Calcutta High Court
Anand Kumar Saraf And Ors. vs Commissioner Of Income-Tax And Ors. on 29 July, 1993
Equivalent citations: [1995]211ITR562(CAL)
JUDGMENT Ajit K. Sengupta, J.
1. This appeal arises out of an order passed on March 31, 1989, by a learned single judge of this court, dismissing the writ petition filed by the appellant petitioner. The relevant facts leading to this appeal are as under :
The appellant is being assessed to both income-tax and wealth-tax for last several years. During the previous years relevant to the assessment years 1980-81 to 1985-86, the appellant writ petitioner derived income from proprietary business carried on by him at Surat in the names of Messrs. A.K. Textiles and Messrs. Rachna Textiles and at Calcutta in the name of Messrs. A.K. Saree Centre. The business of the said concerns was that of buying and selling sarees. During September 30, 1980, to January 17, 1983, the appellant writ petitioner operated a current account with the Oriental Bank of Commerce, Surat, in the name of his proprietary concern, Messrs. A.K. Textiles. During the period from June 9, 1983, onwards, the appellant writ petitioner operated another current account with the Oriental Bank of Commerce, Surat branch, in the name of Messrs. A.K. Textiles. During the period from October 9, 1983, the writ petitioner operated a current account with the State Bank of India, Tharpa Bazar, Surat, in the name of his proprietary business "Rachna Textiles". Further, during the period from May 3, 1979, to April 20, 1983, the appellant writ petitioner operated a current account with Catholic Syrian Bank Ltd., Burra Bazar Branch, Calcutta, in the name of his proprietary concern "Messrs. A.K. Saree Centre".
2. It is an admitted fact that the appellant writ petitioner did not include the income derived by him from the aforesaid three proprietary concerns in his returns of total income filed in respect of the previous years relevant to the assessment years 1981-82 to 1985-86.
3. On or about March 7, 1986, a search was conducted by the income-tax authorities in exercise of the powers vested in them under Section 132(1) of the Income-tax Act, 1961, at the residential premises of the appellant writ petitioner at P-2, Kalakar Street, Calcutta, as well as at the business premises of five different firms, namely, "Jaree and Saree Stores", "Saraf Saree Centre", "Annapurna Textiles", "Sanwalram Raj Kumar" and "Gouri Shankar Saraf" at 212, Mahatma Gandhi Road, as well as at Ramkumar Rakshit Lane, Calcutta, In the course of the said search, certain jewellery and ornaments and a sum of Rs. 2,600 in cash were found in the bedroom of the appellant writ petitioner. None of these items were seized by the income-tax authorities. On the same date, namely, March 7, 1986, the business premises of the partnership firm, Messrs. Annapurna Textiles, Surat, of which the appellant writ petitioner, was a partner in his capacity as karta of a Hindu undivided family was sealed by the income-tax authorities. Subsequently, on March 26, 1986, the seals on the said business premises of the said Annapurana Textiles, Surat, were removed and the searching officials came across certain cheque books and pay-in-slips in respect of the two bank accounts, namely, Current Account No. 253 with the State Bank of India in the name of Messrs. Rachna Textiles and the Current Account No. 1469 with the Oriental Bank of Commerce in the name of Messrs. A.K. Textiles. These two were the proprietary concerns of the appellant writ petitioner. The income of these two proprietary businesses had not been disclosed by the appellant writ petitioner in the income-tax returns filed by him so far. These cheque books and pay-in-slips were seized from the office of Messrs. Annapurna Textiles and the fact of such seizure was noted in the panchnama drawn in the name of the said firm.
4. On or about March 31, 1986, the appellant writ petitioner filed revised returns of income and wealth under the amnesty scheme administered by the Central Board of Direct Taxes through its various Circulars, bearing numbers 423(See [1985] 155 ITR (St.) 45), 432(See [1985] 156 ITR (St.) 162), 439(See [1985] 156 ITR (St.) 163), 440(See [1985] 156 ITR (St.) 164), 441(See [1985] 156 ITR (St.) 165), 450(See [1986] 158 ITR (St.) 134), 451(See [1986] 158 ITR (St.) 135), 453(See [1986] 159 ITR (St.) 9), 456(See [1986] 159 ITR (St.) 123), 472(See [1986] 162 ITR (St.) 17) and 474(See [1986] 162 ITR (St.) 57). Under the said amnesty scheme, taxpayers were invited to come forward and file returns of income and wealth disclosing therein their true income and wealth irrespective of what the assessees might have done earlier. It was represented by the Board that such taxpayers need not have any apprehension that they would be subjected to any penalty or prosecution so long as they came forward to declare their correct income and wealth suo motu before the Tax Department. The taxpayers were also invited to disclose their true income and wealth even in respect of past assessment years irrespective of whether the assessments for those years were pending or completed. It was represented by the Board that the taxpayers would have to pay taxes at the rates applicable to those years, but would not be subjected to any penalty or prosecution.
