TaxTMI 
TaxTMI 
1996 (3) TMI 177
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....ing Works were found. These books pertained to assessment years 1994-95 and 1995-96 for the first two firms and for assessment year 1995-96 for the third firm. Though three different persons were shown to be the respective proprietors of these three concerns as informed by the bankers of the three concerns, the assessee, in his statement recorded at the time of survey, admitted owning these three concerns. He also offered to surrender Rs. 5 lakhs and Rs. 6 lakhs for assessment years 1994-95 and 1995-96 respectively as capital introduced in the three concerns out of his undisclosed income. He also owned up as his own money the various cash deposits appearing in different names in the account books. The accounts of the three concerns were stated to have been written by himself. 3. In view of the above facts, summons under section 131(3) were issued to produce the aforementioned books. The books were produced and were also impounded on 25-11-1994 under section 131(3). The examination of these books revealed that the three proprietary concerns were in existence prior to assessment year 1994-95 also. Summons were issued to produce the remaining books, but there was no compliance. ....
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.... 4 --------------------------------------------------------------------------------------- 1. Summons U/s Requiting attendance on Assessee attends 131 dt. 25-11-94. 25-11-94 with books with books as found at the time of required. survey. 2. Order U/s 131 Books produced are &nbs....
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....; Served on 142(1) dt. 15-12-94 1994-95 by 30-12-94 17-12-94 7. Assessee's Stating inability to produce - letter dt. books of earlier years and 20-12-94 requesting copies of impounded material. 8. Notice U/s A. Requiring attendance on 13-1-95 - 142(1)dt. with accounts, do....
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....; material and stating to file 9-1-95 return within reasonable time after obtaining the copies. Also request to keep proceedings in abeyance till return is filed. 10. Letter No. Requiring the assessee to comply This letter 1201 dated with notice dated 6-1-95 &n....
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....p; dt. 24-1-95. 11. Letter No. 1234 dt. 24-1-95 A. Dt. of hearing refixed on 31-1-95. - B. Permitting inspection of books on or before 31-1-95. C. Explanation regarding capital employed in 3 firms and to show &nb....
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..... 14. Deptt. letter Stating : dt. 2-2-95 A. None attended on 31-1-95. - B. No further time can be allowed to file the return. C. Issue of filing has no importance as assessment proceedings have  ....
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....p; and hence the return filed is subject to the said petition. 16. Assessee's Stating- letter dt. A. That return has been filed Copy of the letter 18-2-95. B. That Settlement Petition is forwarded to the filed on 16-2-95, and hence, C....
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....sp; 4,59,675 (e) Estimation of income from Arvind Padding Works 50,000 --------- 69,22,400  ....
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.... regards the time allowed, be that as it may, submitted Shri Jhanwar, but at least the Assessing Officer was bound to take notice of the return submitted and act upon it rather than proceeding under section 144 of the Act. For these contentions Shri Jhanwar relied on the decisions reported in Indra Prasad Gupta v. CIT [1990] 185 ITR 608 (All.), Rajmani Devi v. CIT [1937] 5 ITR 631 (All.), CIT v. S. Raman Chettiar [1965] 55 ITR 630 (SC), CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 (SC), Mohindra Mohan Sirkar v. ITO [1978] 112 ITR 47 (Cal.), Qammar-ud-Din & Sons v. CIT [1981] 129 ITR 703 (Delhi) and CIT v. Garia Industries (P.) Ltd [1983] 140 ITR 636 (Cal.). He also referred to the commentary on Income-tax Law by Chaturvedi and Pithisaria at page 3275 of the 4th Edition of Volume-3. 11. The next argument of Shri Jhanwar was that the assessee filed an application under section 245C with the Settlement Commission on 16-2-1995 and hence from that day exclusive jurisdiction was with the Commission over the case. For this, reliance was placed on the decision of the Jaipur Bench of the Tribunal in the case of ITO v. Saraf Textile Mills (P.) Ltd. [1986] 19 ITD 655 (Jp.).....
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....epartmental Representative, submitted that the case had a unique history of its own. All the three proprietary concerns had a turnover exceeding Rs. 40 lacs, yet the books of account were not audited under section 44AB, nor the incomes arising from these concerns were ever returned. The orders of both the lower authorities were speaking orders and the assessee himself had surrendered Rs. 11 lacs at the time of survey. Looking to the conduct and the attitude of the assessee, the Assessing Officer had no other option but to pin him down by invoking the provisions of section 144. As regards proper opportunity given to the assessee, more than adequate opportunities were provided to him which were not availed of. Section 131 does not provide for furnishing of copies of the books impounded and the several opportunities given to inspect the books were merely a facility which the assessee did not make use of. In fact the assessee kept on changing his stand from time to time insofar as that at times he asked for inspection of the books and at times he asked for photocopies of the books. But at no stage did the assessee ask for the basis of various additions. Ultimately the assessee did file....
