1997 (10) TMI 51 - HC - Benami Property

Summary

Issues Involved:
1. Legality of the show-cause notice dated June 6, 1994.
2. Validity of the assessment orders dated March 22, 1996, and March 27, 1996.
3. Ownership of the Fixed Deposit Receipts (FDRs).
4. Allegations of mala fide actions by the Income-tax Department officials.
5. Jurisdiction of the High Court under Article 226 of the Constitution of India.

Summary:

1. Legality of the Show-Cause Notice:
The petitioner challenged the show-cause notice dated June 6, 1994, arguing that it was issued despite the quashing of an FIR by the High Court, which had passed strictures against the DDI, Shri Dilip Shivpuri. The notice under section 263 of the Income-tax Act was deemed baseless as it relied on a valuation report previously found unreliable by the court.

2. Validity of the Assessment Orders:
The petitioner contested the assessment orders dated March 22, 1996, and March 27, 1996, which included several additions to the income of Dr. Tomar and his family members. These additions were based on:
- Valuation of a house by the PWD, ignoring the departmental valuer's report.
- Figures on a small piece of paper found during a search, which were not in the handwriting of Dr. Tomar or any family member.
- Doubtful loans and sale proceeds of jewellery, despite affidavits and court decrees supporting their genuineness.

The court found no justification for these additions, noting that the assessment orders were influenced by mala fide actions of the Income-tax Department officials.

3. Ownership of the FDRs:
Three FDRs found during the search were explained to belong to Shri Jayanti Lal Patel, an NRI. The Assistant Commissioner of Income-tax (Investigation) confirmed this after thorough enquiries. The court held that the FDRs should be released to Dr. Tomar, who was their custodian, on the condition that he would pay taxes if found to be the actual owner.

4. Allegations of Mala Fide Actions:
The court observed that the actions of the Income-tax Department officials, particularly Shri Dilip Shivpuri and Shri Rohit Mahajan, were driven by personal vendetta against Dr. Tomar. The assessment orders were found to be mala fide, as they ignored substantial evidence and relied on dubious grounds.

5. Jurisdiction of the High Court:
The court held that despite the availability of an alternative remedy, the High Court could entertain the writ petition under Article 226 of the Constitution of India due to the mala fide nature of the assessment orders and the lack of faith in departmental officials by the petitioner.

Conclusion:
The writ petition of Dr. Tomar was allowed, setting aside all six assessment orders, and directing the Income-tax Department to pass fresh assessment orders within three months. The FDRs were to be released to Dr. Tomar, and the petition filed by Shri Jayanti Lal Patel was disposed of in light of the decision in Dr. Tomar's case.