K.C.AGRAWAL, J. - (1.) THIS is a petition under Art. 226 of the Constitution for quashing the notices dt. 31st March, 1976 and 6th Sept., 1976 issued by the ITO 'A' Ward, Varanasi and for a writ of mandamus directing the respondents for taking any proceeding in pursuance of the notices mentioned above. These notices had been issued under S. 148 of the IT Act. 1961 (hereinafter referred to as "The Act").
(2.) THE facts of the case lie within a narrow compass, Renusagar Power Co. Ltd., the petitioner is a subsidiary company of Hindustan Aluminium corporation Ltd., Renukoot, Mirzapur. The petitioner company is engaged in the business of generation and supply of power. For the asst. yr. 1972-73, the corresponding finical year of which is form 1st Jan., 1971 to 31st Dec., 1971, the petitioner filed its returns of income. By an order of assessment dt. 22nd March, 1975 the ITO assessed the petitioner company and substantially accepted the returns filed by it. On a application made by the petitioner of 24th May, 1975, under S. 154 of the Act, the ITO rectified the mistake alleged to have crept in the assessment order dt. 22nd March, 1975. On 31st March 1976, the ITO 'A' Ward Circle I, Varanasi issued a notice under S. 148 of the Act in respect of the asst yr. 1972-73 and others on the allegations that certain incomes chargeable to income-tax had escaped assessment within the meaning of S. 147 of the Act. The ITO proposed to re-assess the income of the aforesaid assessment years. By the said notice the petitioner-company was required to file return within 30 days from the date of the service of the same. It may be noticed that this notice sent under S. 148 of the Act did not specify whether the same was under cl. (a) of (b) of S. 147 of the Act. In response to the said notice the petitioner sent a reply on 21st April, 1976 stating that there was no material in possession of the ITO on the basis of which action could be taken against the petitioner-company for reassessment. Through this reply the petitioner- company also called upon the ITO to intimate the provision of the IT Act under which the proceedings for re-assessment were intended to be taken. Thereafter, similar notices in respect of the asst yrs. 1968-69 and 1971-72 had been sent by the ITO to the petitioner. Instead of submitting a fresh return the petitioner-company preferred the present writ petition challenging the validity of the notice as well as of the proceedings for re-assessment started against the petitioner on the grounds disclosed in the writ petition. The writ petition was admitted on 12th Oct. 1976. The High Court although admitted the writ petition on 12th Oct. 1976 but directed the petitioner-company through the order passed on the aforesaid date to file return before the ITO concerned within the time granted by the notice issued under S. 148 of the Act.
(3.) A counter-affidavit was filed by Shri K. K. Rai, ITO 'A' Ward Circle I., Varanasi refusing the allegation made by the petitioner in the writ petition. The counter-affidavit disclosed that by the order dt. 22nd March, 1975 the ITO, after relying implicitly upon the information given to him by the authorised representative of the petitioner-company, had granted the following concessions : The counter-affidavit states that as the ITO did not doubt the correctness of the adjustments made by the petitioner-company, he allowed the same without questioning the correctness of the facts and figures contained in the statements submitted before him on behalf of the petitioner-company. While disclosing the reasons which led him to believe that the income had escaped assessment due to the failure of the petitioner-company to disclose truly and fully the particulars of the income- chargeable to tax, the ITO stated.-- "The deponent did have the required reason to believe for reopening the assessment under S. 147 of the Act. Information was received by the deponent vied audit note dt. 10th Feb., 1976 that the petitioner's income chargeable to income-tax for the asst. yr. 1972-73 had escaped assessment. The deponent scrutinised the information and having reason to believe that the petitioners income chargeable to income-tax for the said assessment year had escaped assessment by reason of the omission and failure on the part of the petitioner to disclose fully and truly the material facts necessary for its assessment for that year; the deponent prepared a record of his reasons and issued a notice under S. 148 of the Act" This averment was further amplified in paragraph 11 of the counter-affidavit. Along with the counter-affidavit, the respondent also had filed as Annexure '8' a copy of the reasons for reopening the case under S. 148 of the IT Act. Besides the facts stated above, the counter-affidavit alleges that the petitioner had not furnished all the requisite details, statements and books of accounts relevant for the purposes of assessment of its income in respect of the asst yr. 1973-74..;