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.... received from the department. It was also not true to say that the assessee kept on changing his stand for obtaining the copies or inspection of the impounded material. Right from the first request dated 7-12-1994, the assessee had been requesting for copies only and nothing else. 23. As regards the issue of impounding the books, Shri Jhanwar clarified that he was seriously challenging the legality of the action and should not be considered merely a passing reference. 24. As regards filing the return subject to the petition made to Settlement Commission, if it was a conditional return, then, it was contended, it should have been treated as a defective return curable by the provisions of section 139(9). But it could not be considered as non est as filing an application to the Settlement Commission was a legal remedy which the assessee could avail of. 25. With regard to not raising any question about the additions, Shri Jhanwar's contention was that it was not possible to do so in absence of the books or copies thereof. Thus it was as a consequence of the unjustified action on the part of the department. And if the accounts lying with the department were voluminous or compl....
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.... If the concerned authority has reason to suspect that any income has been concealed or is likely to be concealed by a person or class of persons, then powers under section 131(1) can be assumed irrespective of the fact whether any proceeding is pending or not. 31. On the other hand, the power of survey under section 133A is different and distinct than the power given under section 131(1). The results of survey operation can be utilised in a proceeding which is pending as well as in a proceeding which is yet to commence. Since both the powers are different, the assumption of one power, and using it to the exclusion of the other, do not, under normal circumstances prejudice the functioning of the tax authorities. In other words, both the powers, namely, those under sections 131(1) and 133A would be required to be taken up only when there are compelling circumstances or when the matter is such where some special investigation is required or where the assessee is not coming forward. As an illustration, the tax authority may compell the production of books of account under section 131(1) and may also carry out a survey under section 133A to physically verify the stocks or the cash b....
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....o summon the ostensible owners of the three concerns. Of the three, only one Shri Ganpatlal complied. On account of the ignorance shown by him about the books of Arvind Padding Works and the non-compliance by other two persons, the Assessing Officer issued notice under section 142(1) on 15-12-1994 to the assessee requiring him to furnish the return by 30-12-1994. Here we do not agree with Shri Jhanwar that by issuing notice under section 142(1), the Assessing Officer could not curtail the time allowed to the assessee under section 139(4). The books having been impounded, whether the time given was sufficient or not, is a different issue, but it was within the Assessing Officer's right to require the assessee to furnish a return by issuing notice under section 142(1), once the assessee had failed to furnish the same by the due date mentioned in section 139(1). 35. However, once the assessee failed to comply with the dates both under sections 139(1) and 142(1), he still had an opportunity to furnish the return under section 139(4) either before 31-3-1996 or before the completion of the assessment, whichever is earlier. The assessment was completed on 24-2-1995. It is undisputed th....
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.... proceeded to seek various information relating to the accounts so as to enable him to frame the assessment. He fixed 13-1-1995 as the date of hearing and permitted the assessee to inspect the accounts for 3 hours daily on 9, 1 0, 11 and January 12, 1995. 38. The most important aspect to be noted is that first the Assessing Officer makes up his mind to frame the assessment under section 144, as is evident from the above facts, and then grants opportunity for inspection. In this connection it is worth quoting the observations of the Andhra Pradesh High Court in the case of K. Rudra Rao v. ITO [1958] 34 ITR 216 at page 220 which are as follows : " In administering a tax law, irritations to the assessees are inevitable ; an officer is bound to do his duty irrespective of the susceptibilities of the assessees or even at the risk of hurting their amour propre. But this would not justify the officers functioning under the Act doing things in an unreasonable way. As has been pointed out by Maxwell on the Interpretation of Statutes, at page 123, tenth edition, all public officers in whom powers are vested by statutes must exercise those powers " within the limits to which an honest m....
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.... which he is entitled to, will have to undergo avoidable hardships, inconveniences and expenses. The Legislature, therefore, in its wisdom, incorporated clause (v) in Explanation-1 to section 153, which is as follows : " Explanation 1: In computing the period of limitation for the purposes of this sub-section (i)........ (ii)....... (iii).......... (iv) ......... (v) in a case where an application made before the Income-tax Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded." Thus, reading section 245-F(2) and the above provision together, it follows that though mere filing of a petition does not entitle the Commission to assume the powers of the Income-tax authority till it decides that the application shall be proceeded with, it is expected that the Income-tax authority also shall not proceed with the case till the Commission rejects the application, and for not so proceeding, the ....