N. Susheela Naidu vs Income Tax Officer

M.N. Rao, J.—The petitioner - Smt. N. Susheela Naidu, Correspondent, Vidyodaya School, Nimmanpalle Road, Madanapalle, Chittoor District - asks this court for a writ of prohibition and to quash the order passed by the Income Tax Officer, Ward No. 2, Chittoor, in S-1157/95-96, dated March 15, 1996, requiring her to show cause as to why penalty should not be imposed against her for the default committed by her u/s 272A(1)(c) of the Income Tax Act, 1961, and that as her case was posted for March 19, 1996, for hearing, any failure on her part to appear on that day would result in imposition of penalty. In the impugned notice, it is mentioned that when the premises of the school were surveyed on March 13, 1996, u/s 133A, the petitioner agreed to pay tentatively a sum of Rs. 1,00,000 (rupees one lakh only) towards Income Tax for the earlier years and that summons was served upon her u/s 131 for her personal presence and production of certain documents which were found during the course of the survey on March 14, 1996. The impugned order further mentions that it was noticed in the course of the survey that the books of account were not maintained properly, receipts were suppressed wilfully and "separate note books/loose slips" were maintained and the same were destroyed by the petitioner as and when she liked. Photocopies of the incriminating documents found during the course of the survey were seized and kept in the custody of the Income Tax Officer in order to show that there was wilful evasion of tax in the earlier years. In paragraph 4 of the order, it is mentioned : "Failure to comply with the provisions of the Income Tax Act will lead to penalty u/s 272A(1)(c) and also prosecution u/s 276C and section 276CC".

In the counter-affidavit filed by the Income Tax Officer, it is averred, inter alia, that the statement filed by Smt. Susheela Naidu u/s 115K of the Income Tax Act was in her individual capacity and it had nothing to do with the activities of the school, i.e., Vidyodaya High School of which she is the correspondent, and that as the "survey operation u/s 133A(1) was conducted at the school and against the activities of the school", no prior permission of the Deputy Commissioner of Income Tax is necessary for issuing summons u/s 131. We are inclined to think that this plea was taken in order to meet the question raised in the writ petition that when a statement was filed disclosing the income u/s 115K, it could not be reopened without the prior permission of the Deputy Commissioner u/s 115N. The counter-affidavit also in categorical terms states that the respondent did not "determine, raise or levy any tax whatsoever, nor any recovery proceedings are taken against the petitioner in her individual status or for that matter, even against the school".

It is unnecessary to refer to any other averments in the counter-affidavit for the purpose of giving disposal to this writ petition. When the stand of the respondent is unambiguous and specific that there was no demand of tax, no levy nor any recovery proceedings either against the petitioner in her individual status or for that matter even against the school, the impugned notice proposing to levy penalty for failure to attend the enquiry and also to prosecute the petitioner under sections 276C and 276CC is clearly impermissible in law. We are unable to find any nexus between the action proposed to be taken under the impugned notice and the facts admitted in the counter-affidavit. The proposed action to prosecute the petitioner under sections 276C and 276CC cannot in any manner be justified in the absence of there being any assessment, demand or any recovery proceedings. As the stand of the Department is that the impugned order is not addressed to the petitioner in her individual capacity but as the correspondent of the school, the survey operation was confined to the activities of the school but not to the financial affairs of the petitioner- Susheela Naidu - in her individual capacity. As no proceedings were pending against the school before the Income Tax Officer, the summons issued prior to the impugned notice was itself invalid and, therefore, the consequential impugned notice proposing to launch prosecution also is without jurisdiction-see Jamnadas Madhavji and Co. and another Vs. J.B. Panchal, Income Tax Officer and another, . It is not as if the summons that preceded the impugned notice was issued at the time of the survey operation but the same was after the operation was over and so is not referable to sub-section (6) of section 133A which lays down that where the person who is required to afford facility to the Income Tax Officer for inspection of books refuses or evades to do so (at the time of the survey), the Income Tax authority shall have powers under sub-section (1) of section 131 for enforcing compliance with the requirements mentioned therein (see N.K. Mohnot Vs. Deputy Commissioner of Income Tax and others, .

In the circumstances, the writ petition is allowed and the impugned notice is set aside. It is open to the respondent to take action against the school in accordance with law. No costs.