MATHUR, J. - (1.) THE D. B. Income Tax References No. 59/1998, 31/1999, 93/1999 27/1999 and S. B. Civil Writ Petitions No. 2723/1997 & 1070/1997 are disposed-of by the common order as they arise out of the survey under Section 133-A of the Income Tax Act, conducted on 25. 11. 1994 at the premise of the assessee Mool Chand Salecha impounding all the books of accounts, exparte assessment order dated 24. 2. 1995 and the ultimate order of the Income Tax Appellate Tribunal dated 12. 3. 1996.
(2.) BRIEFLY stated the facts of the case are that the assessee Mool Chand Salecha deals in cloth dyeing and trading business. He has been filing return in his individual capacity showing share income form Praveen Cotton Mills, Jasol and as Karta of Hindu Undivided Family (in short `huf') M/s. Mool Chand Praveen Kumar and as partner of M/s. Parmeshwari Textile Mills, Jasol. As no return for the Assessment Year 1994-95 was filed, a survey under Section 133a of the Income Tax Act, 1961 (in short `the Act of 1961') was conducted at the premises of M/s. Praveen Cotton Mills and M/s. Parmeshwari Textile Mills, Jasol on 25. 11. 1994. During survey operation, assessee Mool Chand Salecha disclosed in his statement that he was drawing a salary of Rs. 30,000/- per annum from M/s. Praveen Cotton Mills and was also partner of M/s. Parmeshwari Textile Mills, Jasol in his HUF capacity. The tax authorities also recovered the account books of three concerns viz; M/s. Sumit textile Mills, M/s. Sabarmati Mills India and M/s. Arvind Padding Works for the Assessment Year 1995-96. With respect to the said firms, the assessee Mool Chand admitted that all the three concerns were owned by him and the capital introduced in the three concerns was from his undisclosed income in the form of deposits in the books of account in various names. Accordingly, he offered to surrender the income of Rs. Five lacs and Rs. six lacs for the Assessment Year 1994-95 and 1995-96 respectively as capital introduced in the three concerns out of his undisclosed income. He also admitted that he did not raise any loan from anybody and all cash deposits appearing in his account books in different names, represented his undisclosed capital and are included in the surrendered capital of Rs. ten lacs for the Assessment Years 1994-95 and 1995-96 in the three concerns. He also admitted that the account books of all the three concerns are written in his own handwriting or in the handwriting of the Muneem Rajesh and Siremal. Regarding the bank accounts, he stated that Smt. Babita Surendra Kumar was authorised by him to operate the bank account of M/s. Sumit Textile Mills and Smt. Damyanti Lalit Kumar to operate the bank account of M/s. Sabarmati Mills. He further stated that as his business was mainly at Ahmedabad, he resided there with other family members. Regarding the sale of said three concerns, he admitted that the sales were to the tune of Rs. seventy lacs approximately in the Assessment Year 1994-95. He also admitted that the account were not got audited under Sec. 44ab. In the facts of the case, the income tax authorities issued a summons under Sec. 131 (1) to the assessee on 25. 11. 1994 to produce the account books found at the time of survey, which were subsequently produced and impounded u/sec. 131 (3) of the Act of 1961. The examination of the account books revealed that said concerns were in existences prior to the Assessment Year 1994-95 also. For production of the remaining books of account and account books of earlier years, summons u/sec. 131 (1) were issued to the assessee on 6. 12. 94 but no compliance was made by the assessee. In view of the fact of non production of account books of earlier years, enquiries were conducted from Barmer Central Cooperative Bank, Jasol. The copy of account opening form and copies of bank accounts since beginning in respect of the three concerns were also called for. The Barmer Central Cooperative Bank, Jasol under communication dated 30. 12. 94 intimated that all the concerns were the proprietary concerns of Smt. Damyanti, Ganpatlal and Surendra Kumar and the accounts were in operation since 5. 2. 88, 26. 4. 1991 and 19. 12. 91 respectively. It further revealed that all the three account were introduced to the bank by the assessee Mool Chand himself. It further revealed that though the cheques of three accounts were signed by Smt. Damyanti, Shri Surendra Kumar and Shri Ganpat for M/s. Sabarmati Mills India, Sumit Textile Mills and Arvind Padding Works respectively, the withdrawals of cheques of `self' were made mostly by munim of assessee Mool Chand viz; Siremal and Rajesh Kumar. Summonses u/sec. 131 were issued to Shri Surendra Kumar,smt. Damyanti Devi and Shri Ganpat Lal on 9. 2. 95. Surendra Kumar and Smt. Damyanti did not make compliance but Ganpatlal attended on 10. 