S. Jagadeesan vs Tax Recovery Officer and Others

Chitra Venkataraman, J.—The Petitioners challenge the notices of demand issued by the first Respondent in Writ Petn. Nos. 20704 and 20706 of 2009 dt. 28th July, 2008 respectively as well as the summons issued by the first Respondent, in Writ Petri. Nos. 20705 and 20707 of 2005 dt. 18th Sept., 2009 respectively.

The grievance of the Petitioners is that one Ganesan was carrying on business in sand quarrying under a licence granted to him. On the basis of a survey conducted at the premises of a few persons, the Department passed assessment order on 3rd Jan., 2005 for the block period 1st April, 1996 to 12th Dec, 2002 on the said Ganesan. There afterwards, a notice dt. 10th Feb., 2005 was issued by the second Respondent to the Petitioners u/s 158BD of the IT Act, 1961, calling upon them to file a return of the total income. Thereupon, the Petitioners filed returns of income in their individual capacity and had also filed sworn statements stating that they had no involvement in any association of persons (AOP). On 28th Feb., 2007, assessment orders were passed u/s 158BD of the Act, assessing a sum of Rs. 10,00,000 and Rs. 7,50,000 respectively as the income of the Petitioner in Writ Petn. Nos. 20704 and 20706 of 2009 respectively as the amounts standing in the credit of the Petitioners'' name in the books of the said Ganesan. The Petitioners filed appeals as against the same. In the meantime, on 7th Feb., 2007, a letter was issued by the third Respondent to the Petitioners in Writ Petn. Nos. 20704 and 20706 of 2009 respectively, wherein, the third Respondent called for objections from the Petitioners as members of the AOP to the proposal to assess the income of the sand quarrying business as income of the alleged AOP.

The grievance of the Petitioners herein is that the Petitioners were not informed about any of the proceedings till a notice was issued on 7th Feb., 2007, particularly with reference to the notice u/s 158BD of the Act dt. 17th Feb., 2005 issued to the AOP as well as the said Ganesan and the further proceedings on this aspect.

The consistent stand of the Petitioners was that they were never a party to the AOP and that the sand quarrying business was the individual business of Ganesan. The Petitioner in Writ Petn. No. 20704 of 2009 sought for copies of statements of one Selvam and others as well as that of V.N. Swaminathan, Petitioner in Writ Petn. Nos. 20706 and 20707 of 2009, who were stated to have admitted the existence of the AOP. Since there was no response, when the third Respondent called upon the Petitioners to submit their objections to the proposal to assess the income, the Petitioners sent objections dt. 21st Feb., 2007 denying the assessment as an AOP and a further letter dt. 21st March, 2007 seeking copy of the block assessment order, if any, passed against the AOP, so that the Petitioners could take recourse to the Tribunal. Since there was no response therein, the Petitioners believed that there were no proceedings. However when the Petitioners received a notice dt. 28th July, 2008 treating the Petitioners as members of the AOP, calling upon them to deposit a sum of Rs. 1,19,95,200 within 15 days from the receipt of the notice followed by a summons dt. 24th Nov., 2008 requiring the Petitioner''s personal attendance, the Petitioners replied vide letter dt. 10th Dec, 2008 stating that the return filed by the said Ganesan as a member of the AOP was on his own volition and that it would not be binding on the Petitioners by any standards and that the entire liability for tax on the income earned from sand quarrying business was that of Ganesan alone.

After nearly ten months, the first Respondent issued a summons dt. 18th Sept., 2009 to the Petitioners requiring their personal attendance with reference to the documents. In the background of the said position, the present writ petitions have been filed.

On notice, the Respondents have filed a counter affidavit justifying the proceedings. Learned standing counsel appearing for the Respondents placed reliance on the provisions of Section 282 of the IT Act, 1961, relating to service of notice generally, which stated that in the case of any association or BOI, notice may be sent either by post or as if it were a summons issued by a Court under the Code of Civil Procedure, 1908, to the principal officer or any member thereof. In the circumstances, since notices were already issued to the said Ganesan, it is a compliance of the provisions of the Act. Hence, it could not be stated that no notice was served on the Petitioners.

I do not agree with the said submission of the learned standing counsel for the simple reason that right from the beginning, the Petitioners have been questioning the assessment as an AOP, as they were never members of the AOP. It is not denied by the Respondents that they have not produced the list of members of association. The reliance on the aforesaid provision will have relevance to a case where the status remains as an admitted one. As the Petitioners deny their status to be assessed as an AOP contending that there is no involvement by them in the said association, the reliance placed to the above said provision of law by the Revenue cannot be sustained. Since the Petitioners challenge the very status of an AOP and deny their involvement, unless they are given a notice as to the assessment made thereon, thereby fastening the liability on behalf of the association, the valuable rights of an appeal given to an aggrieved Assessee would remain meaningless. The Petitioners herein have denied their involvement in the AOP. Consequently, if the appeal remedy has to have some meaning, the Petitioners need to be put on notice as regards the assessment made in the capacity of an AOP, indicating the involvement of the Petitioners as members of the association. In the circumstances, the third Respondent is hereby directed to serve a copy of the order of assessment on the Petitioners within two weeks from the date of receipt of a copy of this order and it is open to the Petitioners to vindicate their grievance in a manner known to law. It is open to the Respondents to take steps after serving the order copy on the Petitioners herein. On receipt of the notice, it is open to the Assessees to take such contentions as they deem fit, including on the question of recovery. The recovery proceedings, hence, shall be kept in abeyance till the orders of assessment are served.

The writ petitions are allowed to the extent stated above. No costs. Consequently Misc. Petn. Nos. 1, 1, 1 and 1 of 2009 in each of these writ petitions stand closed.