5. It was further represented that interest would be waived in all such cases. The said amnesty scheme was extended from time to time up to March 31, 1987, and was made applicable in the case of returns of income and wealth for the assessment year 1986-87 and earlier assessment years. In its Circular bearing No. 451 (see [1986] 158 ITR (St.) 135), dated February 17, 1986, the Central Board of Direct Taxes issued certain clarifications on the Press Note issued by it in connection with the said amnesty scheme. Questions Nos. 7, 12, 19 and 30 contained in the said Circular bearing No. 451 (see [1986] 158 ITR (St.) 135) and the replies thereto are relevant for the purpose of this appeal and the same are set out hereunder (at pages 136, 137, 138, 139) :
"Question No. 7 : Where the investigations in the case of persons other than the assessee indicate concealment of income by the assessee and the assessee makes a true and full disclosure of his income, would he be entitled to immunity under these circulars ?
Answer : Yes."
" Question No. 12 : Can immunity given by the circulars be availed of by assessees whose premises have been searched by the tax authorities ?
Answer : No."
"Question No. 19 : Kindly clarify the expression 'before detection by the Department' ?
Answer : If the Income-tax Officer has already found material to show that there has been concealment, that would mean that the Department has detected the concealment. If the Income-tax Officer only had prima facie belief that would not mean concealment has been detected."
"Question No. 30 : Whether an assessee could make a declaration in respect of assets or income which is not the subject-matter of seizure ?
Answer : Yes, if it has not been already found out in the course of the search."
6. In the covering letter dated March 31, 1986, accompanying the revised return filed by the appellant writ petitioner, it was, inter alia, stated that the income now declared in respect of the assessment years 1981-82 to 1985-86 included income derived from business done by him in the names of Messrs. A.K. Saree Centre, Messrs. A.K. Textiles, Surat, and Messrs. Rachna Textiles, Surat. It was also stated that this declaration covered all transactions which were incorporated in the books and documents seized by the Department in the course of search carried out in the office and residential premises on March 7, 1986. The assessee requested that no penalty should be initiated and all interest leviable under Sections 139(8), 215/217 of the Income-tax Act, 1961, should be waived. The appellant writ petitioner also filed wealth-tax returns in respect of the assessment years 1982-83 to 1985-86 including therein the assets represented by the income so disclosed in the revised returns of income filed as aforesaid.
7. The Income-tax Officer completed both the income-tax and wealth-tax assessments of the appellant writ petitioner, but did not grant the benefit of amnesty scheme to the assessee on the ground that revised returns were filed after the search carried out by the authorities at the office and residential premises of the assessee and in the course of such search, certain documents relevant to the income and wealth now disclosed by the assessee had been duly seized.
8. The appellant writ petitioner, however, contended before the tax authorities that he was entitled to declare the hitherto undisclosed income of his said two proprietary businesses, namely, Messrs. A.K. Textiles and Messrs. Rachna Textiles, under the amnesty scheme for the following reasons :
(a) No books of account or documents were seized from the possession of the assessee writ petitioner in the course of the said search. The jewellery and cash found in the course of the search were also not seized,
(b) The cheque books and pay-in-slips in respect of the said two bank accounts in the names of Messrs. A.K. Textiles and Messrs. Rachna Textiles were recovered from the possession of Messrs. Annapurna Textiles of Surat and included in the purported panchnama prepared in the name of the said firm. The said cheque books and pay-in-slips did not indicate the name of the proprietor. The said bank accounts were in existence from 1983 onwards.
(c) No examination of the said bank accounts was made by the Income-tax Officer assessing the writ petitioner till March 31, 1986. The Income-tax Department did not have even a prima facie belief with regard to the said bank accounts.
(d) Further, the Income-tax Department had no idea whatsoever as to whether the said bank accounts related to regular disclosed business transactions or not.
(e) Until March 31, 1986, the Income-tax Department had not come to know that the said bank accounts belonged to the writ petitioner and/ or that these were not disclosed in the returns filed so far.
