Allahabad High Court
Kamal Krishan Shukla vs Commissioner Of Income-Tax And Ors. on 7 December, 1987
Equivalent citations: (1988)69CTR(ALL)105, [1988]173ITR170(ALL), [1988]39TAXMAN64(ALL)
Author: R.M. Sahai
Bench: R.M. Sahai
JUDGMENT Om Prakash, J.
1. Prayer of the petitioner is that a writ in the nature of certiorari be issued for quashing the ex parte assessment orders, made by respondent No. 2 for the assessment years 1963-64, 1964-65 and 1965-66 on the firm, Badshah Pasand Karyalaya, and for quashing the proclamation dated March 24, 1987 (annexure 1 to the writ petition), for auctioning the house No. 74/110, Dhan Kutti, Kanpur, and that a writ be issued in the nature of mandamus directing the respondents not to proceed with the recovery on the basis of the ex parte assessment orders.
2. Brief facts are that one Laxmi Narain Shukla, who was engaged in the business of manufacture and sale of pan masala in the name Badshah Pasand Pan Masala, died on March 23, 1959, leaving behind his wife, Smt. Bitti Kunwar, his sons, Chunni Lal Shukla, Munna Lal Shukla and the petitioner. It is averred that after the death of Laxmi Narain Shukla, his son, namely, Chunni Lal Shukla, formed a partnership on March 23, (sic) 1959, which, purportedly, comprised six partners, viz., three sons of Laxmi Narain Shukla, his widow and two sons of Chunni Lal Shukla. Smt. Bitti Kunwar disputed the genuineness of the partnership deed of that firm and she averred that the partnership deed as well as Form No. 11 never bore her thumb impressions. It is averred that the petitioner started a separate business with his brother, Munna Lal Shukla, and mother, Smt. Bitti Kunwar, in 1961, in the name and style, Badshah Pasand Karyalaya. For such business, the petitioner filed a return for the assessment year 1963-64 in the status of a Hindu undivided family and returns for the assessment years 1964-65 and 1965-66 were filed on behalf of the firm, Badshah Pasand Karyalaya, which was constituted under the partnership deed dated October 11, 1962, by the petitioner, Munna Lal Shukla and Smt. Bitti Kunwar. In para. 6 of the petition, the averment is that Chunni Lal Shukla carried on a separate business in the same name and style in which the business was later carried on by the partnership firm constituted by the petitioner, Munna Lal Shukla and Smt. Bitti Kunwar. Chunni Lal Shukla, therefore, filed Suit No. 4 of 1963 in the civil court against the partners of the firm, Badshah Pasand Karyalaya, that the latter infringed the trade mark of the former's business and claimed a mandatory injunction against the partners that they be restrained from carrying on the business in the name and style in which the business was being carried on by Chunni Lal. In this civil suit, a receiver was appointed at the instance of Chunni Lal Shukla on May 21, 1966. It is said that the receiver had no concern with the business started under the partnership deed dated March 23, 1959, and October 11, 1962. The Income-tax Officer framed an assessment for the assessment year 1963-64 on March 19, 1968, pursuant to the return which was filed by the petitioner in the status of a Hindu undivided family and for the assessment years 1964-65 and 1965-66, the assessments had been made on December 11, 1970, pursuant to the returns which the petitioner filed in the name of the firm, Badshah Pasand Karyalaya. All the three assessments were, however, made in the status of an association of persons. The income-tax returns for all the three years were not accepted and the assessments had been made on larger amounts under Section 144 of the Income-tax Act, 1961 (for short, " the Act, 1961 ").
3. The receiver, who was appointed on May 21, 1966, filed returns for the years 1966-67 to 1970-71 and he also made an application under Section 146 of the Act, 1961, to set aside the ex parte assessment orders.
4. As the ex parte orders were not set aside, the Income-tax Officer issued recovery certificate to the Tax Recovery Officer, who attached house No. 74/110, Dhan Kutti, Kanpur, belonging to Smt. Bitti Kunwar, one of the partners of the firm, Badshah Pasand Karyalaya, vide order dated February 20, 1969, which was later set aside. The same property was again attached, vide order dated May 18, 1974. Smt. Bitti Kunwar filed objections against the attachment on November 16, 1979, which was dismissed on March 12, 1984. A proclamation was then issued for auctioning the aforesaid house.
