Shri Shiv Lal vs Income Tax Officer

B.C. Mitra, J.—This is an application for appropriate writs, for quashing, setting aside, cancelling and withdrawing an assessment order dated March 29, 1963, made by the Respondent No. 1.

The only point urged by Mr. Debi Pal, learned Advocate for the Petitioner, was that rules of natural justice had been violated in making the impugned order. The facts material for the purpose for this application are set out hereunder. On March 21, 1963, the Petitioner was served with a notice under Sections 23(2) and 22(4) of the Indian income tax Act, 1922 (hereinafter referred to as ''the Act''). By this notice the Petitioner was directed to appear before the Respondent. No. 1 on March 25, 1963, and produce the following documents:

(1) Agreement and Conveyance and Transfer Deeds with regard to the sale of the mines by Sri Lal to Messrs. S. Lal & Company (Private) Ltd.

(2) Correspondence with regard to the sale of the mines referred to in (1).

(3) Lease Deeds of each of the mines referred to in (1).

(4) Prospecting licence.

(5) Correspondence with the Government asking for permission to sale each mine referred to above and the Government''s replies and permissions.

(6) Memorandum of Agreement dated April 18, 1950, between Sri S. Lal and M/s. S. Lal & Company (Private) Ltd. for sale of ores mined by him at cost plus 20 % thereon.

(7) All books of account for the accounting period ending March 31, 1958, including specially the cash book and ledger, wages registers of the different mines log books of the motor vehicles used at the different mines to show the petrol and tyres and tubes consumption and the mileage covered against such consumption the stock register of manganese, iron and other ores to enable quantitative analysis of shortages or surpluses, if any.

(8) Papers and documents to prove the original costs and written down values of the buildings sold during the year of account to M/s. S. Lal & Company (Private) Limited.

The Petitioner''s contention is that various documents specially the wages registers of the mines, log books of the motor vehicles and documents to prove the original costs and written down value of the buildings sold to S. Lal & Company (Private) Ltd., are not kept in the registered office of the Petitioner in Calcutta and these books were at Barbil in the State of Orissa and Mosaboni in the State of Bihar. According to the Petitioner it was impossible for him to produce these books before the Respondent No. 1 by March 23, 1963. It was contended that the Petitioner had only one and a half working day, Friday and Saturday within which all these papers relating to earlier years had to be searched, collected and made ready for production before the Respondent No. 1.

On March 25, 1963, the Petitioner''s authorised representative wrote to the Respondent No. 1 objecting to the assessment proposed to be made and prayed for reasonable time and opportunities for searching out and collecting the papers and documents. It is alleged that this letter was handed over to the Respondent No. 1 on March 25, 1963, and that an ex parte assessment order was made on March 29, 1963, computing the total income of the Petitioner at Rs. 30,79,111. Though the order was made on March 29, 1963, no notice of demand was served on the Petitioner in compliance with an interim order made by this Court on March 21, 1963, whereby liberty was given to the income tax authority to complete the assessment, but no notice of demand was to be served on the Petitioner without further order of this Court.

Before proceeding to deal with the contentions raised on behalf of the Petitioner, I should refer to certain events which occurred before the impugned order was made.

The Petitioner had acquired various mines and was assessed to income tax in the assessment year 1958-59. He transferred the said mining lease to a private company known as S. Lal and Company (Private) Ltd. for Rs. 29,86,630. For the assessment year 1058-59 the Petitioner was assessed under the Act and the total income computed by the income tax Officer was Rs. 2,47,180. This assessment was followed by a letter dated May 22, 1962, from the Respondent No. 2 informing the Petitioner that the latter proposed to revise the assessment for the assessment year 1958-59 u/s 33B of the Act and calling upon the Petitioner to show cause why the order should not be revised. This was followed by a writ petition moved by the Petitioner being matter No. 205/62 challenging the jurisdiction of the Respondent No. 1 to initiate the proceeding u/s 33B of the Act. A Rule nisi was issued and an interim order was made staying all proceedings pending the disposal of the application. On August 10, 1962, the interim order was modified and the Respondent No. 2 was given liberty to make an order u/s 33B of the Act, but it was provided that no effect should be given to the order passed u/s 33B of the Act till the disposal of the Rule.

