TaxTMI 
TaxTMI 
TaxTMI 
1966 (10) TMI 20
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....aid Rai Bahadur Oberoi in the said company. It appears that the case of Rai Bahadur Obiroi was referred to the Income-tax Investigation Commission, set up under the provisions of the Taxation on Income (Investigation Commission) Act, 1947. The said Commission, on or about 18th August, 1951 issued notices under section 5(4) of the Investigation Commission Act to the petitioner in respect of the assessment years 1940-41 to 1946-47. Before the Investigation Commission, the petitioner made various statements of his net wealth on various dates and produced various books and records of all the companies in which he was a director or managing director, and in respect of which he furnished various information. In Suraj Mall Mohta & Co. v. Visvanatha Sastri and in Muthiah v. Commissioner of Income-tax the Supreme Court held that section 5(4) and section 5(1) respectively, of the Taxation on Income (Investigation Commission) Act, 1947, became void on the commencement of the Constitution, as offending against article 14 of the Constitution. The first-mentioned decision lead to the insertion of sub-sections (1A) to (1D) in section 34 of the Income-tax Act, 1922 (hereinafter referred to as the ....
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.... March, 1956, the Income-tax Officer, Central Circle XII, Shri R. S. Gahlot, issued a fresh set of notices under section 34(1A) in respect of the assessment years 1940-41 to 1946-47 and proceedings under the previous notices were discontinued. Accordingly, the petitioner did not press on with the rule in Matter No. 92 of 1955, which was discharged, but it was recorded that the petitioner did not abandon his contentions. The Income-tax Officer, Central Circle XII, Shri G. P. Gupta, assessed the petitioner for the years 1942-43, 1943-44, 1944-45 and 1945-46. In these assessment orders, it is mentioned that, pursuant to the notice under section 34(1A), the petitioner had filed returns according to his original assessment. It was further stated that in the meanwhile the Income-tax Officer had received the records of the Investigation Commission, under section 37 of the said Act. In the assessment order for 1942-43 it is mentioned that the assessee had received a sum of Rs. 22,00,000 or so, during 1944, and there was reason to believe that this sum or a part thereof had escaped assessment. It was stated that several investments in sundry companies in the names of various persons totalli....
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....ceeding 12,675 shares. This, if true, shows that the acquisition and sale of the shares was not in the nature of an investment only. It is stated in the assessment order that the petitioner was unable to satisfy the Income-tax Officer as to the particulars of the transactions that took place in respect of the said agreement. After taking into account the various facts relating to the acquisition and sale of the shares, the Income-tax Officer came to the conclusion that these shares were neither purchased for investment nor by way of a change of investment, but that the gain that the petitioner made was an operational gain in course of business, under a scheme for profit making. Also it was found that there was a huge amount of surplus cash, the source of which was not disclosed. It was held that this was nothing but secreted income, made out of undisclosed sources. Against all these assessment orders for the years 1942-43, 1943-44 and 1945-46, the petitioner appealed to the Appellate Assistant Commissioner. Some of the grounds of appeal are interesting, because the same or similar grounds have been taken in the petition in the present case. For example, ground No. 1 was that the In....
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.... as the appellant's profit on sale of shares of Associated Hotels India Ltd. This sum is taken as business profit of the appellant as the Income-tax Officer has given a finding that the shares of Associated Hotels India Ltd. were sold as a part of the operation of the appellant's business in shares and in carrying out a scheme for making profits. Appellant strongly contends that the Income-tax Officer while making the original assessment had before him the information about the receipt of a sum of over Rs. 20,00,000 on the sale of the shares of Associated Hotels India Ltd. and the Income-tax Officer had in the past taxed interest on the amount so deposited and, hence, the Income-tax Officer had no new facts or new evidence on the basis of which he could come to the conclusion that the profit arising from the sale of the shares was a business profit. The appellant contends that all the particulars about the sale of shares of Associated Hotels India Ltd. in October, 1944, were produced before the Income-tax Officer at the time of the original assessments for 1945-46 and 1946-47, and after considering the evidence produced by the appellant the then Income-tax Officer came to the concl....
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....uch importance that it was necessary for him to refer the matter under Chapter 5, rule 2 of the Rules on the original side of this court, for hearing by a larger Bench. These two points were as follows: The first point was that section 34(1A) of the said Act was discriminatory and violative of the provisions of article 14 of the Constitution and as such void. The second point was that the disclosures before the Investigation Commission could not be looked into by the Income-tax Officer for purposes of assessment under the said Act. It is as a result of the said reference that we are hearing this matter. Before us, Mr. Sen appearing on behalf of the petitioner took the following points : (1) that the provisions of section 34(1A) are discriminatory and violative of the provision of article 14 of the Constitution and as such ultra vires and void; (2) that the Income-tax Officer had no jurisdiction to make the assessment inasmuch as the precondition in section 34(1A), namely, that he should have "reason to believe" that income, profits or gains chargeable to income had escaped assessment, was not satisfied. In other words, that in the facts and circumstances of the case, the Income-ta....
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.... and at the time the application came up for hearing, this appeal was still pending and it was stated before the court that the petitioner intended to proceed with the same. A preliminary ground was taken that it could not actively pursue a parallel remedy and yet go on with the writ application. The preliminary ground was upheld and the application dismissed. I referred to the Supreme Court decision in K. S. Rashid & Sons v. Income-tax Investigation Commission and I cited the following observation of Mahajan C. J. : " We think that it is not necessary for us to express any final opinion in this case as to whether section 8(5) of the Act is to be regarded as providing the only remedy available to the aggrieved party and that it excludes altogether the remedy provided for under article 226 of the Constitution. " For purposes of this case it is enough to state that the remedy provided for in article 226 of the Constitution is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. So far as the present case is concerned, it has been brought to our n....