5. The daughters of Smt. Bitti Kunwar filed a writ petition on December 15, 1986, challenging the attachment of the house, belonging to their mother on the ground that the house devolved on them after the death of Smt. Bitti Kunwar, who died on December 10, 1980, and that the recovery proceedings against that property were null and void. The said writ petition was dismissed summarily on December 15, 1986.
6. The petitioner then filed the instant writ petition raising the contentions that neither notices under Section 143(2) of the Act, 1961, nor the assessment orders and the demand notices were served on the partners of the firm, Badshah Pasand Karyalaya, and, therefore, no recovery proceeding could be pursued against the partners and their property. It is, therefore, prayed that all the ex parte assessment orders and proclamation issued for auctioning the house be quashed and that the respondents be restrained from pursuing the recovery proceedings on the basis of the ex parte assessment orders.
7. Counter-affidavit was filed on behalf of respondents Nos. 2 and 3 stating that the notices under Section 143(2) of the Act, 1961, and the assessment orders and demand notices had been duly served on the receiver for all the assessment years 1963-64 to 1965-66. It is averred that since Smt. Bitti Kunwar was a beneficial member of the association of persons on which the assessments were made for all the three years, she was jointly and severally liable to pay the outstanding demand and, therefore, the recovery proceedings by way of auction of her house are valid. It is stated that the receiver was authorised to conduct the entire business and other activities of the concern, known as Badshah Pasand Karyalaya, and, therefore, he was legally competent to receive notices, copies of the assessment orders and the demand notices. It is averred that all the members of the association of persons were well aware of the assessment proceedings and that they cannot escape the tax liability by wrongly pleading that they were not aware of the assessment proceedings and that the assessment orders/demand notices were not served on them.
8. We have heard learned counsel for the parties at some length. It is not disputed that the notices issued under Section 143(2) and the assessment orders/demand notice were served on the receiver. What is contended by Sri V.K. Upadhya, learned counsel for the petitioner, is that the receiver appointed on May 21, 1966, by the order of the civil judge, had no concern with the business of the firm on whom the demand was raised for the assessment years 1963-64 to 1965-66 in the status of an association of persons. It is contended that the receiver was appointed in the year 1966 for a different firm comprising of six partners, which was started under the partnership deed dated March 23, 1959. The question is what is the basis of the submission that the receiver was appointed for the firm, constituted by six partners under the partnership deed dated March 23, 1959. There is no material on record to link the partnership firm for and on behalf of which returns were filed by the receiver for the assessment years 1966-67 to 1970-71 and the firm, constituted under the deed dated March 23, 1959. Sri Upadhya urges that the firm, for which the receiver was appointed, is entirely different from the firm, which was constituted under the deed dated October 11, 1962, by three partners for which the returns were filed by the petitioner for the assessment years 1964-65 and 1965-66. We do not see any basis for this contention of Sri Upadhya but his argument seems to have been based merely on conjectures and surmises. It appears that he made this argument simply on the basis that the constitution of the firm which remained in existence in the subsequent assessment years 1966-67 to 1970-71 for which returns were filed by the receiver, matched with the constitution of the firm which purports to have been constituted under the deed dated March 23, 1959. Simply because the two constitutions coincide, it cannot be said that the firm which was in existence in the subsequent assessment years 1966-67 to 1970-71 sprang up from the partnership deed dated March 23, 1959. The constitution of a firm may undergo a change at any time within an assessment year. Simply because a deed was written on March 23, 1959, showing the constitution of a firm by six partners, no sound submission could be made that the firm comprising the same partners during the assessment years 1966-67 to 1970-71 had a link or nexus with the partnership deed dated March 23, 1959. There is nothing on record to show that the partnership formed under the deed dated March 23, 1959, as stated in para 2 of the petition continued to exist year after year and continued in all the subsequent assessment years 1966-67 to 1970-71. It is not shown that the firm constituted under the deed dated March 23, 1959, filed returns year after year or submitted Form No. 12 for seeking renewal of registration year after year and that the same firm continued for all the assessment years 1966-67 to 1970-71. Rather, there is enough material on record to show that when the genuineness of the deed dated March 23, 1959, was disputed by Smt. Bitti Kunwar, Chunni Lal Shukla started a separate business and the petitioner along with Munna Lal Shukla and Smt. Bitti Kunwar started their separate business. In paras 3 and 6 of the writ petition, it is clearly averred that Chunni Lal Shukla started his separate business and the petitioner along with his another brother and mother started separate business in the name and style of Badshah Pasand Karyalaya. There is no averment in the writ petition that the firm constituted under the deed dated March 23, 1959, carried on and continued the business till the assessment year 1970-71. So, the genesis of the firm for which returns were filed by the receiver for the assessment years 1966-67 to 1970-71 cannot be attributed to the deed dated March 23, 1959. On the other hand, the record plainly shows that the firm, Badshah Pasand Karyalaya, constituted by three partners under the deed dated October 11, 1962, continued with the changed constitution during the subsequent assessment years 1966-67 to 1970-71. Whereas, there were three partners of the said firm during the assessment years 1964-65 and 1965-66, the firm was constituted by six partners in the following years till the assessment year 1970-71. There is no case that two firms, bearing the same name and style, Badshah Pasand Karyalaya, simultaneously existed during the assessment years 1964-65 and 1965-66 and that the firm under the same name and style continued right from March 23, 1959, to the assessment year 1970-71.