On August 18, 1962, the Respondent No. 2 passed an order u/s 33B of the Act cancelling the assessment made by the income tax Officer, which was considered to be erroneous and prejudicial to the interest of the revenue. By this order the income tax Officer was directed to make a fresh assessment in accordance with law. This order u/s 33B of the Act was challenged by a second writ petition filed by the Petitioner. A Rule nisi was issued and an interim order was also made staying all proceedings under the order till the disposal of the application. The interim order, however, was modified by an order made on March 21, 1963, and by this modification the Respondents were given liberty to complete the assessment, but they were not to issue any notice of demand on the Petitioner without further order of this Court. It was after the variation of the interim order that the said notice dated March 21, 1963, was served upon the Petitioner and thereafter the impugned order of assessment was made. I should mention here that the order u/s 33B was made on the ground that capital gain arising from the transfer of the assets of the Petitioner to the said private company had escaped assessment.

The Petitioner''s representative S.K. Sawday & Company wrote a letter to the Respondent No. 1 on March 25, 1963. The main contention in the letter was that the time granted to the Petitioner for complying with the notice was too short and was not reasonable. It was further contended that the audit of accounts having been completed and also the income tax, wealth-tax and expenditure-tax assessment having been similarly completed, the Petitioner had no particular reason to hang on to the cash book, wages register etc. and, therefore, the Petitioner should be given reasonable time and opportunity for looking for and collecting those books. While asking for adjournment for producing books, however, the said representative forwarded various documents, namely, copies of seven agreements and conveyance and also copies of nine lease deeds. The Respondent No. 1 took these documents into consideration in the assessment order, in which he also noted that no one appeared at the appointed time of hearing and also that a letter was received from S.K. Swaday & Company at about 4 p.m. of the appointed day, namely, March 25, 1963. After taking into consideration the said documents forwarded on behalf of the Petitioner the impugned order was made by the Respondent No. 1. It is this order which is the subject-matter of challenge in this application.

In support of his contention that rules of natural justice had been violated as no opportunity was given to the Petitioner to produce the various documents required by the Respondent No. 1, reliance was placed by the learned Advocate for the Petitioner on a Special Bench decision of this Court reported in In the matter of In Re: Sadaram Puranchand, . In that case barely 24 hours was given by the income tax Officer to the Assessee to produce any evidence on which the Assessee might rely in support of his return. It was held that whether a given time was reasonable was a question of fact and that in that case the time allowed was unreasonable and, therefore, the Assessee was not given a reasonable opportunity required by the Act to produce his evidence in support of the return. Relying upon this decision Mr. Pal contended that in this case also effective time allowed was only 1 1/2 days and the Petitioner had to collect his books from distant place in Orissa and Bihar and, therefore, reasonable opportunity of producing evidence was denied to him.

The next case relied upon by Mr. Pal is a decision of the Andhra Pradesh High Court in K. RUDRA RAO Vs. Income Tax OFFICER, SPECIAL SURVEY CIRCLE, VIJAYAWADA, AND ANOTHER., . In that case it was held that giving a night''s time to the Assessee to produce his account books for a period of eight years could not be called reasonable.

Mr. Pal contended that his client should have been given a reasonable opportunity to produce the materials requisitioned by the Respondent No. 1 and there was no justification for proceeding post-haste in the matter of making an order ex parte.

The next contention of Mr. Pal was that there was denial of natural justice also on the ground that in the impugned order the Respondent No. 1 had stated that the Petitioner was questioned on various points and that on these points the Petitioner had no specific and adequate reply. It was argued that this statement in the impugned order was patently incorrect as the Petitioner was not present on the day and at time fixed for the hearing of the matter and, therefore, there was no occasion to put any questions to him.

Mr. Gouri Mitter, Learned Counsel for the Respondents, contended that there was no substance in any of the contentions raised by Mr. Pal. He argued that there was no violation of the rules of natural justice as the Petitioner had more than ample opportunity of producing the documents which he was called upon to produce. He further argued that the refusal of the Respondent No. 1 to adjourn the hearing of the matter was a purely discretionary matter for which no writ lies. In support of his contention Mr. Mitter relied upon a Bench decision of this Court in Commissioner of income tax v. Champalal Binani Unreported decision in Appeal from Original Order No. 144 of 1965. In that case the question was whether sufficient opportunity as required by the Section 33B of the Act was given to the Assessee. The notice was served upon the Assessee''s three different addresses in Calcutta, but he was at Rajasthan at the material time. It was held that sufficient opportunity was given to the Assessee as required by the Act. To my mind this decision is not of much assistance to the Respondent as the question in that case was whether sufficient notice was given to the Assessee as required by Section 33B of the Act. Mr. Mitter relied upon another Bench decision of this Court in Commissioner of income tax v. Gita Devi Agarwala Unreported decision in Appeal from Original Order No. 28 of 1965. In that case also the question was whether opportunity of being heard as required by Section 33B of the Act was given to the Assessee as the notice as required u/s 33B of the Act was not served upon her and, therefore, on the date fixed for hearing no one appeared on her behalf. An order was made by the Appellant ex parte u/s 33B of the Act cancelling the said assessment order and directing the income tax Officer to make a fresh assessment order according to law. The question was whether a sufficient opportunity was given having regard to the contention of the Assessee that no notice was served on her, and it was held that in the facts of that case sufficient opportunity was given to the Assessee as she refused to accept the notice which was attempted to be served upon her by post. This decision, again, to my mind is of no assistance to the Respondents in the instant case as there is no dispute with regard to the service of notice. The only question is whether sufficient opportunity was given to the Petitioner having regard to the fact that a notice was served on March 21, 1963, calling upon the Petitioner to produce documents on March 25, 1963.

