V.K. Bali, J. - (1.) IN this petition which has been filed under section 256(2) of the Income Tax Act, 1961, by the Commissioner of Income Tax, Central -I, Calcutta, the prayer is to direct the Tribunal to refer the following question of law for adjudication : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the addition of Rs. 65 lakhs when the assessee had failed to discharge its onus under the provision of Income Tax Act ?"
(2.) THE facts, on which question framed above amanates, need a necessary mention. Respondent -assessee filed its return of income on 28 -6 -1985 and a revised return on 17 -2 -1988 pertaining to the assessment year 1985 -86. The Income Tax assessment of the assessee for the assessment year 1985 -86 was completed under section 143(3) on 15 -2 -1989 by the Deputy Commissioner of Income Tax, Special Range, Rohtak. A search and seizure operation was conducted by the Directorate of Revenue Intelligence (Anti Evasion) at the business premises of the assessee and also at the residential premises of one Mr. M.L. Vyas, an Executive of the assessee -company. From the residence of Mr. Vyas certain documents were seized which revealed that the amount over and above the bill price Rs. 10 on onix variety, and Rs. 5 on other varieties was also charged from the customers. The Central Excise Department contacted some customers and recorded their statements, from where it revealed that said dealers had taken extra charges. This resulted into issuance of a show -cause notice by the Central Excise Department to the assessee. It is further clear from the facts, as enumerated in the petition itself, that the petitioner -Income Tax Department had obtained from the Central Excise a copy of the show -cause notice and its annexures. The annexures which are only statements of some dealers revealed charging of over and above the bill price. It is on the basis of these annexures only that the assessee was required to explain as to why the annexures to the show -cause notice should not be made basis for Income Tax assessment proceedings. Pursuant to the show -cause notice aforesaid, the assessee filed a reply wherein it was, inter alia, stated that it had already filed a suit before the Hon'ble Delhi High Court and the show -cause notice and an ex parte order issued by the Central Excise Department has been stayed by the Hon'ble Delhi High Court. It was further stated that the assessing officer had observed that the department was relying on the annexures itself and not on the show -cause notice. Annexures to the show -cause notice were only an information relied in the show -cause notice by the Central Excise Department. This information was available even before the show -cause notice came into existence. The case of the department was that the annexures served two purposes, namely, that the documents were in existence even before the show -cause notice and that the same had been made annexures to the show -cause notice. In the hands of the department this is the only information from the outside sources which can be utilised for the purpose of assessment. The assessing officer, while disagreeing with the reply to the show -cause notice added an amount of Rs. 65 lakhs to the total income of the assessee subject to the filing of complete details of the onix and other varieties of tiles. This order of the assessing officer was challenged by the assessee in an appeal before the Commissioner (Appeals). The Commissioner (Appeals) found that subsequent to the passing of the assessment order the Hon'ble High Court at Delhi, had already set aside the show -cause notice issued by Central Excise authorities. The decision of the Hon'ble Delhi High Court was, however, not available to the Assessing Authority at the time of passing the assessment order and, therefore, the Commissioner of Income Tax remanded the case to the assessing officer for fresh decision. Being aggrieved by the said order of the Commissioner (Appeals), both the Income Tax Department and the assessee preferred appeal before the Income Tax Appellate Tribunal, Delhi Bench "C", Delhi. The Tribunal held that the remand by the Commissioner (Appeals) to the assessing officer could have been avoided as the decision of the Hon'ble High Court, Delhi, was binding and required implementation and deleted the entire addition of Rs. 65 lakhs. Being aggrieved, the petitioner herein sought reference from Tribunal on the question reproduced above. When it failed in its endeavour to get the question referred, the present petition under section 256(2) of the Income Tax Act, 1961 was filed.
(3.) MR . R.P. Sawhney, learned Senior Advocate, who appears in support of this petition has, vehemently, raised two fold contentions. His first contention is that on the facts and circumstances of this case and in particular when the Annexures with the show -cause notice dated 27 -3 -1986 revealed that the Company had charged extra money than the one mentioned in invoice, the Income Tax Department was well within its right to add the income of the Company and issue show -cause notice and the question, which has been posed for decision was required to be sent by the Tribunal as it was not such which could be said not to be even arguable. Once, therefore, an arguable point is made out, the Tribunal has to refer the question for adjudication, contends the learned counsel. For his aforesaid contention, reliance has been placed on a judgment of the Supreme Court in CIT v. : [1967]66ITR619(SC) . The next contention of Mr. Sawhney that judgment rendered by learned Tribunal holding the judgment of Hon'ble Delhi High Court rendered in Somany -Pilkington's Ltd. v. B.P. Verma (Suit No. 650 of 1986 dated 31 -7 -1989), was binding upon the department when the petitioner herein was not arrayed as a party -respondent in the suit aforesaid is incorrect and cannot sustain. We have given our thoughtful consideration to the contentions raised by Mr. Sawhney, as noted above, but in the facts and circumstances of this case, do not find any merit therein. As has been mentioned, in the earlier part of the judgment, it is conceded position that it is only Annexures to notice, dated 27 -3 -1986, which were made the basis of the show -cause notice to the petitioner for adding to the income of the Company and this very notice, which has been a subject -matter of decision before the Delhi High Court has since been quashed. Once, the very notice which contained Annexures which were made basis of the show -cause notice has since been set aside, the Annexures had lost all their validity. All the Annexures tagged up with the notice would, at the most, support the contents of the notice only, and once notice is quashed, in our view nothing remains before the department on the basis of which show -cause notice could be issued. The Delhi High Court judgment, may not be binding upon the Income Tax Department, as such, but once, the very notice on the basis of which it was a case of the department, that it required to add to the income of the assessee, has been quashed, no meaningful purpose shall at all be served in still persisting and proceeding with the show -cause notice. We may mention here at this stage, that while dealing with the core issue pertaining to extra charges disclosed by Annexures by virtue of statement of dealers, the Delhi High Court held as follows : "From the statements of these dealers, it is clear that none alleged that any extra payment over and above the invoice price was made to plaintiff or its Directors. Statement of Mr. Vyas was also recorded under section 14 of the Act. In his statement, Mr. M.L. Vyas admitted that he was the Sales Executive of plaintiff, and he had started a side business during his tenure as sales Executive. He admitted that he was not getting extra money from all the dealers but only from some of the dealers. He has also stated that he did not share this extra amount with any one and that the Company was not aware of it. Mr. Vyas, has categorically denied that either the Company or any of its Directors or officials, was involved in the collection of extra money by him. The money, so received by him, was deposited in his or his wife bank account or in a joint account. This he did in his personal capacity. It appears that Mr. Vyas was getting the extra money from certain dealers, by misusing his position, as Sales Executive, as, there was a short supply of the glazed tiles. Plaintiff has also placed on record the statements of certain dealers, whereby the dealers have specifically stated that no extra amount was paid. Out of 200, dealers, only 5 dealers have alleged extra payment to Mr. Vyas." We may also mention here that learned Income Tax Tribunal has placed reliance upon a judgment of Hon'ble Delhi High Court, some parts whereof have been reproduced above, but, insofar as, judgment itself is concerned, the same is made available to us during the course of arguments. We have ordered that the same be placed on record. A categorical finding has been recorded by the Delhi High Court that Mr. Vyas had charged some extra money from some of the dealers but the said money was never counted as an income of the assessee.;