Sidhu, J. -
(1.)THE petitioner, M/s Aditya Mills Ltd., is engaged in the business of manufacturing cotton and synthetic yarn. M/s. Traders and Miners Ltd. is said to have been working as sole selling agent of those products at the material time. In the return of income filed by the petitioner for the assessment year 1972-73, it claimed a deduction of Rs. 7,80,952 on account of expenses alleged to have been incurred by way of commission paid to the selling agent aforementioned. THE petitioner did not, however, disclose the name of M/s. Traders and Miners Ltd. as its selling agent in the return or the documents accompanying it. By his letter (annexure 2), dated April 1], 1974, the Income-tax Officer (ITO) required the petitioner to give particulars, inter alia, of the selling agents and the commission paid to them. THE petitioner sent a laconic reply (annexure 3) dated April 23, 1974, in which the required particulars were not furnished; THE ITO had, therefore, to summon and record the statement (annexure 6) of R. K. Parikh, the managing director of M/s. Traders and Miners Ltd., on February 26, 1975. It appeared from Parikh's statement that the petitioner and M/s. Traders and Miners Ltd. were carrying on their respective businesses from the same premises and that in fact the employees of the petitioner had been working for M/s. Traders and Miners Ltd. as well. THE ITO, thereafter, recorded the statement (annexure 5) of P.O. Poddar, the Executive President of the petitioner on March 15, 1975. Poddar's statement also did not help the ITO in ascertaining the particulars of sales alleged to have been effected through the agency of M/s. Traders and Miners Ltd. On March 19, 1975, the petitioner wrote a letter (annexure 7) giving some information regarding the services alleged to have been rendered by M/s. Traders and Miners Ltd. for the petitioner. THE ITO made the assessment order (annexure 8), dated Match 27, 1975, under Section 143, I.T. Act, 1961, (hereinafter called "the Act"). He did not discuss in that order the merits or otherwise of the petitioner's claim of deduction of Rs. 7,80,952 on account of expenses incurred by way of commission alleged to have been paid by the petitioner to M/s. Traders & Miners Ltd. In the assessment order made by the ITO, he allowed, by necessary implication, the petitioner's claim and assessed the petitioner's income for the previous year ending December 31, 1971, after making allowauce for the aforementioned amount by way of expenses on sales effected during that year. On April 22, 1978, the ITO reopened this assessment with a notice (annexure 9) served on the petitioner under Section 148 of the Act. THE notice reads as under :
Whereas I have reason to believe that your income chargeable to tax for the assessment year 1972-73 has escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961.
I, therefore, propose to reassess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your income in respect of which you are assessable for the said assessment year.
This notice is being issued after obtaining the necessary sanction of the Commissioner of Income-tax, Rajasthan, Jaipur.
(2.)THE petitioner's case is that though the ITO had no jurisdiction to reopen the assessment, yet the petitioner made a reply (annexure 10), dated May 10, 1978, to the aforementioned notice stating that the reply was being made without prejudice to the petitioner's right to raise the question of jurisdiction. THE petitioner raised the objection that the notice was bad in law and that, therefore, no return need be filed in response to it. THE petitioner, however, told the ITO that it had already filed its return under Section 139 of the Act and that the same may be treated as the return filed in response to the impugned notice. On September 1, 1982, the IAC of Income-tax sent a notice to the petitioner, purporting to do so under Section 142(1) of the Act, requiring the petitioner to produce documents relating to all the sales on which commission was alleged to have been paid to the sole selling agent during the previous year ending December 31, 1971. He also called upon the petitioner to produce evidence regarding the services rendered by M/s Traders & Miners Ltd. and particulars of the sales in which commission had been paid to them. THE petitioner was also apprised by that notice that the Department had since collected evidence showing that no commission, etc., had been paid to M/s. Traders & Miners Ltd. and that, therefore, the amount of Rs. 7,80,952 may not be allowed as deductible expense for the assessment year 1972-73.
The petitioner made a reply to that notice on September 11, 1982, stating that the necessary material had already been placed before the ITO who made the assessment for the assessment year 1972-73 and that he had correctly allowed the amount of commission paid to the sole selling agents as deductible expense. The petitioner further submitted in its reply that merely because the Department had subsequently collected some information in the course of making assessment for the year 1976-77 and rejected, on the basis of that information, the petitioner's claim for a similar deduction during that year, such subsequent information is no ground for reopening the assessment for the year 1972-73. The petitioner demanded a copy of the reasons recorded by the ITO for issuing notice dated April 22, 1978, under Section 148(1) of the Act. The petitioner threatened that if the proceedings were not dropped and the notice under Section 148(1) was not discharged, he would be left with no alternative but to file a writ petition in the High Court challenging the entire proceedings as to the reopening of the assessment in question,
The Department did not yield to the aforementioned threat with the result that the petitioner filed the present petition on September 30, 1982, seeking a writ of certiorari for quashing the notice dated April 22, 1978, and for an order directing the Department to refrain from reopening the assessment for the assessment year 1972-73.
The only ground on which the petitioner has challenged the competence of the ITO to issue the impuged notice is that since the petitioner had disclosed the name of its sole selling agent to the ITO during the course of assessment proceedings under Section 143 of the Act, and had placed the necessary material before him at that time, and that since the assessment had already been made by the ITO under Section 143, it is not lawful for the ITO to reopen the assessment merely because on reconsideration of the same material, he wants to change his mind and reject the claim of the petitioner in respect of the amount of commission paid to M/s. Traders and Miners Ltd.
