Tin Mfg. Co. of India vs Commissioner of Income Tax

M.C. Agarwal, J.—By this petition under article 226 of the Constitution of India, the petitioner challenges an order dated 22-3-1996, copy of which is Annexure ''10'' to the writ petition passed by the Commissioner, Meerut in proceedings, purporting to be u/s 264 of the income tax Act, 1961 (''the Act'') and rejecting an application moved by the petitioner for staying the reassessment proceedings for the assessment years 1984-85, 1985-86, 1986-87, 1987-88 and 1989-90 pending before the Deputy Commissioner, Special Range-II, Ghaziabad. I have heard Shri Rakesh Kumar Agarwal, the learned counsel for the petitioner and Shri Ashok Kumar, the learned counsel for the respondents.

The petitioner carries on business of manufacture and sale of tin container and agriculture implements. Its assessments for the aforesaid assessment year were duly made u/s 143 of the Act. Subsequently, the Central Excise Authority conducted a search and seizure operation against the petitioner and recovered documents which showed that the petitioner had sought import licences for much larger quantity of raw materials than the quantity shown in the books of account as having been purchased and used for the manufacture of goods. When this information was conveyed by the Central Excise Authority to the income tax authorities, the Assistant Commissioner, Investigation Circle, Ghaziabad issued a detailed notice dated 22-9-1993, copy of which is Annexure ''2'' to the writ petition mentioning the relevant details and requiring the assessee-petitioner to show cause why action u/s 147 of the Act may not be taken and notice u/s 148 may not be issued. The petitioner sent a reply dated 3-11-1993 stating that the orders of the Excise Authorities relevant to the show-cause notice are pending in appeal before the Customs, Excise and Gold (Control) Appellate Tribunal and that detailed explanation have been made before the excise authorities and requested the Assessing Officer to keep the reassessment proceedings u/s 147 in abeyance till the decision of the Tribunal. The petitioner has not disclosed when the aforesaid reply was actually delivered to the Assessing Officer. The Assessing Officer issued notices u/s 148, copies of which are cumulatively marked as Annexure ''4'' to the writ petition. The notice for assessment year 1989-90 was issued on 8-11 -1993 and served on 9-11-1993. The other notices are dated 21-1-1994 and were served on 29-1-1994. The petitioner came to this Court in writ petition No. 1193 of 1995 which was disposed of by order dated 22-12-1995. The relevant portion of the order passed by this Court is as under:

Therefore, the Assistant Commissioner of income tax, Investigation Circle, Ghaziabad, issued a show-cause notice dated 22-9-1993 (Annexure ''4'' to the writ petition) pursuant to the said show-cause notice the petitioner filed a reply dated 3-11-1993 (Annexure ''5'' to the writ petition) stating that the detailed explanation about discrepancing had been made before the CEGAT. No more details were given by the petitioner in the said reply.

The case of the petitioner before us is that no inference could be drawn on the basis of Form ''A'', recovered from its business premises by the Excise Department during the raid, because in those Forms inflated figures with a view of importing larger quantity, more quantity was mentioned. The counsel for the petitioner submits before us that higher figures were mentioned in Form ''A'' and import licence were also materials, but actually import was made of much lesser quantity of the raw material under those import licence. It is also submitted by the counsel for the petitioner that the details of actual import were not furnished before the income tax authority, because the detailed explanation was already given to the CEGAT. It is submitted that if an opportunity is afforded now to the petitioner, then the evidence of actual import against the import licence can be given to the income tax authorities.

On these facts, we dispose of this petition finally with the observations that the assessing authority will be given an opportunity to the petitioner to adduce the evidence to show that much lesser quantity of raw material against the import licence was actually imported and consumed by the petitioner. The petitioner will be called upon by the assessing authority to furnish a detailed reply within two weeks from date of certified copy of this order is produced before him by the petitioner, which the petitioner undertakes to produce before him within a week from today.

Until decision by a speaking order on such reply to be furnished by the petitioner, no further proceedings u/s 148 of the Act will be taken against the petitioner pursuant to impugned reasons dated 21-8-1995 (Annexure ''7'' to the writ petition) recorded by the Department.