9. The petitioner having failed to establish that the receiver was appointed in May, 1966, for an entirely different firm which was formed under the deed dated March 23, 1959, the submission that he had no concern with the firm constituted under the deed dated October 11, 1962, cannot be accepted. Therefore, the submission of Sri Upadhya that the receiver was wholly a stranger to the business of the firm constituted under the deed dated October 11, 1962 is not sustainable. Unless the contrary is shown by the petitioner, it has to be accepted that the firm, Badshah Pasand Karyalaya, was formed by the three partners during the assessment years 1964-65 and 1965-66 and that firm continued with the constitution of six partners in the subsequent years at least till the assessment year 1970-71 up to which returns were filed by the receiver.
10. Then, it was argued by Sri Upadhya that the receiver was appointed in May, 1966, and, therefore, he was not legally competent to receive the notices under Section 143, assessment orders and demand notices pertaining to the earlier assessment years for and on behalf of the firm, Badshah Pasand Karyalaya. In the counter-affidavit, it is averred that the receiver was appointed to look after the total activities of the firm, Badshah Pasand Karyalaya, and that by virtue of his duties, he was well within his rights to receive assessment orders and demand notices for and on behalf of the firm. In para 19 of the counter-affidavit, the respondents do not dispute the legal proposition that the receiver had no concern with the business of the earlier years but what is stated is that ".....during the pendency of the assessment proceedings for those eriods, he was justified in attending to the proceedings of assessment and receiving the notices for the period for which he was not concerned". In the instant case, we need not enter into the legal verbiage whether or not the receiver was entitled to receive the notices issued under Section 143, the assessment orders and the demand notices pertaining to the assessment years 1963-64 to 1965-66, but, what is more important is the question whether the partners of the firm, Badshah Pasand Karyalaya, as it was during the assessment years 1964-65 and 1965-66 and whether the members of the Hindu undivided family which carried on business in the assessment year 1963-64 were aware of the assessments and demand notices right from the beginning. If we reach the conclusion that all the three persons who carried on business in the consecutive assessment years 1963-64 to 1965-66 as members of the Hindu undivided family or as partners of the firm were fully aware of the assessment proceedings right from the inception, then there would be no justification for giving any relief sought for by one of them under Article 226 of the Constitution which confers discretionary jurisdiction on this court. If it is established that these persons possessed knowledge of the assessment proceedings right from the beginning, then there will be no equity in their favour to invoke the jurisdiction of this court under Article 226 as late as in the year 1987 to frustrate the assessment proceedings culminating in the recovery proceedings. For getting equitable relief, the petitioner must come with clean hands and if the state of affairs is otherwise, then, the court must refuse to exercise its extraordinary jurisdiction to quash the proceedings.
