TMI Blog1978 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... orities for years. That formula is as follows : Head Office General Charges X Indian Management Expenses -------------------------------------------------------------------------------------------------------------- Management Expenses of all Territories. In deciding the dispute now before us we are, however, not concerned directly with the formula as aforesaid. The appellant filed its return for the assessment year 1972-73, which corresponds to the accounting year of 1971. In such returns as in previous years, the appellant claimed deduction in respect of its expenses including head office expenses. Dealing with the said return the ITO sought for information to meet his own doubts and apprehensions for the purpose of making the assessment. There is no dispute that on September 18, 1974, the ITO sought for such information on various points including some in respect of head office expenses. The appellant gave reply on November 27, 1974. The reply did not satisfy the ITO who on February 12, 1975, requested the appellant " to produce the cash book, ledger and journal for the year 1971 relating to the head office relevant to the assessment year 1972-73 ". The appellant expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character, that the same on its face betrays utter lack of application of mind because what the appellant had been called upon to produce is not only all its financial books of accounts but all evidence in support of all the entries therein made. It was pointed out that the appellant as an institution carrying on banking business has to maintain varied books of account and the attention of the court was drawn to Batliboi's Advance Accounts to show what numerous types of books, principal and subsidiary, a banking institution is to maintain. All such books of accounts maintained at the head office certainly could not have any relevance to the assessment and the ITO could not have bona fide required all such books as also all evidence in support of all the entries made therein for the purpose of the present assessment. Reliance was placed on the decision of the Supreme Court in the case of Barium Chemicals Ltd. v. A. J. Rana [1972] 42 Comp Cas 245 ; AIR 1972 SC 591, to support the contention that the impugned notice had not been issued in lawful exercise of powers by the ITO. The learned trial judge accepted what was contended on behalf of the appellant to be the requirement of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the items constituting head office expenses, a portion of which has been claimed as allowable deduction for the relevant assessment year. Having regard to the facts and circumstances of the case, in my opinion, it would be sufficient compliance with the notice if the petitioner produces an abstract of the relevant entries in the original books and documents and papers certified or attested by a duly authorised person to the ITO. If thereafter the ITO requires the examination of the originals of any of the said abstracts of relevant entries the petitioner would cause such inspection either by production or by convenient method mutually agreed." He then recorded certain consequential directions as to how the appellant is to produce such abstracts and how the follow-up steps are to be taken. Feeling aggrieved by the judgment and order so passed by the learned trial judge the appellant has preferred the present appeal. Dr. Debi Pal appearing in support of this appeal has contended that on the finding of the learned judge the impugned notice read on its terms not being a lawful one, he should have set aside the same. He has strongly disputed the correctness of the view taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-application of mind for fulfilling the requirements on which a notice under s. 142(1) could be issued. Though it was a matter of some embarrassment for Mr. Pal to support the consequential direction issued by the learned judge it had been contended by him that the learned judge in exercising his power in the writ jurisdiction was competent to give such consequential directions to suit the convenience of both the parties in the interests of justice. Alternatively, it had been contended by Mr. Pal that when the ITO had the jurisdiction vested in him to issue a notice under s. 142(1) of the Act, this Court could not have interfered with issue of any notice in exercise of such powers in the writ juris diction even if there had been any illegality or irregularity in the matter of exercising such powers and issuing such a notice. Before we proceed to consider the appeal on its merits we should first dispose of the last point raised by Mr. Pal on behalf of the revenue disputing the jurisdiction of this court to interfere with the notice. We should do so because if he succeeds there the appellant's writ petition must fail, so also the appeal. It must, however, be pointed out at this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king the assessment. Where the ITO does not apply his mind to these requirements and does not arrive at any such satisfaction but issues the notice in mechanical exercise of his powers it would really be an act beyond his jurisdiction which can certainly be challenged before this court in the writ jurisdiction. Moreover, issue of a notice in mechanical exercise of powers under s. 142(1) would be merely a purported exercise of powers and not a real one and it is always open to a person aggrieved by such a notice to challenge it before this court in its writ jurisdiction (See Union of India v. Tarachand Gupta Bros., AIR 1971 SC 1558, and also the decision of the Supreme Court in the case of Barium Chemicals v. A. J. Rana [1972] 42 Comp Cas 245). This being the position, we are unable to accept the contention of Mr. Pal that even if we accept the contention of the appellant we should hold that the infirmity alleged constitutes such irregularity or illegality as would not entitle this court to interfere in exercise of its writ jurisdiction. Next, we proceed to consider the appeal on its merits. As we have indicated hereinbefore the learned judge accepted what was contended by Dr. