioner is not entitled to any relief in the present writ petition. Learned counsel for the petitioner, despite taking time

to place before me some authority to support his contentions, was unable to do so. No other point was demonstrated requiring any determination

in this petition.

The petition, therefore, fails which is hereby dismissed with no order as to costs.