(f) Furthermore, in the course of the said search, the searching officials did not at all come across the other two bank accounts being Account Nos. 507 and 884 with the Catholic Syrian Bank in the name of A.K. Saree Centre and with the Oriental Bank of Commerce, Surat, in the name of A.K. Textiles, respectively. Income disclosed through these bank accounts were not found by the Department but were being voluntarily disclosed by the/writ petitioner.
9. On or about November 1, 1988, the appellant writ petitioner wrote a letter to the Commissioner of Income-tax, pointing out that although he had filed income-tax and wealth-tax returns under the amnesty scheme, the Assessing Officer had initiated penalty proceedings both under the Income-tax Act and the Wealth-tax Act and had also charged interest. The Commissioner of Income-tax was requested by the appellant writ petitioner to delete the interest charged by the Income-tax Officer and drop the penalty proceedings initiated in the course of the assessments already completed and not to charge interest or penalty in respect of the pending assessments. It appears that the Commissioner of Income-tax on November 11, 1988, passed the following order :
"Anand Kumar Saraf, assessment years 1980-81 to 1985-86 :
Miscellaneous order :
After going through the facts of the case, I am of the opinion that the benefit of amnesty scheme be given to the assessee for all the years for which the assessee has submitted the returns under that scheme both under the Income-tax Act and the Wealth-tax Act."
10. On or about February 23, 1989, the Commissioner of Income-tax issued the impugned notice under Section 154 of the Income-tax Act, 1961, proposing to rectify certain errors, which, according to him, were apparent from the record in the Miscellaneous Order dated November 11, 1988, passed by his predecessor-in-office. The appellant writ petitioner through his tax consultant's letter of March 11, 1989, sought clarification as to the nature of mistakes which were sought to be rectified through the said impugned notice. The Commissioner of Income-tax, West Bengal-VI, Calcutta, issued necessary clarifications through his letter of March 7, 1989. It was stated by the Commissioner that the miscellaneous order passed by his predecessor-in-office on November 11, 1988, was erroneous and a mistake had crept therein inasmuch as the said order was passed under a mistaken belief that the income-tax and wealth-tax returns filed by the appellant writ petitioner were covered by the amnesty scheme. The succeeding Commissioner of Income-tax, West Bengal-VI, now felt that the returns filed by the appellant writ petitioner were not covered by the amnesty scheme and he, therefore, wanted to rectify the miscellaneous order passed by his predecessor-in-office under Section 154 of the Income-tax Act, 1961, as well as under Section 35 of the Wealth-tax Act, 1957.
11. At this stage, the appellant writ petitioner moved a writ petition under Article 226 of the Constitution challenging, inter alia, the initiation of proceedings under Section 154 of the Income-tax Act, 1961, as well as Section 35 of the Wealth-tax Act, 1957, by the said impugned notice dated February 23, 1989, issued by the Commissioner of Income-tax, West Bengal-VI, Calcutta. This writ petition was dismissed by an order dated March 31, 1989, passed by Mr. Justice Manoj Kumar Mookherji. The said order was in the following terms :
"Having regard to the observations made by the Supreme Court in the case of Titaghur Paper Mills Co. Ltd. v. State of Orissa, and the fact that the Income-tax Act, 1961, provides for a complete machinery through which the petitioner will be able to challenge any order, if made adverse to his interest pursuant to the impugned notice and that the impugned notice does not suffer from any jurisdictional infirmities, I reject this application."
12. The appellant writ petitioner thereafter filed an appeal with a stay petition. The following order was passed on such appeal by the Division Bench of this court on August 11, 1989 :
"It has been clarified on behalf of the Revenue that the grounds on which the impugned proceedings under Section 154 of the Income-tax Act, 1961, had been initiated have been precisely set out in the affidavit-in-opposition dated July 13, 1989, filed by Indu Kumar Nandi, and more particularly, in paragraphs 3 to 6 thereof and that the appellant-petitioner will require to meet only those grounds and none other.
On the facts and in the circumstances of the case, we are of the view that the appellant-petitioner should, without prejudice to his rights and contentions, and more particularly, without prejudice to the contention that the proceedings in question are wholly without jurisdiction, show cause against the proposed action. He will be at liberty to take the point of jurisdiction before the competent authority, who will decide the said issue without in any manner being inhibited or influenced by anything which has happened during the course of judicial proceeding in the trial court and the pendency of the present appeal. He will be afforded all reasonable opportunity to contest or controvert the materials sought to be relied on against him and also given personal hearing himself or through his accredited representative including a tax consultant or advocate. The order which may ultimately be passed in the course of such proceedings will not be enforced for a period of four weeks from the date of service thereof on the appellant-petitioner who will have liberty to challenge the same by way of a supplementary affidavit in the present proceeding on all available grounds.