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....g this court for a writ and after obtaining a rule, it went to pursue simultaneously a parallel remedy by way of an appeal under the ordinary law and kept his recourse to the alternative remedy from the knowledge of the court up to the last moment. We are informed that the appellant's appeal before the Appellate Assistant Commissioner is still pending. In that state of the facts, the respondent has contended that we ought to follow the principle laid down by the Supreme Court in Rashid & Sons v. Income-tax Investigation Commission ... It was brought to the notice of the court that the assessee had already caused a reference to be made to the High Court of Allahabad of the points involved in these cases under section 18(5) of the Investigation Commission Act and that the reference was still pending. 'In these circumstances', observed the Supreme Court 'we think that it would not be proper to allow the appellants to invoke the discretionary jurisdiction under article 226 of the Constitution at the present stage.' " The learned Chief Justice pointed out the danger of allowing two parallel proceedings to continue in the High Court. It was pointed out that in the proceeding pending be....
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.... bar to a writ petition, particularly where the question of initial jurisdiction or violation of rules of natural justice are concerned. This proposition is not denied by the respondent. But a clear distinction is to be made between cases where one is considering the mere existence of an alternative remedy, and cases where there exists an alternative remedy in law and that remedy is being actively pursued, giving rise to parallel proceedings. It is only in such cases that the above-mentioned principle applies and a writ application should fail or at least should not be allowed to be proceeded with, so long as the legal action is pending. Two decisions cited by Mr. Sen, however, call for consideration. One is a Supreme Court decision, Chandra Bhan Gosain v. State of Orissa. The facts in that case were as follows: The appellant manufactured and supplied large quantities of bricks to a company under a contract. These transactions were assessed to sales tax. The appellant contended that these were not sales which were subject to sales tax. He first of all filed appeals before the Sales Tax Appellate Tribunal against the orders of assessment. These appeals failed and the appellant appli....
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....reupon the petitioner made a writ application to compel the Election Tribunal to determine this preliminary point of jurisdiction. It was held that such an application was permissible. In my opinion, this case also is not to the point, Certainly, a person defending a legal action can always come to the writ court challenging jurisdiction of the legal tribunal to proceed with the action in suitable cases. It was not he who had brought the legal action, and this makes all the difference, the principle being that the same person cannot initiate and conduct two parallel proceedings, one in a court of law and another in an equity court. On the authorities cited before us, we must hold that this preliminary point has been substantiated and because the applicant has appealed to the Appellate Assistant Commissioner, which appeal is not only pending, but the proceedings are being actively pursued and even before us the petitioner says that he will continue to pursue it, he should not be allowed to pursue this application in the writ jurisdiction. This would have been sufficient to dispose of the application, but we shall not rest our decision on the preliminary point alone, but will deal w....
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....d to the Income-tax Officer the receipt of Rs. 20,65,705-13-0 in respect of the shares of the Associated Hotels, and such receipt had been held to be a capital receipt in respect of which no income-tax was payable. It is further stated that, in the return for the subsequent years, the interest on this amount had been duly disclosed and taxed. In the affidavit-in-opposition filed by Mahadevan Hariharan, Income-tax Officer, Central Circle VI, Calcutta, affirmed on 23rd November, 1961, paragraph 4 of the petition was dealt with in paragraph 6. It is peculiar that in this paragraph what has been stated is that the petitioner had filed a return for the year 1946-47, in which the receipt of the said sum was not disclosed nor brought to the notice of the Income-tax Officer, nor was it held to be a capital receipt, nor was the interest received on the said moneys included in the assessment of the petitioner. It will be seen that, while paragraph 4 deals with the assessment of 1945-46, the reply was with regard to the assessment of 1946-47. How this came about nobody can say. Mr. Mitra had to confess that this was an extremely negligent way of doing things. The question, therefore, is as to....
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....ns showed that the Income-tax Officer had ample reason to believe that income had escaped assessment. Mr. Sen strongly opposed our looking into these recorded reasons. I might also mention here that nowhere in the materials placed before us did his client ever state that the reasons had never been recorded. In our opinion, in order to decide the point it is not necessary to travel beyond the order of the Appellate Assistant Commissioner, exhibit H, read with the income-tax assessment orders for the relevant period which are under challenge. Obviously, the Appellate Assistant Commissioner looked into the records, which included the statements and other materials filed with the Income-tax Investigation Commission by the petitioner. The order of the Appellate Assistant Commissioner read with the Income-tax assessment orders show that even if the petitioner had disclosed in 1945-46 that he had sold certain shares in the Associated Hotels to Rai Bahadur Oberoi, the subsequent information that was received by the Income-tax Officer threw doubts on the nature and origin of the shares as also the nature of the sale. The previous disclosure was that he had a large number of shares in the As....
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....urther inquiry. Doubtlessly, these matters will be gone into when the appeal is finally determined. In our opinion, the petitioner has failed to establish that the pre-condition in section 34(1A) has not been fulfilled and, consequently, there was an initial lack of jurisdiction. It remains for me to deal with the last ground, namely, the objection as to the remand order made by the Appellate Assistant Commissioner. Mr. Sen has argued that the Appellate Assistant Commissioner has not really remanded the matter under section 37(2) of the said Act but has decided part of the appeal and has remanded the rest with direction to make a reassessment. If this is a correct description of the order made by the Appellate Assistant Commissioner, it is defective. Under sub-section (2) of section 31 the Appellate Assistant Commissioner may, before disposing of any appeal, make such further inquiry as he thinks fit or cause further inquiry to be made by the Income-tax Officer. In such cases, the assessment already made has not to be first set aside. That can only be done under sub-section (3b) of section 31. Under that provision the Appellate Assistant Commissioner can set aside the assessment a....