Rastogi, J. - (1.) THIS petition under Article 226 of the Constitution challenges the initiation of proceedings under Section 148 of the I.T. Act, 1961 (hereinafter "the Act"). The petitioner, M/s. Rameshwar Prasad Kishan Gopal, Kanpur, is a partnership firm consisting of three partners, namely, Rameshwar Prasad, Kishan Gopal and Smt. Sarju Devi. It is registered under the Act and carries on business in poppy heads as wholesale dealer. The State of Uttar Pradesh by a notification issued under Rule 42A of the U.P. Poppy Heads (Amendment) Rules, 1969, had imposed an excise duty of 50 paise per kg. on poppy heads with effect from 1st of July, 1969. The petitioner along with other dealers in poppy heads challenged that levy before the Lucknow Bench of this court by means of a writ petition. The petition was admitted and an interim order staying the realisation of excise duty was granted. Subsequently on the application of the Excise Dept. the petitioner was directed by the court to deposit the excise duty in the court each month and the petitioner complied with the same. The petition was allowed on 12th April, 1973, and Section 5 of the Opium Act and the relevant Rules framed by the Uttar Pradesh Govt. were held to be ultra vires. The petitioner was held not liable to pay any duty imposed under those Rules.
(2.) AFTER the decision a sum of Rs. 2,58,983, which the petitioner had deposited in the court, was refunded to it. The petitioner showed that amount in the balance-sheet of the previous year (ended October 25, 1973), relevant to the assessment year 1974-75 on the liabilities side. The petitioner filed a copy of the P and L a/c and the balance-sheet along with the return for that year. The assessment was completed on September 17, 1974, wherein the petitioner's return except for some minor additions on account of some inadmissible expenses was accepted and the aforesaid amount of Rs. 2,58,983 was not treated as an item of income. It has further been stated in the writ petition that later on the audit section of the I.T. Dept. raised an objection to the effect that the aforesaid sum of Rs. 2,58,983 received by the petitioner as refund from the High Court was liable to be treated as its taxable income for the assessment year 1974-75. The decision in the writ petition had not been accepted by the State of Uttar Pradesh or by the Central Govt. and both filed appeals against the same before the Supreme Court and on an application moved by the Excise Dept, the petitioner was required by the Supreme Court to furnish security for the amount of excise duty refunded to it. The petitioner furnished a bank guarantee which has been accepted. On the basis of the audit objection, the ITO, Circle I(7), Kanpur, respondent No. 1, issued a notice under Section 148 of the Act to the petitioner on January 8, 1979. A similar notice was issued for the assessment year 1975-76 also. Despite the petitioner's request respondent No. 1 did not inform it of the reasons for reopening the assessment or whether the assessment had been reopened under Clause (a) or Clause (b) of Section 147 of the Act. The petitioner submitted its returns for the assessment years 1974-75 and 1975-76 on March 5, 1979, with a note that no income had escaped assessment and Section 41(1) of the Act was not applicable. It has been further alleged that the petitioner was ultimately informed by respondent No. 1 that the assessment had been reopened under Section 147(b) of the Act. The petitioner filed objections to the same contending that Section 41 of the Act was not applicable and, secondly, that the audit objection could not constitute an information within the meaning of Section 147(b) so as to justify the reopening of the assessments. The ITO repelled those objections and sent a draft assessment order which was received by the petitioner on November 29, 1979, in which he treated the aforesaid amount of refund as also another sum of Rs. 39,171-50, which also appeared on the liabilities side of the balance-sheet as Duty Khata Jama Excise, as income liable to tax, and proposed to initiate penalty proceedings under Section 271(1)(c) of the Act for concealment of these two items. The petitioner filed objection to the proposed assessment order in accordance with Section 144B(2) of the Act before the IAC, A-Range, Kanpur, respondent No. 2. The petitioner now challenges the reopening of the assessments for the aforesaid assessment years mainly on the ground that the aforesaid two items did not constitute its income and Section 41(1) of the Act is not applicable and that the action taken was without jurisdiction because it was based on an opinion expressed by the audit party which does not constitute an information within the meaning of Section 147(b) of the Act. The petitioner prays for the issue of a writ, order or direction in the nature of certiorari quashing the notices issued under Section 148 of the Act on January 8, 1979, as also the subsequent proceedings taken in pursuance thereof including the proposed draft assessment order and the notice issued by respondent No. 2 dated December 10, 1979. There is also a prayer for a writ in the nature of mandamus directing the respondents not to initiate proceedings against the petitioner under Section 271(1)(c) of the Act.
(3.) A counter-affidavit has been filed on behalf of the respondents in which, inter alia, it has been averred that the assessment for the year 1974-75 had been made under Section 143(1) of the Act and the return had been accepted. That being so, the Explanation to Section 147 was attracted to the case. Apart from this, in para. 13 it has been stated that the monthly payments made to the credit of the High Court were included by the petitioner in the trading account of the poppy heads as cost for purchase of the same and not as deposits with the court. It was only in October, 1973, when the refund was received from the High Court, that the amount was mentioned on the liabilities side and it was credited to the bank account and a bank guarantee of an equal amount was furnished before the Supreme Court. It has been averred that accordingly it was a revenue receipt in the year of refund. Further, it has been stated that only on February 17, 1978, when the assessee filed the copy of the order of the Supreme Court dated February 10, 1978, in Civil Misc. Writ Petition No 1555 of 1978, that this concealment came to light and then action was taken. The facts which now transpire from the record do not admit of any doubt. The petitioner along with other dealers in poppy heads had challenged the levy of excise duty on poppy heads which levy had been made effective from 1st of July, 1969. The challenge ultimately succeeded and the impugned provisions were held ultra vires. This decision was given on 12th of April, 1973. Aggrieved, the State of Uttar Pradesh and the Central Govt. filed appeals by special leave before the Supreme Court. The petitioner had deposited a total amount of Rs. 2,58,983 by way of excise duty in the court. This was done in pursuance of an order passed by the court on May 7, 1970, a copy of which is annex. 13 to the supplementary affidavit filed by the petitioner. That amount was directed to be refunded to it when the writ petition was allowed on April 12, 1973. The date of refund fell in the previous year relevant to the assessment year 1974-75. In pursuance of an interim order passed by the Supreme Court the petitioner furnished a bank guarantee for the amount of excise duty refunded to it. The appeals are still pending. The action has been taken under Section 148 of the Act to reopen assessments for the years 1974-75 and 1975-76 on the basis of an audit objection. The question whether the ITO had jurisdiction to do so would depend on the interpretation of Sub-section (1) of Section 41 of the Act. This provision reads as under : "41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not. " ;