The applicant-petitioner will show cause on or before September 15, 1989. The proceedings will conclude in accordance with law and keeping in view the observations made in the course of this order by passing the final order on or before December 31, 1989. Liberty is reserved to the appellant-petitioner to file a fresh application seeking appropriate interim relief, if any, after the service of such order.
The application is disposed of in terms of the foregoing order."
13. Pursuant to the leave granted by the appeal court, the appellant writ petitioner appeared before the Commissioner of Income-tax, West Bengal-VI, Calcutta, and contested the validity of the rectificatory proceedings initiated by the said impugned notice dated February 23, 1989, proposing to rectify the miscellaneous order dated November 11, 1988, passed earlier in his case. The Commissioner of Income-tax, West Bengal-VI, Calcutta, however, felt that the initiation of rectificatory proceedings was in order and that the law nowhere provided for the passing of such an omnibus order like the miscellaneous order dated November 11, 1988, under any provision either of the Income-tax Act, 1961, or the Wealth-tax Act, 1957, The Commissioner felt that the search and seizure cases have been treated as a separate category under the amnesty circulars and in answer to question No. 12 of Circular No. 451 (see [1986] 158 ITR (St.) 135), dated February 17, 1986, it was made very clear by the Central Board of Direct Taxes that immunity under the amnesty scheme could not be availed of by persons whose premises had been searched.
14. The Commissioner of Income-tax, therefore, passed the rectificatory order on January 1, 1990, holding that the miscellaneous order dated November 11, 1988, was not a legal and proper order and that the appellant writ petitioner was not entitled to the benefit of the amnesty scheme, since this was a case of search and seizure.
15. The appellant-writ petitioner thereafter affirmed a supplementary affidavit also challenging the legality or validity of the said order dated January 1, 1990, passed by the Commissioner of Income-tax under Section 154 of the same Act along with an application seeking stay of operation of the said order dated January 1, 1990, passed by the Commissioner of Income-tax, West Bengal-VI, Calcutta.
16. At the outset, we must observe that the learned judge dismissed the writ application solely on the ground that the appellant-writ petitioner has an alternative remedy under the Income-tax Act, 1961. Existence of an alternative remedy is not an absolute bar to the issue of a writ. If the conditions precedent for assumption of jurisdiction under Section 154 were not satisfied, in that event, the concerned officer could not have any jurisdiction to initiate proceedings for rectification. If the absence of jurisdiction is apparent, the court should interfere in a writ proceeding. It has been laid down by the Supreme Court in Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 that the question whether there is a mistake apparent from the record or not pertains to the question of jurisdiction of the concerned officer to initiate proceedings for rectification. In that view of the matter, we are unable to uphold the ground on which the writ application was dismissed.
17. In this appeal, we are concerned with the legality and/or validity of the notice dated February 23, 1989, issued by the Commissioner of Income-tax, West Bengal-VI, Calcutta, under Section 154 of the Income-tax Act, 1961, and the subsequent order dated January 1, 1990, passed by his successor-in-office holding that the original miscellaneous order dated November 11, 1988, passed by his predecessor-in-office was not valid and it disclosed a mistake apparent from the records and that the appellant-writ petitioner was not entitled to any benefit of the amnesty scheme since this was a case of search and seizure.
18. The short point for consideration in this case is whether an assessee whose premises had been searched before the filing of revised returns under the amnesty scheme is entitled to the benefits of the amnesty scheme. As already stated earlier, the amnesty scheme was announced by the Central Board of Direct Taxes through Press Notes and the same was administered through various Circulars issued by the Central Board of Direct Taxes from time to time. Circular No. 451 (see [1986] 158 ITR (St.) 135), dated February 17, 1986, purported to explain the various questions raised in connection with the amnesty scheme. Four questions, namely, questions Nos. 7, 12, 19 and 30, which are relevant in this context have already been quoted earlier.
19. It is true that in answer to question No. 12, the Central Board of Direct Taxes clarified that no immunity given by the circular can be availed of by the assessees, whose premises had been searched by the tax authorities, the Central Board of Direct Taxes proceeded to clarify in answer to question No. 30 in the same circular that an assessee could make a disclosure in respect of assets or income which had not been found in the course of the search. In answer to question No. 19, seeking clarification as to the meaning of the expression "before detection by the Department", the Central Board of Direct Taxes further clarified that "if the Income-tax Officer had already found materials to show that there had been concealment, that would mean that the Department had detected the concealment. If the Income-tax Officer had only prima facie belief that would not mean that the concealment had been detected".
