Muni Lal Moti Ram vs Commissioner of Income Tax

Gokal Chand Mital, J.—The Registry has pointed out that there was a typographical mistake about the question referred for the opinion of this court as, by mistake, instead of one-referred question, we had recorded in our order dated December 15, 1988, that there were five questions that had been referred. Since there is an apparent mistake on the record in this behalf, the case was posted for rehearing.

Counsel for the parties appearing are agreed that there is a typographical mistake in our order dated December 15, 1988. Accordingly, we recall that order and proceed to pass a fresh order to correct the mistake.

For the assessment years 1969-70 to 1974-75, the Income Tax Appellate Tribunal, Chandigarh, has referred the following common question for opinion of this court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income Tax Officer had afforded the assessee an opportunity u/s 186(2) as required under law before cancellation of registration ?"

The assessee is a partnership firm. For the assessment years in question, the assessments were completed either u/s 143(1) or u/s 143(3) of the Income Tax Act between October 27, 1969, and October 25, 1973. Later on, the Income Tax Officer received information from the sales tax authorities that, on a surprise inspection carried out by their Department on June 20, 1973, at the premises of the assessee, certain account books had been seized and on examination thereof it was found that the assessee had been substantially suppressing its turnover. A detailed list of the seized account books is mentioned in para 3 of the order of the Tribunal, In the same para, the turnovers declared by the assessee and the turnovers assessed by the sales tax department are mentioned for the financial years which are relevant to the assessment years in question. These are tabulated below:

Financial year

Turnover declared

Turnover assessed

1968-69

2,48,162

6,00,000

1969-70

2,07,154

5,00,000

1970-71

1,95,060

6,15,506

1971-72

2,03,029

5,24,725

1972-73

2,39,285

6,09,602

After the assessment was framed by the sales tax department, the assessee requested those authorities to return the seized account books. On October 16, 1974, the account books were returned to Radhe Sham, partner of the firm, against a signed receipt.

On receiving the information from the sales tax authorities, the Income Tax Officer initiated proceedings u/s 147(a) after obtaining the approval of the Commissioner of Income Tax and issued notice u/s 148 for all the assessment years in question on January 7, 1975, which was served on the assessee on January 20, 1975. The assessee filed returns. The Income Tax Officer was not satisfied with the returns and on June 23, 1975, issued notice to the assessee u/s 142 to produce the account books on July 9, 1975. The details of the account books to be produced were mentioned and were the same which were seized by the sales tax authorities. On July 9, 1975, the assessee sought adjournment for July 24, 1975, instead of producing the account books and again sought adjournment for July 28, 1975. Even on July 28, 1975, the account books were not produced and the Income Tax Officer framed the assessment u/s 144 of the Income Tax Act by taking into consideration the turnover on which the sales tax assessments were framed treating the same to be relevant material. Different percentages of profit were worked out for the assessment years and the tax liability was calculated. The assessee filed an application u/s 146 of the Act for revoking the assessment but for deciding the referred question, we are not concerned as to what ultimately happened in those proceedings.

After framing the assessment u/s 144 of the Act, the Income Tax Officer simultaneously proceeded to cancel the registration for the assessment years 4969-70 to 1973-74 and to refuse registration for the assessment year 1974-75. The Income Tax Officer took notice of the default committed by the assessee u/s 144(1)(b) of the Act whereby it failed to comply with the terms of the notice issued u/s 142(1), that is, it failed to produce the account books asked for by the Income Tax Officer, and cancelled the registration for the assessment years 1969-70 to 1973-74, and refused registration for the assessment year 1974-75. The assessee succeeded before the Appellate Assistant Commissioner, but on the Revenue''s appeal, failed before the Tribunal. The Tribunal accepted the fact that the assessee had failed to comply with the provisions of Section 144(1)(b) of the Act as, in spite of having possession of the account books which were seized by the sales tax authorities, the same were not produced. For not complying with the notice u/s 142(1) of the Act, registration could be cancelled as this, in turn, violated Section 144(1)(b) of the Act, which was one of the pre-requisites for cancelling the registration. The assessee had due notice of not less than fourteen days intimating the intention of the Income Tax Officer that for failure to comply with the notice, the registration could be cancelled. In spite of notice and opportunity, the assessee did not produce the account books. This is a finding of fact based on appreciation of evidence recorded by the Tribunal against the assessee. Accordingly, the order of the Tribunal is well-justified.

For the reasons recorded above, we answer the referred question in favour of the Revenue, in the affirmative and hold that, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income Tax Officer had afforded the assessee an opportunity u/s 186(2), as required under law, before cancelling the registration. The Revenue will have its costs which are assessed at Rs. 500.