The next case relied upon by Mr. Mitter was also a Bench decision of this Court in Commissioner of income tax v. Kiran Debi Singhee (1965) 70 C.W.N. 414. Reliance was placed upon this decision in support of the contention that the income tax Act, 1922, was a comprehensive Code which provides for an alternative remedy and such remedy was available to the Respondent and would have been more appropriate. Questions of facts were involved and such questions could have been gone into in such proceeding under the Act which should have been pursued. Relying upon this decision Mr. Mitter argued that no explanation was furnished by the Petitioner as to why he did not pursue the alternative remedy by way of appeal which the Statute prescribed. It was also argued that the discretionary relief under Article 226 of the Constitution ought not to be granted to the Petitioner who had chosen to invoke the writ jurisdiction of this Court instead of pursuing the statutory remedy available to him. It was further argued that the question whether the Petitioner had sufficient time to collect and produce the documents between March 21, 1963, on which date the notice was served and March 25, 1963, on which date the hearing was fixed, was a question of fact and such question could be more appropriately gone into in an appeal against the impugned order than in a writ proceeding. In my view this contention of the Learned Counsel for the Respondent is well-founded. This is not a case where a notice was not served upon the Assessee. Admittedly, notice was served on March 21, 1963, calling upon the Petitioner to produce several documents by March 25, 1963. Copies of various documents were indeed forwarded to the Respondent No. 1 by the Petitioner''s representative as mentioned earlier in this judgment. Furthermore, items Nos. 1, 2, 3, 4, 5, 6 and 8 of the documents required to be produced by the notice dated March 21, 1963, are more likely to be kept at the head office or registered office of the company than in the mines. It may be that books of account including cash books, ledger, wages register, log books of motor vehicles are kept at the mines. But, even in regard to these books it could not be overlooked that these books were required upto the period ending March 31, 1958, and audit of these books had been completed, and there was hardly any justification for sending the old books back to the mines after they were audited. If the Petitioner was called upon to produce current books of account including cash book, ledger, wages register, log books of motor vehicles, there would have been some force in the contention of the learned Advocate for the Petitioner that the time allowed to produce such books was wholly inadequate and, therefore, there was a denial of opportunity to the Petitioner, and as the impugned order was made ex parte and without taking into consideration the books of account of the company, rules of natural justice had been violated. But the books of account required to be produced were for the period ending on March 31, 1958. The Petitioner''s representative S.K. Sawday & Company by the letter dated March 25, 1963, admitted that audit of these books had been completed. It is not the Petitioner''s case that after audit the books had been sent back to the mines and, therefore, they were not readily available for production before the Respondent No. 1 on March 25, 1963. In the facts of this case the decisions reported in In the matter of Sadaram Puranchand Supra and K. Rudra Rao v. income tax Officer Supra discussed earlier, are of no assistance to the Petitioner.

But quite apart from the notice u/s 22(4) of the Act calling upon the Petitioner to produce the various documents, another notice was served upon the Petitioner on the same day, namely March 21, 1963, u/s 23(2) of the Act. By this notice the Petitioner was informed that in connection with the return submitted by him some further information was needed and, therefore, the Petitioner was requested to attend at the office of the Respondent No. 1 on March 25, 1963, either in person or by a duly authorised representative and produce documents, accounts and other evidences on which the Petitioner''s return was based. Even assuming that the Petitioner had difficulty in collecting the books of account and producing the same on the appointed day, I do not see any reason why the Petitioner did not attend at the office of the Respondent No. 1 or send a representative as requested by the said notice u/s 23(2). Indeed in the letter of S.K. Sawday & Company dated March 25, 1963, no explanation has been given as to why it was not possible for the Petitioner or his representative to attend at the office of the Respondent No. 1 as requested, and no adjournment of the hearing had been asked for. The only point raised in the said letter of the Petitioner''s representative was the difficulty of collecting and producing the documents required to be produced by the notice u/s 22(4) of the Act. In these facts there is no merit in the Petitioner''s contention that opportunity of being heard was not given to the Petitioner.

