ORDER UNDER S.132(5)–No justification of making any addition in the assessment orders and the same mala fide
Ratio :
On finding that there was no justification of making any addition in the assessment orders and that the taxation authority has framed assessment orders purely out of malice both in fact and in law, the Single Judge rightly remanded the matter to the assessing authority for fresh consideration.
Held :
The finding on the alternative remedy, recorded by the learned Single Judge is based on sound reasoning that filing of appeal would be just an empty formality. On consideration of the matter, and the facts and circumstances of the case, alternative remedy could not be said to be a bar in exercising the jurisdiction under article 226 of the Constitution. Therefore, the order of remand is just and proper. The interest of the department is well protected. It serves the interest of justice. It needs no interference.
The assessing authority has to act strictly in accordance with the guidelines and observations given in the order.
Case Law Analysis :
Jayanti Lal Patel v. Asstt. CIT & Ors. (1998) 2 DTC 88 (Raj-HC); (1997) 142 CTR (Raj) 571; Gopilal Teli v. State of Rajasthan 1995 (1) RLW 1; M.P. Oil Extraction v. State of Madhya Pradesh 1997(2) Unreported Judgment (SC) 438; Nanhoo Mal v. Hira Mal AIR 1975 SC 2141; K.S. Rashid & Sons v. IT Investigation Commission (1954) 25 ITR 167 (SC); Rajasthan S.R.T. Corpn. v. Krishna Kant AIR 1995 SC 1715; R.V. Bhupal Prasad v. State of Andhra Pradesh AIR 1996 SC 140 : State of Punjab v. V.P. Duggal AIR 1977 SC 196 distinguished.
Application :
Also to current assessment year.
Income Tax Act 1961 s.132(5)
Constitution of India art 226
Writ–ALTERNATIVE REMEDY–Exercising of writ jurisdiction by the assessee instead of appeal to the Commissioner(Appeal)
Ratio :
Since the proceedings were mala fide and assessment orders have been passed out of malice, therefore, in spite of availability of alternative remedy by way of appeal before Commissioner (Appeals), the High Court had jurisdiction to interfere with the matter.
Held :
The finding on the alternative remedy, recorded by the learned Single Judge is based on sound reasoning that filing of appeal would be just an empty formality. On consideration of the matter, and the facts and circumstances of the case, alternative remedy could not be said to be a bar in exercising the jurisdiction under article 226 of the Constitution. Therefore, the order of remand is just and proper. The interest of the department is well protected. It serves the interest of justice. It needs no interference. The assessing authority has to act strictly in accordance with the guidelines and observations given in the order.
Case Law Analysis :
Jayanti Lal Patel v. Asstt. CIT & Ors. (1998) 2 DTC 88 (Raj-HC) ; (1997) 142 CTR (Raj) 571 followed.
Gopilal Teli v. State of Rajasthan 1995 (1) RLW 1; M.P. Oil Extraction v. State of Madhya Pradesh 1997(2) Unreported Judgment (SC) 438; Nanhoo Mal v. Hira Mal AIR 1975 SC 2141; K.S. Rashid & Sons v. IT Investigation Commission (1954) 25 ITR 167 (SC); Rajasthan S. R.T. Corpn. v. Krishna Kant AIR 1995 SC 1715; R.V. Bhupal Prasad v. State of Andhra Pradesh AIR 1996 SC 140 : State of Punjab v. V.P. Duggal AIR 1977 SC 196 distinguished.
Application :
Also to current assessment year.
Income Tax Act 1961 s.132(5)
Constitution of India art 226
JUDGMENT
M. P. SINGH, J. :
The High Court has already expressed its opinion vide order dt. 15th October, 1994, that the action of Mr. Dilip Shivpuri, the then Dy. Director (Investigation), IT Department, in conducting the search and seizure in the house of Dr. B. S. Tomar on 17th & 18th September, 1992, and the FIR lodged by him against Dr. Tomar was malafide. This view has been upheld by the Supreme Court in the Special Leave Petition filed by the Department.
Inspite of these findings, recorded about 3 years back, the IT Department has not changed its attitude towards the assessee. In all good grace, the Department should have given up the revengeful and rancorous attitude. The matter should have been dealt with, only in accordance with the law, without abuse of the official position while exercising power under the IT Act. Justice is not only done, but it should be seemed to have been done.
