Susanta Kumar Chatterjee, J. - (1.) The aforementioned civil rules were issued on June 26, 1978, and an interim order was made in. terms of prayer (e) to the writ petition. The prayer was for restraining the respondents and each of them from proceeding any further with or giving any effect to or taking any steps whatsoever relating thereto and thereunder or in respect of or in furtherance of or under the notice dated April 20, 1978, and all proceedings/notices and orders relating thereto and thereunder under Section 154/155(5) of the Income-tax Act, 1961, relating to the assessment orders as mentioned in the respective writ petitions. The writ petitions were moved mainly on the grounds that the conditions precedent necessary to confer jurisdiction upon the Commissioner of Income-tax, West Bengal, respondent No. 2, to initiate the purported proceedings and to make the alleged rectification under Section 154 read with Section 155(5) of the Income-tax Act, 1961, do not exist and have not been fulfilled and satisfied. There were no facts and materials whatsoever before respondent No. 2 to allege that the factory of the petitioner or any of its plant and machinery had been taken over by the said company for consideration as mentioned therein and the allegations are entirely baseless and without any evidence whatsoever and they were motivated by irrelevant and extraneous considerations. None of the conditions as required under Section 34(3)(b) read with Section 155(5) of the Act were present and there was no contravention of any provision of law. The hiring out of the plant and machinery did not fall within the meaning of the expression "sold or otherwise transferred" in Section 34(3)(b) of the said Act. Attempts were made to impose tax upon the petitioner and to deprive the petitioner of its property without any authority of law.
(2.) The petitioner, an existing company, has alleged that it runs the business of manufacture of hacksaw and handsaw and cold rolling mill at its factory situate at premises No. 20, Barrackpore Trunk Road, Belghoria (hereinafter referred to as "the factory"). Messrs. Bengal Saw and Steel Products (P.) Ltd. is a subsidiary company of the petitioner. Towards the beginning of the year 1973, there was a proposal and scheme by the petitioner to sell the factory to the aforesaid company and the petitioner agreed to give on hire the plant and machinery of the said factory to the said subsidiary company. In an application under Section 23(8) of the Monopolies and Restrictive Trade Practices Act, 1969, it was made clear that the plant and machinery in respect of the said factory would be taken on hire by the said company and that only the land and building would be sold to the said company. The said hiring out by the petitioner is claimed to be a mode of carrying on the business of the said factory and was a commercial exploitation of the commercial assets of the petitioner. The income from the said hiring is assessable under the Income-tax Act as business income. The petitioner filed its returns under the Income-tax Act for the assessment years taking up such a stand. The petitioner was, however, surprised to receive from respondent No. 2 a purported notice dated April 20, 1978, issued by him under Section 154 read with Section 155 of the said Act wherein respondent No. 2 alleged, inter alia, that the assessment made under Section 143(3) of the said Act required to be amended as there was a mistake apparent from the record within the meaning of Section 154 read with Section 155 of the said Act as per details mentioned below therein which rectification would have the effect of enhancing the assessment, and increasing the liability of the petitioner and, therefore, the petitioner was required to show cause why the proposed rectification should not be made. The petitioner objected to the said purported rectification proceedings placing on record that no assets relating to the said factory had been sold or otherwise transferred by the petitioner to the aforesaid company and that only the plant and machinery of the said factory had been hired out on monthly rental basis under the agreement dated September 1, 1975.
(3.) The writ petitions are contested by the respondents by filing an affidavit-in-opposition. It is alleged that the development rebate for the years 1968-69 to 1974-75 in respect of plant and machinery installed by the petitioner was allowed. It was found thereafter that the petitioner-company made an arrangement with Messrs. Bengal Saw and Steel Products (P.) Ltd. to sell its factory shed, land, building, plant and machinery. Pursuant to the said arrangement, Messrs. Bengal Saw and Steel Co. P. Ltd. applied to the Central Government for its approval to acquire the assets of the petitioner-company under the Monopolies and Restrictive Trade Practices Act, 1969. The Central Government, in exercise of its power under Section 23(8) of the Monopolies and Restrictive Trade Practices Act, 1969, passed an order approving the proposal, and from the said order it appeared that in the application for approval of the Central Government, it was categorically stated that the machinery of the petitioner-company will, for the present, be taken on hire, with a view to avoid withdrawal of development rebate. It was claimed by the respondents that the transfer effected in favour of Messrs. Bengal Saw and Steel Products (P.) Ltd. was not complete and comprehensive. Only for the purpose of avoiding withdrawal of development rebate, such a device was made. The sale of machinery will be deemed to have taken place as soon as the assessee transferred the other properties, namely, land, shed, structure and everything embedded on earth. For all practical purposes, the assessee has transferred the machinery and the relevant facts were considered to initiate the proceeding and the proposed action under Section 154 of the Act was warranted by law. Steps taken to rectify the mistake are all the more bona fide and the writ petitions are thoroughly misconceived.;