Before concluding, I shall refer to two other decisions relied upon by Mr. Pal in support of his contention that where rules of natural justice had been violated, this Court should interfere by issuing appropriate writs or orders. The first case relied upon by Mr. Pal was a decision of the Supreme Court in State of Uttar Pradesh v. Mohammed Nooh AIR 1958 S.C. 86. Reliance was placed upon this decision for the proposition that if an inferior Court or Tribunal acted wholly without jurisdiction, or patently in excess of jurisdiction or manifestly conducted the proceeding in a manner contrary to the rules of natural justice, the superior Court might exercise its power to issue a writ of certiorari to correct the errors of the Court or Tribunal even if an appeal to another inferior Court or Tribunal was available and recourse was not had to or if recourse was had to it, it confirmed what ex facie was a nullity. This decision, to my mind, is of no assistance to the Petitioner in the instant case as there is no challenge to the jurisdiction of the Petitioner to make an impugned order. The only question canvassed in this case is that rules of natural justice had been violated. On the facts in this case I have already held that opportunity was given to the Petitioner to produce documents and that such opportunity was sufficient. Furthermore, as I have noticed earlier, there was no explanation why the Petitioner or his representative did not attend the hearing fixed on March 25, 1963. No adjournment of the hearing was asked for by the Petitioner at any stage. In these facts it cannot be said that rules of natural justice had been violated.

The next case relied upon by Mr. Pal was also a decision of the Supreme Court in Mahadayal Prem Chandra v. Commercial Tax Officer AIR 1958 S.C. 667. In that case a Commercial Tax Officer without exercising his own judgment in the matter of assessment, asked for instructions of the Assistant Commissioner, who gave such instructions, but the correspondence between the Commercial Tax Officer and the Assistant Commissioner showed that the former did not agree with the opinion and instruction of the latter. The Commercial Tax Officer again asked for instruction from the Assistant Commissioner, and the latter directed the Commercial Tax Officer to assess the Assessee, and thereupon without giving any satisfactory reason, the Commercial Tax Officer assessed the Assessee. The correspondence between the Assistant Commissioner and the Commercial Tax Officer was made behind the back of the Appellant and in these facts it was held that the Commercial Tax Officer merely voiced the opinion of the Assistant Commissioner without any conviction of his own and that this procedure was contrary to the principles of natural justice. The facts of this case are entirely different from the facts of the instant ease now before me. There was no instruction from the Respondent No. 1 to assess the Petitioner. All that the Respondent No. 1 was directed to do by the order u/s 33B of the Act was to make a fresh assessment in accordance with law after making a proper valuation of the assets transferred and correct determination of the capital gain earned by the Assessee. This decision of the Supreme Court is, therefore, of no assistance to the Petitioner in this case.

I shall now deal with the Petitioner''s contention that there was denial of natural justice on the ground that in the impugned order the Respondent No. 1 had stated that the Petitioner was questioned on various points, and on these points the Petitioner had no specific and adequate reply. It was argued that this statement in the impugned order was incorrect as the Petitioner was not present on the day and at the time fixed for the hearing of the matter. In my view there is no force in this contention of the learned Advocate for the Petitioner. It is clear that the Petitioner''s representative appeared before the Respondent No. 2 at the hearing that was given by the latter in pursuance of the notice u/s 33B of the Act. At this hearing the Petitioner''s representative raised various contentions and the Respondent No. 2 in the order u/s 33B of the Act had dealt with these contentions. In the impugned order the Respondent No. 1 has referred to the contentions raised and particulars furnished by the Petitioner''s representative at the hearing before the Respondent No. 2 u/s 33B of the Act. Although the Petitioner did not appear before the Respondent No. 1 at the hearing fixed on March 25, 1963; the latter was entitled to refer to the contentions raised and particulars furnished by the Petitioner''s representative before the Respondent No. 2 at the hearing u/s 33B of the the Act. For this reason there is no force in this contention of the learned Advocate of the Petitioner.

For the reasons mentioned above this application fails and is dismissed. The Rule is discharged. Each party to pay its own costs.