Yashodanandan, J. - (1.) BY means of this petition under Article 226 of the Constitution, the petitioner, M/s. Juggilal Ramlapat Cotton Spinning and Weaving Mills Co. Ltd., Kanpur, primarily challenged the legality of a notice dated 20th March, 1975, issued to it by the respondent, the ITO, Central Circle "V", Kanpur, and the follow up action taken consequent thereto.
(2.) THE petitioner is a public limited company incorporated under the Indian Companies Act, 1913, and owns several industrial undertakings, including a cotton spinning and weaving mills for the manufacture of different varieties of cloth including medium "A" and medium "B" categories. THE cloth manufactured by the petitioner is liable to the levy of excise duty in accordance with the effective rates for each variety as fixed under the Central Excise Tariff from time to time. THE production and distribution of cloth by the petitioner is subject, inter alia, to the various orders and/or notifications issued by the Textile Commissioner from time to time under the Cotton Textile Control Order, 1948 (hereinafter referred to as "the order"), promulgated under the provisions of Essential Commodities Act. Admittedly in the year 1964 an order for the statutory control on production and pricing of controlled cloth including the fixation of minimum obligation for the production of such controlled cloth was issued by the Textile Commissioner under the provisions of the order. This scheme was subsequently revised in May, 1968, in respect of the specifications of controlled cloth and statutory orders specifying the minimum quantity of controlled cloth of the specified varieties required to be packed were issued separately for each mill in respect of each quarter beginning from May, 1968. The petitioner claims that in accordance with the above statutory orders it manufactured and packed controlled cloth and sold the same at the ex-mill prices calculated in accordance with the formula of multipliers as laid down by the Textile Commissioner. The non-controlled cloth continued to be sold at the market price obtainable for the same. It is alleged that according to the directions of the Textile Commissioner, the petitioner stamped in bold letters on each piece of controlled cloth packed by it the above ex-mill price and the excise duties payable on them as well as the maximum retail price at which the cloth could be sold to the consumers' Admittedly no such stamping of prices was required on the non-controlled cloth marketed by the petitioner. In July, 1972, the local excise authorities raided the premises of the petitioner and seized and removed its records and documents relating to the production and sale of cloth and, it is claimed, that no lists of such records and documents were delivered to it in spite of requests made. It is alleged that in the year, 1973, the excise authorities in an attempt to realise excise duties in excess of what they were entitled to, raised a dispute in respect of certain varieties of controlled printed shirting, cleared during the year 1969 to 1972, alleging the same being not in accordance with the specifications of controlled cloth. According to the petitioner, the said information was also apparently communicated to the ITO some time in February 1973. We are not concerned with 1he proceedings that were or are being taken against the petitioner by the excise authorities and consequenlly the details of such action, furnished in the petition, it is unnecessary to make a mention of any further.
(3.) THE petitioner is an income-tax assessee and had filed its return of income as required under Section 139 of the I.T. Act, 1961 (hereinafter referred to as "the Act"), for the assessment year 1972-73. Before the assessment proceedings culminated on the 20th March, 1975, the respondent issued to the petitioner a notice purporting to be under Section 142(1) of the Act, a true copy of which has been filed as annex. I to the writ petition. THE notice was sent as an enclosure along with a communication giving details of the particulars required to be furnished, relevant portion of which runs as follows : "Information has come to my possession that certain cotton fabrics were cleared by you under the garb of control fabrics which were as follows : (a) Fabrics wherein average count of yarn used was more than 25.49 Ave. counts and the difference of Read Pick was less than 16 (Med. 'A' falsely cleared as Med. 'B' controlled) = 88,78,797 Mtrs. (b) Fabrics wherein the difference of Read and Pick was less than 16 (Med. 'B' non-controlled falsely cleared as Med. 'B' controlled)--6,99,965 Mtrs. Total -95,78,762 Mtrs. or 68,67,072 sq. Mtrs. Value of these goods is shown at Rs. 1,56,005-49 and Rs. 12,18,202. For the purpose of your assessment you are required to kindly give the following information : (i) Trade name of fabrics. (ii) Sale rate if to be sold as controlled cloth. (iii) Sale rate if to be sold as uncontrolled cloth. (iv) Sale rate at which actually sold, (v) Difference between Cols. Nos. (iii) and (iv). Above information should be given for the period 1-1-1969 to 12-4-1972. This information is required with respect to the following qualities as at (a), (b) and (c) : (a) Shirting between period from 1-1-1969 to 12-4-1972 (6,99,965 linear meters or 5,17,986 Sq. Metres). JUDGEMENT_710_ITR142_1983Html1.htm It has come to my notice that the above fabrics were medium "A" category but they were declared as medium "B" category. You are, therefore, requested to give the information about sale rates in the prescribed pro forma and make categorical statement and give specific information and the amounts to show as to whether the above qualities were sold at market rates available for medium 'A' category or medium 'B' category. Relevant sale bills should be produced, (c) Medium A wrongly declared as category 'B' :-- THE information has come to my possession to show that the above fabric was manufactured by you so as to fall in the category of medium 'A' but you declared it as medium 'B'. It was a mercerised and sanforised and printed fabric. This clearance was also done during the period from 1-1-1969 to 12-4-1972. THE quantity cleared was 7,96,211 linear metres or 5,89,196 sq. metres. (4) Above information is required Under Section 142(1). You are required to submit the information in the prescribed pro forma as given above and produce your sale bills and sale registers relevant in the present context. Formal notice Under Section 142(1) is enclosed. Time is allowed up to 25-3-1975." The petitioner asked for extension of time for compliance of the notice to the extent possible but the request was turned down. By means of a letter dated 26th March, 1975, a true copy of which has been filed as annex. II to the petition, the petitioner again expressed its inability to comply with the notice dated 20th March, 1975, the relevant portions of which are as follows : "Without going into factual allegations, we may point out that the allegations made by you in your notice is wholly irrelevant for the purpose of the above income-tax proceedings as no question of addition of any income arises on account of the allegations made by you. According to your allegations, certain cotton fabrics were allegedly cleared in the garb of controlled fabrics. If cotton fabrics are cleared as controlled fabrics, only controlled price can be realised and the controlled price represents the actual amounts received in respect thereof. These amounts are fully accounted for while computing the income. The stamped varieties of fabrics mentioned in your letter dated 20th March, 1975, were sold as controlled cloth. They were not sold as uncontrolled cloth. Thus there could not be three different sale rates of these varieties as suggested by you, nor any such question could arise." ;