9911796707
TMI Blog1986 (1) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... y its order dt. 30th Nov., 1981 as per the provisions contained in s. 245M(7) of the Act. 3. We first proceed to deal with the appeal which is directed against the order of the AAC declining to interfere with the decision of the ITO to cancel the assessment under the provisions of s. 146 of the Act. The assessee which is a registered firm filed its returns of income on 30th Aug., 1971 declaring therein a total income of Rs. 1,19,033. It followed S.Y. as its previous year the relevant previous year being S.Y. 2026. The business was hitherto carried on as a proprietary business of R.N. Shroff which was taken over by the assessee firm and a new partnership was formed by instrument of partnership executed on 14th Nov., 1969. The assessee firm carried on business in shrafi, discount of cheques, hundies etc. Inits healed office at Nadiad with branch offices at Ahmedabad, Mehmedabad, Surat and Bombay. The ITO issued various notices under s. 143(2) as well as s. 142(1) on various dates, the details of which are set out in the order of the ITO. In response to these notices the assessee either asked for adjournment or at times the notices were returned unserved or there was no compliance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO are as follows: (i) That after the searched seizure operations carried out by the Department as well as the publication about the seizure of the cash amount of Rs. 12,00,000 in the newspaper, its reputation suffered a rude shock which resulted in to an acute rush of is creditors for withdrawing their deposits. Further, many suits and civil legations were launched in the various courts and therefore they were fully engaged and occupied to defend the civil and criminal proceedings initiated against them. (ii) That there were acute disturbances which took place in all the parts of Gujarat right from 10th Jan., 1974 onwards and therefore it was not possible for any of the partners to go to the various offices for getting the information's and the documents. Further, it was wel-nigh impossible to attend the ITO during the disturbed period. A final opportunity had been given on 2nd Feb., 1974 to produce necessary materials for the purpose of the assessment but on that date it was very difficult to attend the IT office on account of the acute disturbances. (iii) That the assessee was called of to produce various proofs, evidences and documents vide the show cause letter dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent a sufficient cause which had prevented the assessee from complying the terms of notices under s. 142(1) of the Act, i.e. production of books from Surat Branch. There was no non-compliance's of notices under s. 143(2) of he Act in as much as Shri Ratilal attended from time to time before the ITO. Therefore, the finding based on the ground that there was non-compliance was without any basis so far as non-production of books of Surat branch were concerned the assessee had explained that they were lying in the Civil Court and could not be produced before the ITO. That apart the assessee had stated in its application that due to disturbance which took place in almost all parts of Gujarat from 10th Jan., 1974 to middle of March it was not possible for the partners to obtain information as requested for by the ITO. Therefore there existed sufficient cause for not complying with the notice under s. 143(1) of the Act. The ld. Departmental Representative on the other had strongly relied on the order of the authorites below. He pointed out in the first place that the assessee was a recalcitrant assessee as was evident from the particulars set out in the order of the ITO. He referred to va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and requested adjournment for 10 days. . . 5-2-1973 Shri Ratilal attended with books of was according of Nadiad office only case adjourned on 20-12-1973 with a request to produce all the books of accounts. . . 20-12-1973 Shri Ratilal at tended but without the books of accounts. 143(2) & 142(1) alongwith a show cause letter 22-1-1974 22-2-1974 On 1-2-1974 Shri Ratilal attended and requested time to comply the show cause letter dt. 22-1-1971. The case was adjourned on 11-2-1974. . . 11-2-1974 On 12-2-1974, Shri Ratilal simply attended but did not comply the terms notices issued under s. 142(1) & s. 143(2). 143(2) & 142(1) alongwith a forwarding show cause letter 15-2-1974 25-2-1974 12-3-1974 assessment order". Now the provisions of s. 146 permits an assessee to move the ITO for cancellation of assessee made under s. 144 if the following grounds existed: "(i) That the assessee was prevented by sufficient cause from making the return required under s. 139(2), or (ii) That he did not receive any notice under s. 142(1) or s. 143(2) for production of the books of account and document or evidence or (iii) That though he had received the notice or notices as afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing shown cause letter. The assessee according to the ITO had committed three defaults. (i) Non-compliance of notice under s. 143(2)(2) non compliance of notice under s. 142(1) and (3) non-compliance with he requirements of show cause notice issued in form of a letter calling upon the assessee to furnish certain information in connection with the assessment. It may be stated that the notice under s. 142(1) related to production of books of accounts of Surat Branch. It is an admitted fact as recorded by the ITO that the partner Shri Ratilal Thakkar, attended on 25th Feb., 1974. Now s. 143(2) reads as follows: "where a return has been made under section 139 and- (a) an assessment having been made under sub-section (1) the assessee make within one month from the date of service of the notice of demand issued in consequence of such assessment, an application to the ITO objecting to the assessment or (b) Whether or not an assessment has been made under sub-section (1) the ITO consider it necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assessee or the production of evidence in this behalf, the ITO shall save on the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irements of show cause notices issued in form of letters caling upon the assessee to furnish certain information in connection with the assessment was not justified and the action of the ITO, founded on these grounds can not be upheld. As a consequence the decision of the ITO to decline to cancel the assessment based on the above two grounds is also unsustainable in law. 9. The only issue which survives for considertion is the default of non-compliance of notices under s. 141(1) of the Act. The assessee could press in the service the ground that though he had received the notices inter alia under s. 142(1) of the Act it would not comply with the same though reasonable time has been granted he was prevented by sufficient cause from complying with the said notices in support of its plea for cancellation of assessment under s. 146 of the Act. At this stage it would be convenient to consider the scope of expression" "sufficient cause" as laid down in s. 146 of the Act. The scope of the express on sufficient cause "had come up for consideration before their Lordships of the Gujarat High Court in case of Saurashtra Cement and Chemical Industries vs. CIT (1978) 115 ITR 27 (Guj). At page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and labour of the assessee must have been devoted to a large extent to the clarification of situation arising out of such seizure a all matter which have to be weighed and considered alongwith this factory and if they are taken into account, it would appear that the delay could not be said to have been occasioned without reasonable cause." In our opinion therefore the consequences of seizure and search proceedings and the consequential fall out of the same resulting in the difficulty set out by the assessee would constitute sufficient cause for non compliance under s. 142(1) of the Act. 11. The other ground on which the assessee has based its submission to support the ground of sufficient cause is that there were acute disturbances in various parts of he city of Gujarat form 10th Jan., 1974 and onwards and it was difficult for the assessee to gather information as called for by the ITO. Now in this connection it is pertinent to mention that the default of the assessee was non-production of the books of accounts of Surat office which were said to be laying with the Court in connection with Civil Suit. These books of accounts were with Civil Suit. These books of accounts were spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in grip of some violent agitation and free movement during the material period was not possible, it would constitute reasonable cause. Applying this test to the facts of the case it is not in dispute, as pointed out earlier that there were violent and sporadic agitation making it difficult to move about freely and in such a situation the assessee was not in a position to produce the material called for by the ITO. It would constitute a sufficient cause to support the default under s. 142(1) of the Act. 12. Then light of the above discussion therefore we hod that on facts of the case the assessee was prevented by sufficient cause in not complying with the requirements of s. 142(1) of the Act. As a consequence the assessee's application for cancellation of assessment as made under s. 146 of the Act deserves to be accepted. We accordingly direct the ITO to cancel the assessment made under s. 144 of the Act and make a fresh assessment in accordance's with law. 13. In the above view of the matter the other appeal as set out in Para 1 of this order which is filed against the order under s. 144 of the Act becomes infructuous. The same is dismissed. 14. In the result the appeal No. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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