1974 (5) TMI 5 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under section 34 of the Indian Income-tax Act, 1922.
2. Satisfaction of the Central Board of Revenue for the issuance of notices.
3. Procedural compliance by the Income-tax Officer.
4. Non-joinder of necessary parties.
5. Timeliness and bona fides of the petitioner's challenge.

Detailed Analysis:

1. Validity of Notices Issued Under Section 34 of the Indian Income-tax Act, 1922
The petitioner challenged the validity of the notices dated March 28, 1962, issued by the Income-tax Officer under section 34 for the assessment years 1940-41 to 1952-53. The petitioner argued that the necessary satisfaction of the Central Board of Revenue was not given in accordance with law, which is a condition precedent for the assumption of jurisdiction under section 34.

2. Satisfaction of the Central Board of Revenue for the Issuance of Notices
The petitioner contended that there was no material to establish that the Central Board of Revenue was satisfied that this was a fit case for the issue of notices under section 34. The petitioner referred to the Central Board of Revenue Act, 1924, and the Central Board of Revenue Regulation and Transaction of Business Rules, 1936, arguing that the affidavits filed by the respondents did not show that the Board had made and come to a decision to grant sanction. The respondents, in their affidavit-in-opposition, contended that the necessary procedure was followed, and the Income-tax Officer had reasons to believe that the income of the petitioner had escaped assessment due to failure to disclose all material facts.

3. Procedural Compliance by the Income-tax Officer
The respondents filed a supplementary affidavit stating that the Income-tax Officer had duly obtained necessary sanction from the Central Board of Revenue. The reasons recorded by the Income-tax Officer were annexed to the supplementary affidavit. The Central Board of Revenue had communicated its approval via telegram, which was confirmed by a letter sent to the Commissioner of Income-tax, West Bengal. The petitioner denied the existence of such communication and the granting of necessary sanction.

4. Non-joinder of Necessary Parties
The petitioner did not make the Central Board of Revenue a party-respondent in the initial writ petitions filed in 1963. The petitioner also did not make the Central Board of Direct Taxes a respondent in the present rule, which was necessary since the Central Board of Revenue Act, 1924, was repealed by the Central Boards of Revenue Act, 1963. The court held that the petition suffered from non-joinder of a necessary party.

5. Timeliness and Bona Fides of the Petitioner's Challenge
The court observed that the petitioner's challenge was belated and not bona fide. The approval by the Board was given in 1962, and the petitioner had previously obtained rules and stays but did not press the earlier writ petitions. The petitioner's conduct led to a stay of proceedings for nearly 11 years, raising questions about the good faith in prosecuting these proceedings. The court also noted that the petitioner did not provide any additional material in the present writ petition regarding the alleged illegality in the Board's approval.

Conclusion
The court held that the petitioner's claim that the Board did not grant approval in accordance with law was belated and not bona fide. The court found that the respondents had satisfactorily proved that the Board had granted approval. The petition suffered from non-joinder of a necessary party, and the petitioner's conduct indicated a lack of good faith. Consequently, the rule was discharged with costs, and the operation of the order was stayed for four weeks.