Decided on January 22,1979



B.K.MEHTA, J. - (1.) THE petitioner herein by this petition under Art. 226 of the Constitution of India, challenges the notice issued by the respondent purporting to act under S. 179(1) and (3) of the IT Act, 1961, of 10th Dec., 1973, calling upon the petitioner to show cause why the petitioner should not be treated as successor to the business of M/s Kalyanji Dhanji & Co. of Mandvi within the district of Kutch. A few facts need be referred to in order to appreciate as to how the petitioner is entitled to challenge the impugned notice at the initial stage when he has been called upon to show cause merely against the proposed action of the respondent for treating him as a successor to the firm of M/s Kalyanji Dhanji & Co.
(2.) THE said firm was a partnership firm consisting of three partners, viz., (1) Kalyanji Dhanji Shah, (2) Vishanji Kalyanji Shah and (3) Hemchand Kalyanji Shah. The said firm had agency business from the most leading and reputed companies of national and international importance. The firm had agencies in cement, automobiles, automobile spare parts, cigarettes, hydrogenated oil, confectionery, iron, batteries, etc. The firm had a large turnover of as much as about Rs. 1,00,00,000 (Rs. one crore) in Kutch. The said firm was holding the agencies from the following companies : 1. M/s Jhonson and Company. 2. Western India Match Company, Bombay. 3. Premier Automobiles, Bombay. 4. Cement Marketing Company, Bombay. 5. Hindustan Lever Ltd., Bombay. 6. Imperial Tobacco Co., Ahmedabad. 7. Imperial Chemical Industries, Bombay. 8. M/s Perry Company, Bombay. 9. Good Year Tyre and Rubber Co., Bombay. 10. Firestone Rubber Co., Bombay. 11. Vulcan Trading Co., Bombay. 12. Shalimar Biscuit Co., Bombay. 13. Asbestos Cement Co., Bombay. 14. Caltex India Co., Bombay. 15. F. Taxik and Co., Bombay. 16 National Carbon Co., Bombay. The said firm was assessed on the best judgment assessment for asst. yrs. 1959 60 to 1961 62 and income for each year was estimated at Rs. 4,00,000. It appears that for the asst. year 1962 63, the income assessed was Rs. 20,000 on the best judgment assessment on the basis of the turnover of Rs. 5,00,000. The partners of the said firm failed to satisfy their income tax liabilities with the result that they were adjudged insolvent by the competent Court and they were ultimately granted discharge. Surprisingly, however, without disclosing even broadly his belief that the petitioner was the successor to the business of the said firm, the impugned notice was issued. The petitioner, by his letter of 20th Dec., 1973, inquired from the respondent as to the basis and the date on the file of the respondent for the proposed action to treat the petitioner as the successor of the said firm. He also prayed for supplying him with the true copies of all such records and papers for submitting his reply to the show cause notice. By reply dt. 28th Dec., 1973, the petitioner was informed that the petitioner's advocate, Shri Vora, attended before the respondent and had discussed with him on 24th Dec., 1973, and he was apprised of the two circumstances which induced the belief that the petitioner was the successor to the business of the said firm. Those two circumstances were stated in the said reply of 28th Dec., 1973. They are : (1) the agreement dt. 5th Nov., 1960, between the Associated Cement Company on the one hand and Shri Premji Khimraj Shah (the petitioner) and Smt. Vasantiben J. Lalan on the other, and (2) taking over of the goods dealt with by the said firm. The petitioner was, therefore, called upon to show cause why he should not be treated as a successor and the hearing was fixed on 7th Jan., 1974, for that purpose.
(3.) THE petitioner thereupon again requested the respondent by his letter of 4th Jan., 1974, that he may be furnished specific information which the Department had, if any, so as to make his reply to the impugned notice. The petitioner also contended in the said letter that the ITO has no jurisdiction or authority to initiate proceedings under S. 170(3) of the IT Act, 1961, since there was no basis whatsoever for treating the petitioner as successor to the said firm. By letter dt. 8th Jan., 1974, of his advocate, the petitioner requested the respondent to furnish him with information and record, namely, (1) relevant assessment orders of the firm, (2) amount of tax in arrears due from the said firm, (3) period for which the petitioner was to be treated as successor to the firm, (4) deed of dissolution of the firm, (5) particulars of the business alleged to be succeeded by the petitioner, and (6) copies of the assessment order of the petitioner. The respondent by his letter of 11th Jan., 1974, informed the petitioner that copies of the assessment orders of the firm could not be furnished since they related to third party, and that the petitioner need not be furnished with the deed of dissolution of the firm for the same reason. As regards the particulars of the business, the respondent stated that these were very much within the knowledge of the petitioner. The respondent gave particulars about the tax in arrears as required by the petitioner. At this stage, the petitioner has moved this Court for appropriate writ, order or direction to quash and set aside the impugned notice and to prevent the respondent from proceeding further in pursuance thereof.;

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