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2004 Supreme(All) 46
HIGH COURT OF ALLAHABAD
M. Katju and U. Pandey, JJ.
V.K.Packaging Industries
Versus
Tax Recovery Officer
Civil Miscellaneous Writ Petition 178 of 2003
Decided On : 12 January 2004
Civil Miscellaneous Writ Petition 178 Of 2003
BHARAT JI AGRAWAL, Govind Saran,
The court emphasized the duty of the Income-tax Department to make a correct assessment and not to make an excessive assessment merely on the ground of shortage of time.
Headnote:
Certiorari - Income Tax - Income-tax Act, 1961, Section 226(3) - Summary of Acts and Sections: Section 226(3), Section 143(3), Section 133(6), Section 148 - The court discussed the validity of the notice under Section 226(3) of the Income-tax Act, the doctrine of merger, and the principle of restitution. The court highlighted the illegality of the notice under Section 226(3) and emphasized the duty of the Department to make a correct assessment and not to make an excessive assessment merely on the ground of shortage of time.
Fact of the Case:
The petitioner, a registered partnership firm, filed a return for the assessment year 1997-98, disclosing income. The Assessing Officer made additions in the hands of the petitioner based on copies of accounts of third parties, leading to a dispute and subsequent appeals. The Tax Recovery Officer issued notices under Section 226(3) for realization of the demand assessed by the Assessing Officer, causing financial hardship to the petitioner.
Finding of the Court:
The court found the notice under Section 226(3) to be wholly illegal as there was no valid demand against the petitioner. The court ordered restitution of any amount realized from the petitioner in pursuance of the notice under Section 226(3) and the assessment order, with interest. The appeal pending before the Commissioner of Income-tax (Appeals) was directed to be decided expeditiously.
Issues: Validity of the notice under Section 226(3), Doctrine of merger, Principle of restitution, Hurried passing of assessment orders by the Income-tax Department
Ratio Decidendi: The assessment order dated March 15, 2000, ceased to exist after the order of the Tribunal dated December 30, 2002, under the doctrine of merger. The court emphasized the duty of the Department to make a correct assessment and not to make an excessive assessment merely on the ground of shortage of time.
Final Decision: The petition was allowed, and the notice under Section 226(3) and the recovery made in pursuance of it were quashed. The court ordered restitution of any amount realized from the petitioner in pursuance of the notice and the assessment order, with interest, and directed the expeditious decision of the pending appeal before the Commissioner of Income-tax (Appeals).
( 2 ) HEARD learned counsel for the parties.
( 3 ) THE petitioner is a registered partnership firm which is doing the business of manufacture of corrugated boxes/card board boxes. The relevant assessment year is 1997-98 and in this year the petitioner filed a return on October 31, 1997, disclosing income of Rs. 27,374. 28. The petitioner has alleged that it has maintained regular and proper books of account in the ordinary and regular course of business.
( 4 ) THE petitioner appeared before the Assessing Officer/income-tax Officer, Ward No. 5, allahabad, and the Assessing Officer by his order dated March 15, 2000, determined the petitioners income at Rs. 7,40,750. True copy of the assessment order dated March 15, 2000 is annexure 1 to the writ petition. This assessment was made, under Section 143 (3) of the income-tax Act.
( 5 ) IT is alleged in para. 7 of the petition that during the course of the hearing the Assessing officer issued notices under Section 133 (6) of the Income-tax Act to M/s. Shiv Datt and Sons, m/s. K. Lal and Company and M/s. Shakumbari Pulp and Paper Mills Ltd. , apart from other parties. It is alleged that these notices were issued only for obtaining copies of accounts of the petitioners firm from the books of the above three respective parties in compliance to the notices under Section 133 (6) of the Act. The parties sent copies of the accounts to the Assessing Officer, and on the basis of those copies of accounts additions were made in the hands of the petitioner on the allegation that there are differences in the accounts. Those differences were added in the hands of the petitioner as undisclosed income. The major additions were of Rs. 4,25,000 and Rs. 50,080. The addition of Rs. 4,25,000 was made on the allegation that payment of the said amount was made by M/s. Shakumbari Paper and Pulp Mills, but no entries were recorded in the petitioners books, though the entries were recorded in the books of Shakumbari Paper and Pulp mills. The other additions were also on similar ground.
( 6 ) IT is alleged in para. 8 of the petition that the copies of the said accounts of the aforesaid three parties were not supplied to the petitioner, nor were the parties summoned, nor were the books examined, and instead the additions were made simply on the basis of these copies of the accounts. In fact the Assessing Officer himself admitted in the assessment order dated March 15, 2000, in para. 6 that due to shortage of time it was impossible to verify the facts properly and hence the additions were made.
( 7 ) AGAINST the assessment order the petitioner filed an appeal before the Commissioner of income-tax (Appeals ). The appellate authority fixed the hearing on various dates, but it is alleged that copies of the accounts were not supplied to the petitioner despite repeated requests in writing as well as orally. Copy of the application filed by the petitioner before the appellate authority praying for supplying of these documents is annexure 2 to the petition. The petitioner stated before the Assessing Officer as well as the Commissioner of Income-tax (Appeals) that the records were misplaced somewhere by the chartered accountant and therefore the petitioner was helpless in conducting the appeal. However, the Commissioner of Income-tax (Appeals)decided the appeal by the ex parte order dated April 30, 2002. True copy of the said order is annexure
