M.L.JAIN, J. - (1.) THE facts of this writ petition appear to be that the petitioners Bombay Electric & General Agencies, Alwar are a partnership firm whose partners are Narpendra Singh Jain, at present an Excise Officer in Delhi and one Suganchand Jain. The concern is managed by Satyendra Singh Jain who is an uncle of Narpendra Singh Jain. It is alleged that Shanti Prasad Jain, who is the husband of the sister of Satyendra Singh and aunt of Narpendra Singh Jain and is the managing director of the Aligarh Electric Supply Co. ; Aligarh, sent Rs. 4,00,000. in the last week of April, 1969, to the petitioners. The assessment of the income of the petitioners for the year 1973-74 was to be completed by the ITO Alwar by the 31st March, 1976, as required by S. 153 of the IT Act, 1961. It was claimed that these Rs. 4,00,000. were kept in the home chest account and were received as a guarantee money from the Aligarh firm for supply of Stores material to the said Aligarh firm in expectation of orders. It was further alleged that this amount was returned on 30th March, 1971 by the petitioners to Shanti Prasad Jain who is said to have passed a receipt on the same day to the petitioners. This return of money was not believed by the ITO and on 1st March, 1976 the ITO issued a letter to the petitioners that this money was utilised by them in some profit earning activity resulting in an alleged profit @ 15 per cent. By his letter dt. 8th March, 1976, the ITO however proposed to apply a rate of 25 per cent on the utilisation of the funds of said Rs. 4,00,000..
(2.) BY his draft assessment order prepared under S. 144B on 29th March, 1976, the ITO proposed that the rate of 15 per cent shall be substituted by 25 per cent because in these times business men are able to earn a net profit even after raising loans bearing interest @ 12 per cent to 18 per cent. The petitioners were earning much more profits on their investment. The profits calculated by him thus were increased from Rs. 21,260 to Rs. 1,92,027. The ITO prepared a draft assessment order and sent it to the petitioner on 29th March, 1976. In his forwarding letter the ITO invited objections from the petitioners on the proposed draft under S. 144B. The ITO forwarded the draft order to the IAC, who by his letter dt.19th April, 1976 wrote to the petitioners to forward their view point and to show cause why directions prejudicial to them be not issued by him; the directions being in the matter of disposal of the points referred to in the draft assessment order. The petitioners were required to respond to the letter personally or through the duly authorised representative or by a letter in writing by 10 a. m. on 7th May, 1976 at his camp office Alwar. Since the IAC could hold his camp at Alwar on 7th May, 1976, he asked the petitioners to file written statement in his office at Jaipur by 10th May, 1976. He also expressed his willingness to come to Alwar in case the petitioners wanted to have the matter decided in Alwar.
(3.) ON 24th May, 1976 the petitioners, however, filed the writ petition praying therein that the ITO and the IAC be directed not to proceed with the impugned proceedings under S. 144B initiated by the aforesaid draft assessment order dt. 29th March, 1976 and the aforesaid two notices issued by the IAC and that the draft assessment order and the aforesaid two notices be quashed. They also prayed for a writ of certiorari for quashing of the proceedings for the asst. yr. 1973-74. They further prayed for a writ of prohibition against the respondents to fore-bear from giving any effect to or from taking any step in pursuance of the proceedings for the asst. yr. 1973-74.;