R.K. Gulati, J. - (1.) THE first petitioner, Satish Chand Singhal, is the managing director of the second petitioner, Cawnpore Chemical Works Pvt. Ltd. THE petitioners have sought a writ of mandamus against the second respondents, the Assistant Commissioner of Income-tax (Central), Circle-25, New Delhi, with a direction to grant refunds to the second petitioner, which were due to it consequent to certain orders passed in its case for certain assessment years and for which a writ petition was also filed earlier in this court. THE other complaint is that the respondents were not legally justified in adjusting the refunds due to the second petitioner against the individual demands of the first petitioner, which fell due against him because of the protective assessment orders for the assessment years 1984-85 and 1985-86 and, thus, the refunds are wrongly being withheld.
(2.) HAVING heard learned counsel for the parties, in our opinion, the writ petition is liable to be rejected summarily. It appears that, while the assessments of the first petitioner for the assessment years 1984-85 and 1985-86 were pending, where he had disclosed taxable income of Rs. 24,830 and Rs. 34,410 respectively, a search under Section 132(1) of the Income-tax Act, 1961, was conducted in the premises of various assessees of the Malook Chand Group, including those of the first petitioner. In due course, the assessments for the two years were completed on an income of Rs. 7,90,770 and Rs. 12,75,724, respectively. The assessment orders were followed by notices of demand for the tax determined for each year together with interest payable thereon. Proceedings for realisation of the dues against the petitioner were also initiated and notices under Sections 226(3) of the Income-tax Act, 1961, were served on the second petitioner attaching the deposits of the first petitioner with the second petitioner. On the request of the petitioners, it appears, certain adjustments of the amounts due against the first petitioner were made from the refunds due to the second petitioner. After the adjustments had been carried out, the petitioners thought of resiling from their earlier stand and, in these circumstances, the present writ petition had been filed claiming the reliefs set out earlier. For the petitioner, it was argued that the demands which fell due against the first petitioner as a result of the assessment orders aforesaid were only protective assessments and the recovery of the tax dues could not legally be made on protective basis. On these premises, it was urged that the adjustment of the refund due to the second petitioner was illegal and, consequently, the claim for refund could not be denied to it.
(3.) THE stand taken by the petitioners is seriously controverted by the respondents in the counter-affidavit filed on their behalf. According to the respondents, the disputed assessments are substantive and, in any case, they do not lose their character of regular assessments merely because the expression "protective" was used in the assessment orders in a different context, namely, to convey that the assessments were without prejudice to the right of the Revenue to proceed against any other person. In the counter-affidavit, the respondents have also categorically stated that the income assessed in the hands of the first petitioner has not been brought to tax in the hands of any other person. THE question whether the assessments against the first petitioner are protective or substantive, in our opinion, need not be gone into in these proceedings, inasmuch as the appeals against those assessment orders are already pending decision before the appellate authority at the instance of the first petitioner. We have no doubt that if such a plea is raised before the appellate authority, the same shall be dealt with in accordance with law. Coming to the question whether the adjustment of tax dues against the first petitioner could or could not be made against the refunds due to the second petitioner, it need not detain us long. Learned standing counsel invited our attention to the two letters which were addressed to the Commissioner of Income-tax (Central), New Delhi, one by the first petitioner and the other by the second petitioner, true copies of which have been attached with the counter-affidavit. THE first petitioner, in his letter, lodged a protest that, on the one hand, substantial refund to the tune of Rs. 9.50 lakhs plus interest was being withheld which was due to the second petitioner of which he was the (first petitioner) managing director and unsecured creditor of an amount of Rs. 20 lakhs, while on the other hand, the demand against him was being pressed for realisation. In the letter written by the second petitioner, it gave its consent for adjustment of the refunds due to the company for meeting the demands due against the first petitioner. THE letter written by the second petitioner was to the following effect : "This is to confirm that we do not have any objection if you adjust the refund due to the company together with interest for the assessment year 1980-81 for meeting your demands against Shri Satish Chand Singhal, the managing director of the company, since the company owes around Rs. 20 lakhs to Shri Singhal on account of unsecured accommodation credit given by him to the company from time to time." It is evident that the adjustment of the refunds was carried out at the instance of the petitioners themselves, and we see no illegality in the same. THEre exists no justification to permit the petitioners at this stage of proceedings to resile from their earlier stand and that too only on the ground that the assessments against the first petitioner were protective and not substantive on which there is a serious contest between the parties. It is also clear that if the second petitioner had not agreed to the adjustment of refunds in view of the notices served on it under Section 226(3) of the Income-tax Act, 1961, the amounts to the extent 6f adjustment could have been realised otherwise from the company (second petitioner), because of its indebtedness to the first petitioner. In our view of the matter, it is not open to the second petitioner to canvass that the assessments against the first petitioner were protective and, consequently, the adjustment against its refunds was illegal. In view of the above, we reject the writ petition summarily.;