1998 (7) TMI 69 - HC - Income Tax

Summary

Issues Involved:
1. Validity of service of notice under section 226(3) of the Income-tax Act.
2. Limitation period under section 231 of the Income-tax Act.
3. Validity and falsity of the affidavit under section 226(3)(vi) of the Income-tax Act.
4. Amount recoverable as per the notice issued.
5. Availability of alternate remedies.

Detailed Analysis:

1. Validity of Service of Notice:
The petitioner contended that the notice served on Sri K. Rehman Khan on May 29, 1982, was invalid because he was not a partner of the firm but merely a general power of attorney holder. However, the court upheld the validity of the service, noting that under section 282 of the Income-tax Act, notice can be addressed to any member or manager of the firm. The court cited precedents where service on an unauthorised person was deemed valid if they were managing the firm's affairs. The petitioner failed to discharge the burden of proving that Sri K. Rehman Khan was not authorised to receive the notice.

2. Limitation Period:
The petitioner argued that the proceedings were barred by the limitation period prescribed under section 231 of the Act. The court observed that section 231 was omitted by the Direct Tax Laws (Amendment) Act of 1987, effective from April 1, 1989. Since the original notice was served on May 29, 1982, the limitation period had not expired at the time of initiation, making this contention baseless.

3. Validity and Falsity of the Affidavit:
The petitioner contended that the affidavit filed by Dr. Mumtaz Ahmed Khan was not found false as required under section 226(3)(vi) of the Act. The court clarified that the rejection of the affidavit implied it was not relied upon and thus considered false. Dr. Mumtaz Ahmed Khan had admitted the liability of Rs. 10.74 lakhs in his sworn statement, and the court found no need for further inquiry into the affidavit's validity.

4. Amount Recoverable:
The petitioner argued that the notice dated May 25, 1982, specified a sum of Rs. 5,49,644, and recovery beyond this amount was not permissible. The court dismissed this contention, stating that the trust had admitted the liability of Rs. 10.74 lakhs. The court referenced precedents where the absence of a specified amount in the notice did not invalidate it, provided no prejudice was caused to the petitioner.

5. Availability of Alternate Remedies:
The court noted that the petitioner had the remedy of revision under section 264 of the Act. It cited judgments from the Allahabad High Court and the Nagpur Bench of the Bombay High Court, which held that writ petitions are not maintainable when factual controversies are involved, and the appropriate remedy is revision.

Conclusion:
The court dismissed the writ petition, finding no merit in the contentions raised by the petitioner. It directed the Commissioner of Income-tax, Bangalore, to investigate the delay in recovery proceedings and initiate disciplinary action against responsible officials. The court emphasized that the trust's liability to pay Rs. 10.74 lakhs to Mr. Askar Mirza was admitted and enforceable.