The respondents, including the IAC of Income-tax, before whom the proceedings pursuant to the impugned notice are pending now, contested this writ petition and filed a written reply in answer to it. The respondents raised a number of preliminary objections to the maintainability of this writ petition. One of these objections is that the writ petition suffers from inordinate delay inasmuch as the impugned notice was served on the petitioner on April 22, 1978, and the writ petition was filed on September 30, 1982, and this delay of nearly 4 1/2 years has not been explained. It is further submitted that the ITO, who issued the impugned notice, had jurisdiction to reopen the assessment because he had reason to believe that the amount of Rs. 7,80,952 mentioned above which was chargeable to tax had escaped assessment in the year 1972-73 by reason of the omission of the petitioner to disclose fully and truly all material facts necessary for its assessment for that year. The respondents further pleaded that as a result of the surveys and investigations conducted by the Department after making the assessment for the year 1972-73, the ITO came to possess information which gave him reason to believe that the sole selling agent was nothing but a dummy created by the petitioner as a device to escape assessment and that in fact the so-called sole selling agent had not rendered any service to the petitioner. Those surveys revealed that many persons, who are alleged to have rendered services at various centres were simply non-existent and fictitious, and that others who were existent had not rendered any such service as alleged. These investigations and surveys revealed that the petitioner had escaped assessment on a total income of Rs. 30,61,693 spread over four different assessment years as follows:
(3.)THE respondents pleaded that it is not a case of the ITO changing his mind in respect of the same material, but it is a case of concealment of material facts by the petitioner and of the ITO discovering subsequently that M/s, Traders and Miners Ltd. was nothing but an alter ego of the petitioner and that it had not rendered any service to the petitioner in any of the four yeais mentioned above to entitle the petitioner to claim deductions on account of the so-called expenses incurred on the sales of its products. It was in this context that the respondent mentioned that it was in the course of the proceedings of assessment for the year 1976-77 that it came to light that M/s. Traders and Miners Ltd. was a dummy created by the petitioner to escape assessment on huge amounts of income in various years and, therefore, the ITO rejected the petitioner's claim for deduction of similar expenses for that year. THE respondents further pleaded that the assessment order for the year 1976-77 was affirmed in appeal by the Commissioner of Income-tax (Appeals), Rajasthan, on March 30, 1981. THE petitioner did not challenge the said order further with the result that it has become final. It was thus on the basis of the information collected in 1976-77 that the ITO served the impugned notice; and, therefore, it is not a case of change of mind on reconsideration of the old material available on the file of assessment for the year 1972-73. THE respondents pleaded that the ITO had recorded his reasons for issuing the impugned notice. A copy of the reasons so recorded has been placed on the record as annexure R-3. This document would show that the impugned notice was issued under Section 148 read with Section 147(a) of the Act. THE Commissioner had also perused the reasons recorded by the ITO and was satisfied that it is a fit case for issuing the impugned notice.
The assessing authority further pleaded in its counter that let alone making a full and true disclosure in the return or in the documents accompanying the return of the particulars oi sales alleged to have been made through the agency of M/s. Traders and Miners Ltd., the petitioner did not even disclose the name of the so-called sole selling agent in those documents. The petitioner did not make the necessary disclosure even after he was specifically required to do so, vide letter (annexure 2) dated April 11, 1974, addressed by the ITO to the petitioner. In its reply (annexure 3) to the letter dated April 11, 1974, the petitioner chose to be evasive and filed a laconic yarn sales statement without mentioning in that statement any payment of any commission to any selling agent. The assessing authority pleaded that the petitioner deliberately kept silent about the so-called payments because the selling agent was a mere dummy created by the petitioner to evade payment of tax on its income. The assessing authority further mentioned in this context that the petitioner did not furnish at any time the particulars regarding the purchasers of its products. It did not disclose the name of any person who might have negotiated those sales. P.D. Poddar of the petitioner and R. K. Parikh of M/s. Traders and Miners Ltd, made statements before the ITO during the course of the assessment proceedings which statements, according to the assessing authority, are " most revealing, being evasive, short of required details and most unsatisfactory in nature ". Thus, according to the assessing authority, a major portion of the petitioner's income escaped assessment by reason of concealment of material facts necessary for assessment for that year.
It is common ground that this case falls under Section 147(a) of the Act. A reference to the reasons recorded by the ITO under Section 148(2) (see annexure R-3) and the satisfaction recorded by the Commissioner under Section 151(2) (see annexure R-4) to the effect that it was a fit case for the issue of notice under Section 147(a) read with Section 148 would at once show that recourse was being taken by the ITO to the provisions of Section 147(a) for reopening the assessment for the year 1972-73. Section 147, in so far as it is material for our present purpose, reads as under:
" 147. Income escaping assessment.--If-
(a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee......to disclose fully and truly all material facts necessary for his assessment for that year income chargeable to tax has accepted assessment for that year.......
he may, subject to the provisions of Sections 148 to 153,......reassess such income......for the assessment year concerned.........
Explanation 2.--Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section."