TMI Blog1981 (11) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... adu Pondicherry) Ltd. is subsidiary of National Textile Corporation Ltd. (an undertaking of Government of India) and had taken over the business of a sick mill owned by Cambodia Mills Ltd. with effect from 1-4-1976 by virtue of section 5(1) of the Sick Textile Undertakings (Nationalisation) Act, 1974 (hereinafter referred to as "the Nationalisation Act"), after such business was first vested with the Central Government on that date on payment of compensation of Rs. 64.40 lakhs to the erstwhile owner, viz., Cambodia Mills Ltd. The amount to which the dispute relates is comprised of the following taxes : Assessment year Nature of tax Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession, (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor, and all the provisions of this Act shall, so far as may be, apply accordingly. (3) When any sum payable under this section in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be recovered from him" and after the ITO records a finding to that effect. It is for this reason that the ITO recorded a "finding" in the impugned order that the amount of arrears could not be recovered from its predecessor, viz., Tamilnadu Textiles Corporation, because the assets had been handed over to successor, viz., National Textile Corporation Ltd. After giving this "finding" he directed National Textile Corporation (Tamilnadu Pondicherry) Ltd., Coimbatore, to pay the above taxes and enclosed a demand notice demanding the sums specified above. He did so without issuing a formal show cause notice or otherwise bearing the affected party which filed an appeal before the Commissioner (Appeals), Coimbatore, on various grounds. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation). In fact, in respect of tax dues of the business before takeover, the Nationalisation Act specifically provides for payment on priority basis by following the requirement of the statute of registration of the claim before the Claims Commissioner. In fact, the Assistant Commissioner of Payments called for claims by a press release and the attention of the ITO was drawn by a letter dated 23-4-1977 addressed by Tamilnadu Textiles Corporation Ltd. to him, asking him to file the claim before 30-4-1977. This letter, though acknowledged on 26-4-1977, was not acted upon in time. Since non-priority debts had the benefit of an amount of Rs. 44.54 lakhs left over after meeting other priority debts, it was argued that if the amount has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the case. If he had noticed that the demand raised in the original assessment for the year 1974-75 is undisputed, he would have to deal with other grounds canvassed by National Textile Corporation (Tamilnadu Pondicherry) Ltd. We can, therefore, remit the matter back to the first appellate authority for a fresh disposal. Or, we could dispose of this matter on legal grounds taken by both sides [referred to briefly in our common order in IT Appeal No. 678 (Mad.) of 1980 and ST Appeal No. 8 (Mad.) of 1980 of even date] and further arguments as to whether National Textile Corporation (Tamilnadu Pondicherry) Ltd. is a successor and whether alleged negligence on the part of ITO in not availing the procedure laid down by the Nationalisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nough authority for the course adopted by the ITO. The Corporation should have been heard so as to enable a proper legal opinion on all relevant facts and law. 4. We, therefore, find that the order under section 170(3) suffers from a basic flaw as it was passed without the affected party having an opportunity to meet the ITO's inference which made the Corporation liable for such a large demand. Such an order which offends the principles of natural justice is invalid and illegal. We have, therefore, to uphold the order of the first appellate authority cancelling such an order, though for reasons which are different from the one which prompted him to cancel it. In the view we have taken, it is not necessary to consider the various other gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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