M.M. Kumar, J. - (1.) THIS order shall dispose of Civil Writ Petn. Nos. 19382, 19623 and 20581 of 2006 and 159 and 2101 of 2007 which involved a large number of senior citizens and retirees of Punjab State Electricity Board (for brevity 'the Board'). The short question involved in these petitions is as to "whether interest income that has accrued on the credit balance maintained by the employees of the Board in their provident fund governed by the Provident Funds Act, 1925 (for brevity, 'the 1925 Act') after their retirement would continue to qualify for exemption from Income Tax -. For the sake of brevity, the facts are being referred from Civil Writ Petn. No. 19382 of 2006. These petitions filed under Article 226 of the Constitution pray for quashing notices issued under Section 148 of the IT Act, 1961 (for brevity 'the 1961 Act'), pursuant to reassessment proceedings. It has further been prayed that the respondents be directed not to proceed further till the disposal of preliminary objections by passing a speaking order. For the sake of brevity, the facts are being referred from Civil Writ Petn. No. 19382 of 2006 because facts in every case would not be significant for the question of law raised before us.
(2.) BRIEF facts of the case are that the petitioners herein are senior citizens and retired employees of the Board. The petitioners are Income Tax assessees and they used to file their respective returns during their service career and even after retirement. It is claimed that the petitioners are covered under the Punjab State Electricity Board Provident Fund Regulations, 1960 (for brevity, 'the 1960 Regulations'), which have been notified under Section 79(c) of the Electricity Supply Act, 1948 (for brevity, 'the 1948 Act'), vide Notification No. 777/PSEB, dt. 9th Sept., 1960. As per provisions of Regulation 38 of the 1960 Regulations, interest component on credit balance retained in the provident fund (PF) is exempted from tax in terms of the provisions of Chapter -Ill, Section 10(11) of the 1961 Act, which provides for exemption on any payment received by the assessee from a fund to which the 1925 Act applies. In this regard, reference has been made to clarification issued by the Central Board of Direct Taxes (for short 'the CBDT), vide letter No. F. No. 275/192/2005 IT(B), dt. 15th June, 2006 (Annex. P.5). The respondents initiated reassessment proceedings against the petitioners and in the last week of March, 2006 separate but similarly worded notices under Section 148 of the 1961 Act, in respect of different assessment years ranging from 2001 -02 to 2004 -05 have been issued to them (Annex. P -l). Thereafter, during the months of August, 2006 to November, 2006, the ITO -respondent No. 1 sent separate letters to the petitioners asking them to attend his office in person or through a representative to clarify certain points in connection with the returns of income submitted by them in respect of different assessment years (Annex. P 2).
(3.) A detailed chart showing the particulars of the petitioners in relation to assessment year, escaped income, returned income, date of filing of return etc. has been placed on record as Annex. P -3. The petitioners also requested respondent No. 1 for supply of the reasons for reopening of assessment in their respective cases, which were supplied. One of the letters dt. 1st Sept., 2006, issued to petitioner No. 1 has been placed on record as Annex. P -4, wherein following reason has been mentioned: On the basis of information received from ITO, Ward -5 (TDS) -cum -TRO, Patiala where the Chief Accounts Officer (GPF) of Punjab State Electricity Board, Patiala remained failed to deduct the tax at source from the interest income of those persons who had kept their credit balance in the GPF wilfully even after the date of retirement/quitting the job. The interest should have been taxed under the head 'Income from other sources'. On the date of retirement on the credit balance of GPF including interest thereon was Rs. 18,41,011/Although the assessee was entitled to withdraw the whole amount yet he wilfully kept the amount in GPF account and claimed it exempted from tax beyond the date of retirement. Any interest earned on such credit balance in GPF account after retirement does not fall in the definition of GPF but comes under the head 'Income from other sources' and is liable to be taxed. The assessee has not declared the amount of interest earned for taxation in the asst. yrs. 2002 -03 to 2004 -05. Therefore, I have reasons to believe that interest income of asst. yr. 2002 -03 Rs. 54,959, asst. yr. 2003 -04 Rs. 1,70,637 and asst. yr. 2004 -05 Rs. 1,65,329 has escaped assessment.;