As is evident from the facts mentioned above, notices u/s 148 had already been issued and served on the petitioner and the petitioner appears not to have disclosed that fact to that Court and obtained the aforesaid order by representing that the proceedings were still at the stage of show-cause notice dated 22-9-1993 while in fact notices u/s 148 had already been served and, therefore, no proceedings u/s 148 was pending. A proceeding u/s 148 consists of the recording of reasons under sub-section (2) of section 148 and an issue of notice u/s 148(1). Once this is done, there is nothing which is required to be done u/s 148 and what remains to be done by the Assessing Officer is an assessment u/s 147. Therefore, the petitioner by his own default procured an order from this Court that was of no legal consequence because the opportunity to adduce evidence and the recording of a speaking order was necessary only when a final order of assessment was passed in which the assessee''s contentions may have been wholly or partially accepted. However, in compliance with the aforesaid order passed by this Court, the Deputy Commissioner, Special Range-II, Ghaziabad, to whom the case seems to have been transferred, recorded his impression about the material on record and ultimately observed as under:

The above makes it clear that the reply of the assessee is not corroborated by any clinching and convincing evidence. In view of this I hold that proceedings u/s 148 have been validly taken. The material off ere J by the assessee and further supporting evidence which may be submitted by the assessee will be examined on merits after giving due opportunity to the assessee during the course of final assessment proceedings.

This note is dated 5-2-1996. A copy of which has been annexed as Annexure 7'' to the writ petition. The petitioner again came to this Court in writ petition No. 207 of 1996 branding the note dated 5-2-1996 as an order and this Court vide order dated 8-3-1996 ordered as under:

We are of the opinion that the petitioner has an alternative remedy u/s 264 of the income tax Act to file a revision before the Commissioner. Hence, we dismiss the writ petition on the ground of alternative remedy. If the petitioner files a stay application along with the revision, the same shall be considered and considered expeditiously.

The petitioner then filed a revision petition before the Commissioner, Meerut and moved an application praying for staying the reassessment proceedings for the aforesaid years. The Commissioner rejected the application observing that u/s 264 he has no power to stay the assessment proceedings. It is against the said order that the petitioner has come to this Court.

It is settled law that proceedings of reassessment commence with the issue of the notice for reassessment u/s 148. As already stated such notices were already issued and served in November 1993 and January 1994. Before issuing the notices the officer is not required to convene the assessee, intimate to him the nature of the alleged escapement or give him an opportunity of being heard. The assessee-petitioner did not challenge the notice. In his reply dated 3-11-1993, copy of which is Annexure ''3'' to the writ petition, he merely requested that the assessment proceedings be kept pending till the disposal of the appeal by the CEGAT. It came to this Court, about two years after the service of notices u/s 148. On the service of notices u/s 148, the reassessment proceedings came into existence which would terminate an assessment order being made u/s 147 or by the notices being quashed. The petitioner did not seek quashing of notices u/s 148 when it came to this Court in writ petition No. 1193 of 1995. This Court directed the assessing authority to give an opportunity to the petitioner to adduce the evidence to show that much lesser quantity was imported and consumed. This was a part of exercise for reassessment in which the assessing authority also had the opportunity to investigate and produce evidence. Yet this Court restrained the respondent-assessing authority from proceeding further u/s 148 until decision by a speaking order on the assessee''s reply. The assessing authority then recorded, on 5-2-1996 a finding that proceedings u/s 148 have been validly taken and further evidence will be examined in the assessment proceedings. The petitioner again came to this Court in writ petition No. 207 of 1996 challenging the so-called order dated 5-2-1996 and this Court dismissed the same observing that the petitioner had the alternative remedy of revision u/s 264. Consequently, a revision petition was filed and an application was made for staying the assessment proceedings. The Commissioner rejected the request on the ground that he had no such power. The assessment proceedings are pending since January 1994. The assessment proceedings should be completed within the period of limitation. The assessee has the remedy of appeal if the reassessment results in any demand. In the reassessment proceedings, the burden is on the revenue to establish that there was income which escaped assessment. For the purposes of assessment both sides have right to adduce evidence. The petitioner has been trying to obstruct assessment proceedings which should be discouraged. In my view there was no justification for staying the assessment proceedings when the petitioner did not challenge the initiation of section 147 by the issue of notices u/s 148 at the earlier and even in writ petition No. 1193 of 1995. The petition is, therefore, dismissed in limine with costs.