2. 95 and his statement was recorded on oath. he stated that he was doing job work of washing grey cloths on small scale in the name of M/s. Arvind Padding Works with the initial investment of Rs. 2000/- taken as loan from his brother-in-law Shri Mohanlal. he denied to have maintained books of account. When he was confronted with the account books of M/s. Arvind Padding Works, he denied to be the owner of such books and stated that as these account books have been found from the premises of Shri Mool Chand, he can only speak about the maintenance and transactions recorded in the said books. He, however, admitted that the bank account in his name was introduced by Mool Chand and he has been doing petty job work of various firms of assessee Mool Chand and his family members. On appreciation of these facts, the assessing authority concluded that the assessee Mool Chand was the actual owner of the said three concerns and Shri Surendra Kumar, Smt. Damyanti and Ganpatlal were the only benamidars of Mool Chand. Accordingly, he issued a notice under Sec. 142 (1) to the assessee Mool Chand and him family members calling upon them to file return of their income on or before 30. 11. 1994. After a great hassle, Mool Chand filed return on 14. 2. 1995 showing his income of Rs. 57,480/- for the Assessment Year 1994-95 including income of Rs. 14,065/- from M/s. Sumit Textile Mills and Rs. 2,124/- from Sabarmati Mills India. The Assessing Authority found that the sale of M/s. Sumit textile Mills and M/s. Sabarmati Mills for the Assessment Year 1994-95 was for Rs. 3,06,45,038/ -. Obviously, this sale was not possible with a meager investment of Rs. for lacs surrendered in the two concerns for the Assessment Year 1994-95. Further for a turnover of Rs. 3. 6 crore, atleast a capital of Rs. fifty lacs was required. The assessee was given show cause notice as to why a sum of Rs. fifty lacs may not be treated as capital from the undisclosed sources on estimate basis. Because of non-cooperation of assessee Mool Chand, the assessing authority was compelled to proceed under Sec. 144. The assessing authority concluded that assessee had owned the ownership of three concerns and he was the real owner of all the three concerns. The assessee made a request not to proceed with the proceeding as he had filed an application before the Settlement Commission on 16. 2. 1995. The request was turned down on the ground that simply filing of application before the Settlement Commission, was not sufficient and the proceedings could not be stayed unless the application was admitted by the Commission. The assessing authority expressed that the assessee was intentionally avoiding the assessment proceedings, hence, he proceeded ex parte with the assessment. The assessing authority computed the income of the assessee Mool Chand as follows:- " (8) After discussion income of the assessee is computed as under: (i) Net salary income from Praveen Cotton Mills 16667. 00 (ii) Income from interest etc. 18723. 00 (iii) Net income of minors Add- 11326. 00 (iv) Capital investment in Sabarmati Mills India and Sumit Textile Mills out of undisclosed sources as discussed above 5100000. 00 (v) Capital investment in Arvind Pedding Works as surrendered by the assessee 100000. 00 (vi) Bogus liabilities as discussed above (Rs. 10,11,944+200781) 1212725. 00 (vii) Estimation of income from Sumit Textiles and Sabarmati Mills India Jasol as discussed above 459675. 00 (viii) Estimation of income from Arvind Padding Works as discussed above 50000. 00 Total Income Rs. 6969116. 00 Less Deduction u/s. 80 L Rs. 5427. 00 Net Taxable Income Rs. 6963689. 00 Thus, the I. T. O. , Balotra computed Rs. 69,63,689/- as a taxable income. He also directed to issue penalty notices under Sections 271 (1) (b), 271 (1) (c) and 271 B of the Act. The department raised a tax demand of Rs. 40,16,480/ -. An appeal was preferred against the order of assessment dated 24. 2. 95 before the Commissioner of Income Tax (Appeals), Jodhpur The Commissioner rejected the contention with respect to the denial of opportunity of hearing. It was held that the assessee did not avail the opportunity given and indulged in delaying tactics. He also held that inspite of the fact that the request of the appellant was accepted for inspection of record, he did not choose to avail the same, though he inspected the documents on few dates. He was of the view that the appellant assessee was trying to put obstacles in the way of smooth investigation by resorting to various dilatory tactics. It was also found that the return filed by the appellant did not reflect the true state of affairs. He did not comply with the notice under Sec. 142 (1) and, therefore, the assessing authority rightly proceeded under Sec. 144. He even went to the extent of observing that the assessing authority was too liberal. Looking to the attitude of the assessee in his opinion, it was a fit case to impose penalty for not responding to the repeated summonses issued. Accordingly, the appellate Commissioner rejected the appeal by order dated 27. 