TMI Blog1999 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... lso a mandamus directing respondents Nos.1 to 3 to withdraw the same. During the pendency of the petition, the petitioner-company was also served with three notices dated February 5 1997, for the aforesaid years under section 142(1) of the Income-tax Act. 1961. On an application made by the petitioner-company for staying the proceedings, pursuant to these notices, a learned single judge of this court passed an order on March 29, 1997, "that the respondents may continue with the assessment proceedings but even after making the final assessment no demand should be raised or no further action for realisation of the assessed amount be made till the disposal of the writ petition." This order was passed with respect to the notices relating to the assessment year 1988-89. Subsequently, on an application seeking the modification of this order, the learned single judge passed an order on June 19, 1997, specifying that the order dated March 29, 1997, would cover the assessment years of 1987-88, 1988-89 and 1989-90. The petitioner has challenged the validity of the notices under section 148 of the Income-tax Act. 1961, on the ground that they have been issued without jurisdiction for the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that year. So the impugned notices are patently illegal. The sanction of respondent No. 2 to the impugned notices had been given in a mechanical manner. Respondents Nos.1 to 3, in their counter-affidavit, have taken the preliminary objection as to the territorial jurisdiction of this court to entertain the petition. It is not disputed that respondents Nos. 1 to 3 against whom reliefs are claimed have their offices at Delhi beyond the territorial jurisdiction of this court. It is averred in the counter-affidavit that no part of the cause of action arose within the territorial jurisdiction of this court inasmuch as the notices under section 148 were sent to the petitioner's authorised agent, Rattan Gupta and Co., 4356/4, Ansari Road, Daryaganj, New Delhi, under a registered cover but were refused, as the authorised agent stated that there was no company at the given address. Notices were sought to be served on Rattan Gupta and Co., since respondents Nos.1 to 3 had the information in their possession that there was no office running from the address given by the company in the memorandum and articles of association and on enquiry it was found that merely a sign board in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not available. The jurisdiction in this case was assigned to this circle vide order No. CIT. I/HQ/Centralisation/93-94/ 522, dated 8th July, 1993. The company was incorporated on June 23, 1986. Thus, the first assessment year would be 1987-88. No return of income was filed by the company. In the absence of exact bifurcation, it is estimated that the company had invested a sum of Rs. 40 lakhs each in the assessment years 1987-88, 1988-89 and 1989-90. No return of income showing the income earned through above investment was filed by the assessee for subsequent years. I, therefore, have reasons to believe that income of Rs. 40 lakhs each chargeable to tax has escaped assessment for the assessment years 1987-88 to 1989-90. If approved notice under section 148 may be issued." Further, it is alleged that the petitioner has accepted that it did not carry out any activity for generation of income in the years under consideration and the sole source of its finances is the issue of bearer share capital, the verification of which can only be done from the petitioner ; the onus to show that the money has come from the bearer shares is squarely on the petitioner and this coupled wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Nos. 1 to 3 is that the notices were served on Rattan Gupta and Co., Daryaganj, New Delhi., who was allegedly the authorised agent of the petitioner but who refused to receive the notices. In support of this submission, learned counsel for the petitioner referred to a copy of the letter dated April 7, 1994, addressed by Shri T. B. Thapa, advocate, on behalf of the petitioner-company to Shri Hemant Sarangi, Assistant Commissioner of Income-tax, Central Circle-4, Mayur Bhawan, Connaught Place, New Delhi, inter alia, stating that the notices under section 142(1) had been received by the petitioner-company from Rattan Gupta and Co. on March 4, 1994. Reference has been made to this letter to show that Rattan Gupta and Co. was authorised to receive notices on behalf of the petitioner-company. In order to show that such inference cannot be drawn from this letter, reference has been made by learned counsel for the petitioner to letter dated February 25, 1994, sent earlier by Rattan Gupta and Company to Shri Hemant Sarangi, Assistant Commissioner of Income-tax, New Delhi, to the effect that Rattan Gupta and Company had received the notices under section 142(1) of the Income-tax Act but Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f article 371-F provides that the President may, by public notification, extend with such restrictions or modifications as he thinks fit to the State of Sikkim any enactment which is in force in a State in India at the date of the notification. At the same time, any law which is in force in any other part of the country may be extended to Sikkim or may be enacted to be in force in Sikkim, as in any other part of the country, as per the general provisions of the Constitution which are applicable to the whole of India. The Income-tax Act, though initially purported to be extended to the State of Sikkim by a presidential notification issued under clause (n), was subsequently extended to Sikkim by section 26 of the Finance Act, 1989 with effect from the previous year relevant to the assessment year commencing from April 1, 1990. Since the present case concerns the assessment years up to 1989-90, the extension of the Income-tax Act to Sikkim by virtue of section 26 of the Finance Act, 1989, is of no consequence. Learned counsel for the petitioner has submitted that since special provision was made under clause (k) of article 371F providing that a State law would continue until it was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not intended to supersede the jurisdiction and authority of the Income-tax Officers to deal with the merits of all the contentions that the assessees may raise before them. Again, the Supreme Court held in S. Narayanappa v. CIT [1967] 63 ITR 219, that it is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings is open to challenge in a court of law. Whether the grounds are adequate or not, is not a matter for the court to investigate. It was observed in State of U. P. v. Dharmander Prasad Singh, AIR 1989 SC 997, that the judicial review under article 226 cannot be converted into an appeal judicial review is directed, not against the decision, but is confined to the examination of the decision making process. CIT v. Pr. Pl. Palaniappa Chettiar [1945] 13 ITR 269 (Mad) ; Chhugamal Rajpal, v. S. P. Chaliha [1991] 79 ITR 603 (SC); Raunaq and Co. Pvt. Ltd. v. ITO [1986] 158 ITR 30 (Delhi) and Smt. Kantamani Venkata Satyavathi v. ITO [1967] 64 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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