Judgement

B. P. JEEVAN REDDY, J. :— The order of the Settlement Commission dated October 15, 1980, has given rise to these appeals. Kuldeep Industrial Corporation had filed an application under Section 245-C of the Income-tax Act in respect of three assessment years 1977-78, 1978-79 and 1979-80. The Settlement Commission refused to admit the case relating to assessment year 1977-78 for settlement against which the assessee has filed Civil Appeals 233-35 of 1982, (Civil Appeals 236-237 of 1982). The Settlement Commission has, however, admitted the case relating to the other two assessment years for settlement, against which the Revenue has preferred Civil Appeals 238-239 of 1982.

2. During the previous year relevant to the said three assessment years, the assessee received substantial quantities of stainless steel sheets from M. M. T. C. claiming to be a manufacturer of sterilizers. It filed returns for the said three assessment years disclosing losses in a sum of Rs. 1,51,143/- (for A. Y. 1977-78), Rs. 39,939/- for (A. Y. 1978-79) and a profit of Rs. 7,340/- (for the A. Y. 1979-80). Certain inquiries were made by the Income-tax Officer in Month of December, 1979. She also impounded the account books of the assessee. On February 13, 1980, the Income-tax Officer visited the premises of the appellant where the assessee was said to be carrying on the manufacturing activity. She found no such activity being carried on there. On February 14, 1980, the Income-tax Officer issued a notice proposing addition of three items of income. At this stage i. e., on February 29, 1980, the assessee filed an application before the Settlement Commission seeking settlement of his case relating to all the said three assessment years. By its letter dated March 1, 1980 the assessee informed the Income-tax Officer that it has filed an application before the Settlement Commission in respect of the said three assessment years and, on that basis, called upon the Income-tax Officer to stop all further proceedings. To this letter, the assessee enclosed a photocopy of the acknowledgement from the office of the Settlement Commission. By her letter dated March, 3, 1980, the Income-tax Officer requested the assessee to furnish copies of the application filed by it before the Commission. The assessee declined to do so on the ground that his application was a secret document. The Income-tax Officer refused to stay the assessment proceedings and called upon the assessee to submit his replies/explanation to the notices already issued by her. The Income-tax Officer once again requested for copies of the application filed by the assessee before the Commission. The assessee complained to the Commission about the refusal of the Income-tax Officer to stay the assessment proceedings but at the same time refused to furnish copies of its application to the Income-tax Officer. By letter dated March 11/12, 1980, the Income-tax Officer again requested for the copies of the application. She also called upon the assessee once again to furnish replies to the notices already issued. The assessee still refused. In these circumstances the Income-tax Officer made a draft assessment order on 19th March, 1980, and communicated the same to the assessee, as required by Section 144-B, which was then in force. This assessment order pertains to the assessment year 1977-78 only. Under this order the Income-tax Officer determined the income of the assessee at Rs. 44,40,500/- as against the loss of Rs. 1,28,691/- returned by the assessee. It was received by the assessee on 31st March, 1980.

3. By its letter dated March 14, 1980, the Settlement Commission forwarded a copy of the assessees application filed under Section 245-C to the Commissioner of Income-tax for his objections. This communication was received by the Commissioner on 3rd April, 1980. On 5th June, 1980, the Commissioner filed his objections enclosing therewith a copy of the draft assessment order dated March 19, 1980, pertaining to