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO meant were the books, papers and documents relating to head office expenses, a portion of which has been claimed as deduction. Obviously it is not so. The requisition of the ITO dated September 18, 1974, would only show that information relating to head office expenses was merely one out of 19 items of information sought for from the appellant. Similarly, when we refer to the letter dated February 12, 1975, of the ITO we clearly find that the ITO was calling for cash book, ledger and journal for the purpose of certain intended test-checks or verification. He had not specified in detail what test-checks or verifications he intended, though a few examples that he set out in this letter would go to show that he intended to check certain guarantor's commission earned in the United Kingdom. Position is not different when we refer to the ITO's letter dated February 18, 1975. With all these facts in background made out by the correspondence between the parties it is difficult for us to speculate what were the real purposes intended to be served by the documents requisitioned by the ITO and what he really meant by the impugned notice. In any event one thing is well established by thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed by the notice would be made dependent on the fortuitous circumstances as to how it is interpreted. There is no reason to think that if interpreted with reference to the facts and circumstances in the background there will be any uniformity just as there is no uniformity in the view taken by the learned trial judge and the view taken by us as we ourselves have indicated hereinbefore. It would not be pertinent, in our view, to introduce such uncertainty as to the requirement of a notice like the one under s. 142(1), wilful non-compliance whereof has been rendered an offence punishable with rigorous imprisonment by the statute itself. Such being the position and particularly when the notice by itself suffers no ambiguity in directing the appellant to produce all its financial books of accounts of the head office, the learned judge could not have substantially modified the same by a process of interpretation which in our view is not permissible in law and then uphold its validity only on such an interpretation. In the result, we accept the contention of the appellant that the ITO in issuing the impugned notice under s. 142(1) did so without application of his mind to the two requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. The learned judge in disposing of the writ petition on August 31, 1976, directed the appellant to produce the abstracts of the relevant entries in the original books, documents and papers which are evidence in support of head office expenses claimed as allowable deduction by November 30, 1976. The learned judge further directed inspection of the originals if required thereafter and the assessment to be completed within March 31, 1977. On September 22, 1976, the learned judge on the oral prayer made on behalf of the revenue modified his order dated August 31, 1976, by altering the last direction whereby he had directed the assessment to be completed within 31st March, 1977, by directing that the assessment for the relevant year must be completed on 31st March, 1977, but must not be completed before 31st March, 1977. It is not in dispute that the appellant having preferred the appeal, thereafter prayed for stay of further proceedings of the assessment and the appeal court, however, permitted the ITO to proceed with the assessment without prejudice to the rights of the appellant that may accrue on its success in this appeal. Consequent to the said order of the appeal court t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides without, however, any direction by this court for reassessment. According to Dr. Pal, an order or direction which can lift the limitation on the provision of s. 153(3) of the Act must be an order necessary to be made for disposal of the matter under adjudication wherein the order is being passed. Any order made which is not so necessary will not lift the limitation. Secondly, it was contended by Dr. Pal that in any event when, in the facts and circumstances, the assessment had already become barred this court should not make such a consequential order directing the ITO to make the assessment afresh. We have carefully considered the rival claims on this point. We are, however, unable to accept the contention of Dr. Pal. In our view, it would not be correct to hold that the assessment had already become barred so that this court should not direct the assessment to be made afresh. It is not in dispute that on the day the appellant moved this court with the writ petition the assessment had not become barred. It is also not in dispute that since the issue of the rule there was an injunction restraining the ITO from proceeding with the assessment so that on the date the learned ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made again in accordance with law and an order to that effect follows as a necessary corollary to our setting aside the order of assessment. In our view, it cannot be disputed for a moment that any authority competent in law to set aside the assessment on grounds as in the present case is empowered to make such a consequential order and without the same the order that he makes would not be complete. We, therefore, accept the contention of Mr. Pal that in disposing of this appeal we should not only set aside the assessment made by the ITO pending the disposal of this appeal but direct him to make a fresh assessment in accordance with law. In the result, the appeal succeeds and is allowed with costs. Hearing fee being assessed at 10 gold mohurs. The impugned notice under s. 142(1) of the Act issued by the ITO on March 4, 1975, is set aside. The assessment made on March 31, 1977, by the ITO in his best judgment based on non-compliance of the above, notice under s. 142(1) of the Act is also set aside and the ITO is directed to make a fresh assessment in accordance with law. In making any such assessment it would be open to the ITO to issue any fresh notice under s. 142(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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