03. 1995. It was contended before the learned Tribunal of behalf of the assessee that the assessing authority in undue haste committed severe irregularities in the survey as well as assessment proceedings. It was submitted that the assessing authority while exercising the powers under Section 133a, had no power to impound the books of account in view of clear prohibition provided under sub section (4) of Section 133a. It was also contended that the assessee had a right to submit the belated return under Sec. 139 (4) and under Sec. 153 upto 31. 03. 1995. The A. O. had time upto 31. 03. 1996 to complete the assessment. It was submitted that the A. O. committed error in not taking into consideration the return filed by the assessee on 14. 2. 1995. According to the learned counsel by issuing notice under Sec. 133 (1), the A. O. curtailed the statutory period of submitting return to the assessee. It was also argued that in all fairness, the A. O. should not have proceeded with the assessment proceedings, once it was brought to his notice that the settlement application was submitted under Sec. 245 (c) with the Settlement Commission on 16. 2. 95. He also criticised the summary was of dealing by the A. O. as well as the appellate authority with respect to the additions. It was argued that the assessee was denied the opportunity of hearing by refusing to supply the incriminating documents which were illegally seized and impounded during survey. It was also argued that if the accounts lying with the department were voluminous or complicated, the A. O. had a power under Sec. 142-A to get the accounts audited and could have then determined the income instead of doing so arbitrarily. It was thus urged that the assessment made under Sec. 144 may be annulled or set aside with the direction to make assessment de novo. On the other hand, it was submitted by the departmental representative that all the three proprietary concerns had a turnover exceeding Rs. forty lacs, yet the books of account were not got audited by the assessee in accordance with the mandatory provisions of Section 44a and B. It was also submitted that no returns were filed with respect to the income arising from the said three concerns. It was also argued that nothing more was required to be done, as assessee himself had surrendered Rs. eleven lacs at the time of survey. With respect to denying of opportunity of hearing to represent the case fully during the assessment proceedings, it was submitted that in the peculiar facts & circumstances of the case, particularly looking to the gross tax evasion by the assessee, the A. O. had no other option but to pin him down by invoking the provisions of Sec. 144. As regards the settlement application, it was submitted that the proceedings could not have been stayed simply because the application for settlements was filed before the Commission. The findings of the learned Tribunal are summarised as follows: (i) The powers of survey under Section 133a are different and distinct that the powers under Sec. 131 (1 ). If the A. O. suspected that the assessee had either concealed or was likely to conceal the particulars of his income, the A. O. could have issued summons under Section 131 (1a) but while exercising powers under Sec. 133a, he could not have usurped the powers under Section 131 (1 ). (ii) It was within the powers of the A. O. to require the assessee to furnish a return by issuing a notice under Sec. 142 (1), once the assessee had failed to furnish the same by due date mentioned is Section 139 (1 ). The assessee had furnished a return on 14. 2. 95 and, as such, the A. O. was bound to consider the said return. it was further held that the assessee had a right to file the belated return under section 139 (4) and having so filed, it was obligatory for the A. O. to consider the same. The A. O. was wrong in not considering the request of the assessee as contained in letter dated 7. 12. 94 for inspection as well as supply of the photostat copies of the account books. The assessee on receipt of the notice under Section 142 (1) dated 15. 12. 94 reiterated the request of supplying the copies of account but the same was rejected arbitrarily. The A. O. made up his mid to frame assessment under Sec. 144 before passing the order of assessment. (iii) The A. O. illegally impounded the books of accounts. In view of the findings, the Tribunal directed the A. O. to release the entire impounded books of account to the assessee within a period of fifteen days from the receipt of the order. A further direction was given to make a fresh assessment after affording the adequate opportunity of hearing to the assessee. The department submitted an application under Sec. 256 (1) of the Income Tax Act before the Tribunal proposing following questions for referring to this court for its opinion:- " i. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was legally justified in entertaining the ground relating to impounding of the books of account under sec. 131 in respect of an appeal filed against order passed u/s. 144 of the I. T. Act, 1961? ii. Whether on the facts and in the circumstances of the case, the ground relating to impounding of the books of accounts would be considered to be a subject matter of appeal before the 1d. CIT (A) in view of the provisions of Sec. 246 (1) (a) of the I. T. Act, 1961 and the Hon'ble ITAT was legally justified in deciding the same and directing the release of the impounded books of a/c to the assessee? iii. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was legally justified in its interpretation of sections 131 and 133a for releasing of the impounded books of a/s? iv. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was legally justified in setting aside the assessment without considering the material on record and in not deciding the appeal on merits on the basis of the same?"
(3.) THE Tribunal refused to refer the first two questions in view of the settled position of law and the decisions of the Apex Court reported in 131 I. T. R. 451 (1 ). THE fourth question was also declined on the ground that the finding of the Tribunal in not giving sufficient opportunity of hearing is a finding of fact and, as such, no referable question of law arises from this order. THE Tribunal, however, referred the question No. 3. THE Tribunal after stating the Statement Of Case and framing the aforesaid question of law, has referred to this court for its opinion. THE reference has been registered as D. B. Income Tax Reference No. 59/1998. THE C. I. T. has also filed an application under Section 256 (2) seeking direction against the Tribunal to refer the question Nos. 1, 3 and 4 for the opinion of this court. This reference has been registered as D. B. Income Tax Reference No. 31/1999. THE assessee Mool Chand has also filed a writ petition under Article 226 of the Constitution of India, which has been registered as S. B. Civil Writ Petition No. 2723/1997 seeking direction to the A. O. to comply with the directions of the Income Tax Appellate Tribunal dated 12. 3. 1996, particularly the directions of releasing the books of account. THE department has also filed a writ petition under Article 226 of the Constitution seeking direction to quash the order of the Income Tax Appellate Tribunal dt. 12. 3. 1996, particularly the directions to release the impounded documents. A further direction has been sought to restrain the first respondent from taking any proceeding coercive or otherwise for enforcing the order of release of documents particularly in view of the facts that settlement application before the settlement Commission has been admitted. As the summonses issued under Section 131 on 6. 12. 94, 16. 12. 1994, 28. 12. 94 and 6. 1. 95 were not complied with, the A. O. made a reference to Dy. Commissioner of Income Tax for imposition of the penalty under Section 272 (A) (1) (C) of the Income Tax Act. The Dy. Commissioner inflicted a penalty of Rs. 10,000/- for each default, in total Rs. 40,000/- by order dated 23. 6. 95. The appeal preferred by the assessee was dismissed by the Commissioner of Income Tax (Appeals) by order dated 13. 10. 95. However, the Income Tax Appellate Tribunal cancelled the penalty levied under Sec. 272 (A) (1) (c) by order dated 29. 12. 97. The department filed an application for reference under Section 256 (1) of the Income Tax Act asking the Tribunal to refer the following questions of law for the opinion of this Court. " Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied u/sec. 271 (1) (b) of the Act on the sole ground that order of the assessment has been set aside to be made afresh in appeal? Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied u/sec. 221 of the Act? Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied u/sec. 272a (1) (c) of the Act on the sole ground that order of assessment has been set aside to be made afresh in appeal? Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied u/sec. 271b of the Act?" This application has been rejected by the order of the Tribunal dated 29. 5. 98. The department has filed a reference application under Section 256 (2) for directing the respondent Tribunal to refer the aforesaid questions of law for the opinion of this Court, which has been registered as D. B. Income Tax Reference No. 27/1999. ;