2. Sometimes, it is the mala fide deeds of some individual officer, which tarnishes the image of the whole Department. Such action should be deprecated. An atmosphere should be created, where the assessee should have full confidence in getting a fair justice. The element of fairness is certainly lacking in this case, as already observed by this Court on 15th October, 1994.
It is high time that Department itself should come forward to fix the personal accountability of the officer who acts with mala fide intention or acts to achieve some oblique motive under the guise of judicial, quasi-judicial or even administrative orders. The higher authorities of the IT Department should have taken stringent action against such erring officer against whom strictures had been passed by this Court.
3. Both these appeals arise out of the remand order dt. 1st October, 1997, passed by the learned Single Judge. The controversy involved in them are almost common, so, they are being decided by a common judgment.
This case has a chequered history which has been discussed in the impugned order in great detail. We will mention only a few of them which are essential to decide the appeals.
4. Dr. B. S. Tomar is a Professor in the Medical College, Jaipur. His wife, Dr. Shobha Tomar, is also in service. Dr. Tomar, the assessee has been victim of circumstances.
One Dr. Shivpuri was the colleague of Dr. Tomar in the Medical College. He had serious professional rivalry with Dr. Tomar. Mr. Dilip Shivpuri, the then Dy. Director (Investigation), IT Department, was the cousin of Dr. Shivpuri. Dr. Tomars case that Dr. Shivpuri is the architect of this unfortunate case, has already been found to be correct by this Court on 15th October, 1994.
At the instance of Dr. Shivpuri, a raid was conducted on 17th & 18th of September, 1992 at the residence of Dr. Tomar. The search and seizure operation was conducted by a team headed by Mr. Dilip Shivpuri. In the search operation, jewellery weighing 12 tolas gold and Rs. 7,162 in cash were found. In addition to that, three FDRs., in the name of one Jayanti Lal Patel were also found. Jayantilal Patel is the personal friend of Dr. Tomar and is a NRI, settled in London.
When the search and seizure operation resulted in utter failure, Mr. Shivpuri filed a FIR (No. 124/92) under s. 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988, on the ground that Dr. Tomar possessed assets disproportionate to his income. Reference was also made to a plot and the house built thereon belonging to him.
Dr. Tomar filed an application under s. 482, Cr. PC, in this Court for quashing the FIR.
His case before the Court was that Dr. Shivpuri was instrumental in getting the FIR filed through his cousin Mr. Dilip Shivpuri. Dr. Shivpuri was behind all these illegal proceedings. The action of Mr. Dilip Shivpuri was malafide. It was he who conducted the Income-tax raid. When Mr. Shivpuri failed to get any result in the raid, he, in connivance with his friend Rohit Mahajan, Addl. Superintendent of Police, Jaipur city, filed a FIR (No. 124/92).
On 15th October, 1994, the High Court allowed Dr. Tomars application filed under s. 482, Cr. PC. Finding was recorded that the action of Mr. Dilip Shivpuri in conducting the search and seizure was attended with mala fide intention and when he failed in his mission against Dr. Tomar, then, in order to save his face and conceal the lapses, he filed the FIR. The action of Mr. Dilip Shivpuri in perusing the matter, was unlawful and the object was to make the character assassination of the assessee and his family members. It has been done so with an ulterior motive of recking vengeance keeping in mind the private and personal grudge.
Against the order, allowing the application under s. 482, Cr. PC, the Department filed a Special Leave Petition in the Supreme Court. It was dismissed. Thus, the Supreme Court has also approved the findings of the High Court that the action of Mr. Shivpuri was wholly illegal and mala fide.
After the search by the IT Department, an order under s. 132(5) of the IT Act, 1961 (hereinafter referred to as the Act), had been passed. It was held that Jayantilal Patel was the owner of three FDRs. Dr. Tomar had nothing to do with it. The order for release of these FDRs. was also passed.
Thereafter, the CIT issued a fresh show cause notice to Dr. Tomar as to why the amount of three FDRs. (Rs. 11,03,811) should not be added in his income. Why the valuation report obtained by the ACD, Rajasthan from the PWD valuing the investment of the house to the tune of Rs. 40,44,328 be not taken for addition in his income. The valuation of the plot and the house standing on it were also to be enhanced. In the said notice, reference of some other investments was also made. The CIT further expressed the view that the officer passing the order under s. 132(5) of the Act, should have scrutinised those facts, and why the direction be not issued for modification/cancellation/amendment in the order under s. 132(5) of the Act.