20. A combined reading of the answers to all these questions and in particular to different questions and answers in the said Circular No. 451 (see [1986] 158 ITR (St.) 135), as a whole leads us to believe that an assessee whose premises had been searched could not claim immunity and other benefits given in the amnesty scheme only in respect of assets or income which had been found and/or seized by the tax authorities before the filing of revised returns by the assessee concerned and also in those cases where the tax authorities had looked into the seized papers and had carried out some investigation (before the furnishing of revised returns by the assessee) to show that the income now declared in the revised return had already been detected by the Department from the papers and documents found and seized in the course of the search.
21. In this case, we find that the search was carried out at the residential premises of the petitioner on March 7, 1986, at Calcutta and on March 26, 1986, at Surat. It is true that certain documents had been found and seized in the course of the said search, but none of these documents had been scrutinised by the tax authorities prior to March 31, 1986, when the assessee-appellant herein filed revised returns both for income-tax and wealth-tax.
22. It is an admitted fact that the assessee disclosed fully and truly his income and wealth in such revised returns and had also paid taxes in due time as provided under the amnesty scheme. Since the Department had not looked into the seized papers and had not carried out investigation prior to March 31, 1986, it cannot be said that by the mere fact of seizure, the tax authorities could be said to have even a prima facie belief that the concealment of income and wealth by the assessee had been detected. Even if there had been such prima facie belief, the existence of such belief could not deprive the assessee from claiming the immunity and benefits given under the amnesty scheme provided the assessee disclosed his true income and wealth in the revised returns and paid taxes based on such revised returns in due time as prescribed in the amnesty scheme. This has been clearly explained by the Central Board of Direct Taxes in reply to question No. 19 in the said Circular No. 451 (see [1986] 158 ITR (St.) 135), dated February 17, 1986.
23. On the facts and circumstances of this case, it cannot be said that the tax authorities had detected concealment merely by having seized certain books and papers a few days before the furnishing of revised returns by the assessee. In order to show that a concealment had already been detected, it was obligatory on the tax authorities to look into the seized books and documents, verify the entries therein with the income already disclosed by the assessee in his original returns and thereafter if the tax authorities had found that certain income, although found to be reflected in the seized books and records, had not been disclosed by the assessee in the original returns, it could have been said that the concealment had already been detected by the Department prior to the furnishing of revised returns. This is not the case here.
24. The mere stigma of search and seizure cannot shut out the assessee from the amnesty. The scheme is an inducement to evaders to make a clean breast of past evasions and square up accounts with the Revenue. The persons who are left out from this opportunity are those whose concealments have come to light beforehand by investigations and search and seizure operations carried out by the Revenue. The clarifications of the Board in its answer to question No. 19 as to the meaning of the expression "before detection by the Department" show that if the assessing authority has a prima facie belief that would not mean detection. The dictionary meaning of the word "detect" is "to discover the true especially hidden or disguised character" or "to discover or determine the existence, presence or fact" (see Webster's Third New International Dictionary, 1976 edition). In the instant case, certain documents and papers were seized. They might or might not reveal concealment. Even the seizure could not lead to a prima facie belief as to concealment as the contents, purport and the implications of the documents were yet to be gone into. Therefore, at the point of time the return under the amnesty scheme was filed, the Assessing Officer admittedly had no idea as to whether the seized papers would reveal any concealment. The mere fact that the petitioner-appellant's case was awaiting a probe with reference to his past records as well as extrinsic sources could not lead to his ouster from the scope of the scheme.
25. Furthermore, the scope of proceedings under Section 154 of the Income-tax Act, 1961, is very limited. It is by now well-settled that an issue which is debatable or on which there could conceivably be two opinions cannot be the subject-matter of rectification. A glaring and obvious mistake either of fact or law can alone be corrected under Section 154.
26. On the facts and circumstances of this case, in our view, the impugned notice issued by the Commissioner of Income-tax on February 23, 1989, was clearly without jurisdiction and, therefore, all proceedings taken in pursuance thereto including the impugned order dated January 1, 1990, passed in this case under Section 154 of the Income-tax Act, 1961, must be held to be without jurisdiction, illegal, invalid and void ab initio.
27. We, accordingly, allow this appeal and quash both the impugned notices dated February 23, 1989, as well as the order dated January 1, 1990, passed by the Commissioner of Income-tax under Section 154 of the said Act in response thereto.
28. There will be no order as to costs.
Bhagabati Prasad Banerjee ,J.
29. I agree.