11. Let us take note of some undisputed facts. The order dated March 12, 1984 of the Tax Recovery Officer (annexure 5 to the supplementary affidavit) shows that the attachment of the house No. 74/110, Dhan Kutti, Kanpur, was made for the first time on February 20, 1969. The assessment for the assessment year 1963-64 was made in the status of association of persons on March 19, 1968. It cannot be believed in any case that Smt. Bitti Kunwar to whom the attached house belonged and her two sons who conjointly carried on the business with her, remained oblivious of the assessment proceedings. When the property of one of the partners was attached, the partners would have started making investigation in the ordinary course and then they would have known the precise nature of the proceedings having been taken up against them giving rise to the attachment or the recovery proceedings. All the three partners having proximate relationship with each other would have acted immediately after the attachment made, vide order dated February 20, 1969, and made all possible enquiries about the proceedings leading to attachment. In para 37 of the supplementary affidavit, it is stated that "....the petitioner and other partners since 1969 are making sincere efforts to get the copies of the assessment orders and notices of demand but the Income-tax Officer, respondent No. 2, has not served the same." The veracity of this averment has to be tested. There is no averment that the receiver was in any way hostile to the petitioner and to his two other partners who constituted the firm during the assessment years 1964-65 and 1965-66. Admittedly, the receiver received the assessment orders and demand notices and on the facts of the case, it is difficult to comprehend as to why the petitioner and his two other partners failed to obtain the assessment orders and demand notices from the receiver who was appointed to look after the business of the firm, which comprised of the petitioner and his two other partners, inter alia, in the assessment year 1966-67 and onwards. For the above reasons, it cannot be believed that the petitioner and his companions made sincere efforts to get the copies of the assessment orders and the demand notices. The petitioner having admittedly possessed knowledge of the assessment orders way back in the year 1969, we fail to understand why steps were not taken by the petitioner to undo the assessment proceedings right from the beginning, i.e., in the year 1969, and why he kept on waiting till 1987, when the instant petition was filed. The facts clearly show that the petitioner kept on waiting for quite some time and right from the year 1969, he and his co-partners acted in a planned manner to defeat the recovery proceedings initiated by the Department. Smt. Bitti Kunwar filed belated objections on November 16, 1979, against the attachment made twice first under the orders dated February 20, 1969, and then under the orders dated May 18, 1974. Then, the petitioner managed to file a writ petition on December 16, 1986, through the daughters of Smt. Bitti Kunwar who claimed that the house of their mother which was attached devolved upon them after her death in December, 1980. In the affidavit dated May 8, 1987, the petitioner has deposed that he alone lives in the house No. 74/110 which was attached and that rental income from that house is the only source of his livelihood. He further deposed that all the four daughters of Smt. Bitti Kunwar having been married, ceased to have any concern with the house and " for all practical purposes, the deponent is now the sole legal heir of late Smt. Bitti Kunwar ". This clearly shows a systematic device of the petitioner and his co-partners being made from time to time. In the beginning, only after considerable time, objection was filed by Smt. Bitti Kunwar and then a petition was got filed through the daughters of Smt. Bitti Kunwar. When they failed to succeed, the petitioner having had no other option but to save the property from being sold, brought the instant petition.
12. Also, it was argued by Sri Upadhya that the receiver who was examined by the Income-tax Officer himself deposed that he had not given any information to the petitioner. On the facts and circumstances of the case, it is difficult to believe that no information was passed on by the receiver. There is no suggestion that the receiver was hostile to the petitioner and to his co-partners. Rather, the record shows that the receiver had made an application under Section 146 to set aside the ex parte assessment orders. The conduct of the receiver in resorting to the proceedings for setting aside the ex parte assessment orders leads to the conclusion that he was interested in the partners of the firm, created under the deed dated October 11, 1962 and, therefore, the case that no information was passed on by the receiver to the petitioner and to his co-partners, cannot be accepted.
13. Sri Upadhya relied on M.L. John v. ITO, [1983] 139 ITR 972 (All), decided with other cases. In the said case, the question was whether a receiver appointed for a successor firm could be assessed for the predecessor firm. This question was answered in the negative. This authority is misplaced inasmuch as the question of the receiver being assessed for the assessment years 1963-64 to 1965-66 is not before us.
14. The facts of this case are almost similar if not identical to the facts of the case Sri Krishna v. CIT, [1983] 142 ITR 618 (All), wherein it was held that the conduct of the petitioner himself should be seen and if that runs counter to the averments made in the petition, then the relief prayed for would he refused. The conduct of the petitioner in the instant case is such which does not induce us to accept the creditworthiness of his case and, therefore, we decline to grant the relief sought for by the petitioner.
15. The petition, therefore, fails and is dismissed. There will be no order as to costs.