Consequently, six assessment orders have been passed on 22nd March, 1996, and 27th March, 1996, inspite of the fact that the proceedings under s. 263 have been stayed on 23rd June, 1994.
The assessee filed Writ Petition No. 2879/97 against the show-cause notice dt. 6th June, 1994, and also challenged the legality of six assessment orders passed on 22nd March, 1996, and 27th March, 1996.
Another Writ Petition No. 3494/94 was filed by Jayantilal Patel, praying for a direction for return of his three FDRs. Since the issue of ownership of FDRs. was common in both the writ petitions, the learned Single Judge disposed of both the petitions by a common order.
The main issue considered by the learned Single Judge was whether additions made in the impugned assessment orders were justified and baseless. He considered the additions in great detail discussing them from paragraphs 6 to 37, by giving good reasons. Finding has been recorded that there was no justification of making any addition in the impugned assessment orders.
We totally agree with the findings recorded, so it is not necessary to reiterate them in the order.
5. The said notice and assessment orders were challenged by the assessee on the ground that Mr. Dilip Shivpuri has managed the issuance of notice under s. 263 of the Act inspite of the fact that strictures were passed by the High Court against him and duly approved by the Supreme Court. No reliance could be placed on valuation report of the PWD as against the value estimated by the valuer of the IT Department which had not been earlier challenged.
While explaining the three FDRs, which were in the name of Jayantilal Patel, reference was made to the order of the Asstt. CIT (Investigation), Circle-I, (3), passed under s. 132(5) of the Act, in which it was found that Jayantilal Patel S/o. Magan Bhai Patel is a non-resident Indian. He resides at 115 Grove Land, Camberwell, London. He is a very close friend of the assessee. Dr. Tomar. Whenever he comes to India, he stays with him. Instead of carrying three FDRs to London, he kept them safely with the assessee. All these FDRs were made out of foreign currency brought in India and converted in Indian Rupees.
The money from which FDRs were purchased had come to India through State Bank of Indore, Jaipur, from Belgium. The said bank account has been operated by Jayantilal Patel since 1984.
The learned Single Judge, after considering the matter, allowed both the writ petitions and remanded the case to the assessing authority after laying down the guidelines in the order.
The learned Single Judge, on perusal of the material on record, held that three FDRs were the property of Jayantilal Patel. There was no justification for adding the amount of FDRs in the income of Dr. Tomar. They should be deleted. The FDRs be released forthwith and handed over to Dr. Tomar, who was the custodian of the FDRs at the time of the search. But a fair condition has been imposed that Dr. Tomar would give an undertaking that if this investment is found to be his, then, he shall pay the tax in accordance with the provisions of the IT Act. The interest of the Department has been well protected.
Examining the issue of mala fide while scrutinising the assessment orders, it was said –
“It is proved beyond doubt that the taxation authority has framed assessment orders purely out of malice both in fact and in law”.
Rejecting the objection of the Department regarding existence of alternative remedy, it was observed that the alternative remedy prescribed in the statute by way of appeal to the CIT(A) is no doubt there, but he is an officer subordinate to the CIT, who has issued the fresh notice to the assessee. The appeal before the CIT(A) in the peculiar facts and circumstances of the present case would neither be efficacious nor alternative remedy. The High Court has jurisdiction to interfere with the matter because the proceedings were mala fide and assessment orders have been passed out of malice.
6. Mr. P. C. Jain, learned counsel appearing on behalf of the appellants, challenging the order of remand, has contended that since there was an alternative remedy, the learned Single Judge has erred in exercising the power under Art. 226 of the Constitution. In support of his contention, he has referred to Than Singh vs. Superintendent of Taxes AIR 1964 SC 1419, wherein it was observed that the jurisdiction of the High Court under Art. 226 is not subject to any restrictions except the territorial restrictions which are expressly provided.
7. In a case in Nanhoo Mal vs. Hira Mal AIR 1975 SC 2141, the question to be considered was that whether the election of the President of the Municipal Board could be challenged only in accordance with the provisions of the UP Municipalities Act which provided that in an election petition, the High Court had no jurisdiction to exercise the power under Art. 226 and set aside the election.
True, the election law is self-contained – “The validity of the election can be challenged only by an election petition and not under Art. 226”.
Reference was also made to the case in K. S. Rashid & Sons vs. IT Investigation Commission (1954) 25 ITR 167 (SC) : AIR 1954 SC 207.
In addition to that, reference was made to the cases of Rajasthan S. R. T. Corpn. vs. Krishna Kant AIR 1995 SC 1715, State of Punjab vs. V. P. Duggal, AIR 1977 SC 196, R. V. Bhupal Prasad vs. State of Andhra Pradesh AIR 1996 SC 140 and M. P. Oil Extraction vs. State of Madhya Pradesh 1997 (2) Unreported Judgment (SC) 438. But, surprisingly, none of these cases deal with the alternative remedy touching the controversy in hand.
He has also referred to a Full Bench judgment of this Court in Gopilal Teli vs. State of Rajasthan 1995 (1) RLW 1, in which, while considering the provisions of the Industrial Disputes Act, 1947 and the principles of natural justice, it was held that normal course is to peruse the remedy provided under the Act and exercise the power under Art. 226 of the Constitution.
8. In none of these cases, it has been observed that even if the impugned order has been passed purely on malice both in fact and law, the High Court should refuse to exercise its discretionary power under Art. 226.
Moreover, the ratio of these decisions is not relevant to the controversy involved in the present case, inasmuch as the learned Single Judge has only remanded the matter to the assessing authority for passing fresh order in accordance with the law and the observations made therein.
9. The learned Single Judge has considered this aspect of the matter and rejected the plea of alternative remedy. He placed reliance on Ram and Shyam Co. vs. State of Haryana & Ors. AIR 1985 SC 1147, Dr. Bal Krishna Agarwal vs. State of Uttar Pradesh & Ors. 1995 Lab. IC (SC) 1396 and Syed Viquar Mohd. vs. Jawaharlal Nehru Technological University, Hyderabad 1984 (2) SLR 294. He held that writ petition could not have been thrown out on the ground of alternative remedy which was not efficacious.
10. The finding on the alternative remedy, recorded by the learned Single Judge is based on sound reasoning that filing of appeal would be just an empty formality.
On consideration of the matter, we are of the view that looking to the facts and circumstances of the case, alternative remedy could not be said to be a bar in exercising the jurisdiction under Art. 226 of the Constitution and we agree with the view expressed by the learned Single Judge.
While remanding the matter, brief synopsis and guidelines have been given. They are –
(i) The income/assets declared under Amnesty Scheme for the asst. yr. 1984-85 cannot be reopened unless there is positive finding of AO that the income shown by the assessee is not correct or the asset has not been properly valued.
(ii) Three FDRs, referred to above, is the property of Shri Jayantilal Patel. They should be released forthwith and be handed-over to Dr. Tomar, who is custodian of these FDRs at the time of search, on an undertaking from him that if the investment in FDRs is found of Dr. Tomar, he will pay the tax in accordance with the provisions of the IT Act.
(iii) The value of the house B-4, Govind Marg, Jaipur cannot be taken more than which has been shown by three assessees, i.e., Dr. Tomar, Dr. Mrs. Tomar and B. S. Tomar HUF.
(iv) No addition on account of entries on a piece of paper which is claimed to have been found at the time of search, can be made, treating the figures as investment for purchase of plot No. B-4, Govind Marg, Jaipur in the hands of Dr. Tomar, Dr. Mrs. Tomar and B. S. Tomar, HUF.
(v) Dr. Tomar and Dr. Mrs. Tomar sold two plots for Rs. 1,71,000. That should be accepted and no double additions should be made presuming that one plot is sold for Rs. 1,71,000. The benefit as required under s. 54F should also be given.
(vi) The loan which has been taken from Ashok Kumar Bansal, and on his suit, the suit has been decreed, that should be accepted as such. The sale proceeds of the jewellery should be accepted as genuine and benefit of s. 54F, if conditions are satisfied, should be given to assessee. Any addition on account of any loan should not be made, if the loan has been taken from the income tax assessees and they have given affidavits. The AO should verify the genuineness of loan from the concerned official in the Department. If he certifies the loan by creditor who is assessee of the Department, no addition is warranted. Similarly, the amount of various gifts be verified, before any addition is made.
After hearing Mr. Jain and perusing the impugned order, we find that the order of remand is just and proper. The interest of the Department is well protected. It serves the interest of justice. It needs no interference.
The assessing authority has to act strictly in accordance with the guidelines and observations given in the order.
For the reasons given above, both the appeals fail and are hereby dismissed in limine.