9911796707
TMI Blog1980 (4) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... Writ Petitions Nos. 562 of 1975 and 790 of 1975 are by N. K. Patni and Munni Lal Mehra. By these petitions, the two petitioners also question the validity of the recovery proceedings, in respect of the aforesaid demands, initiated against them. The respondents have, however, clarified that they were proceeding to recover from the petitioners only the sum representing the demand created as a result of the reassessment proceedings under the Indian I.T. Act, 1922 and the Excess Profits Tax Act, taken against the firm John Mills and Company for the assessment years 1942-43 to 1944-45. Briefly stated, the facts giving rise to these petitions are that at one stage four brothers G. A. John, A. U. John, Edven John and H. C. John owned three spinning mills and one flour mill at Agra. They ran those mills under the name and style of John Brothers. During the course of their business, John Brothers took some loan from one Govind Ram Saksaria of Bombay after mortgaging the mill properties with him. Govind Ram Saksaria filed a suit against John Brothers in the Bombay High Court for the recovery of the aforesaid loan advanced by him. The Bombay High Court appointed a receiver to take posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n No. 962 of 1975) and Munni Lal Mehra (petitioner in Writ Petition No. 790 of 1975). Likewise Edven John sold his interest in the mill properties to one Sri Gambhirmal Pandey. On April 11, 1949, the new owners of the mills formed a partnership by the name of John Jain Mehra and Company. On April 18, 1949, one Sri Loon Karan Sethiya filed suit No. 76/49 against John Jain Mehra and Company and John Mills and Company for the recovery of certain loans advanced to M/s. John and Company. In that suit, the Civil Court at Agra, vide its order dated May 21, 1949, appointed Sarvasri P.S. Mathur and M.B. Tawakley, advocates, as joint receivers. In due course, for the assessment year 1942-43, the ITO by his order dated June 30, 1945, assessed the firm M/s. John Mills Co., on an, income of Rs. 1,78,468, after permitting depreciation allowance on the assets represented by the mill properties treating its original cost as Rs. 20,80,000 instead of Rs. 62,37,505, as claimed by the assessee. He pointed out that the court receiver, appointed by the Bombay High Court in the suit instituted by Govind Ram Saksaria, had claimed depreciation on the same property treating its original costs as Rs. 62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He disallowed the depreciation in respect of the mill properties claimed by the assessee and, vide his orders dated January 24, 1952, reassessed the assessee M/s. John Mills and Co., for the assessment years 1942-43, 1943-44 and 1944-45. Likewise, for the subsequent years also the ITO, vide his order dated January 29, 1954, revised the assessments of M/s. John Mills and Company after disallowing the depreciation allowance. He also communicated his decision to the Excess Profits Tax Officer, who in his turn, revised the excess profits tax assessment of the firm M/s. John Mills and Company for the years 1942-43 to 1946-47. The petitioners in Writ Petition No. 523 of 1975 are also aggrieved by the recovery proceedings initiated against them in respect of the assessment of the firm known as John and Company for the assessment years 1948-49 to 1956-57. A perusal of the allegations made in the various writ petitions shows that what in substance the petitioners are challenging is: 1. The validity of the assessments of M/s. John Mills and Company made under s. 34 of the I.T. Act in respect of the assessment years 1942-43 to 1947-48, and that of the proceedings for a recovery of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return forms for the assessment years 1942-43, 1943-44 and 1944-45), are mentioned and it also bears the post office stamp dated March 30, 1951. 3. Sarvasri M. B. Tawakley and P. S. Mathur, Court Receivers, John Mills and Co., Civil Courts, Agra, postal receipt No. 884. The acknowledgment due in respect of this, bearing postal stamp dated March 30, 1951, showing service on March 29, 1951, and bearing details as in the two above, together with letter dated March 28, 1951, requesting the receiver to transmit the notices for the three assessment years 1942-43, 1943-44 and 1944-45, to the proper person concerned for compliance of these notices. A copy of the letter dated March 31, 1951, received from the Receivers indicates that these notices were handed over to Sri B. D. Agarwal, advocate. The respondents further claim that notices under s. 22(4) were issued on August 22, 1951, for all the three years, i.e., 1942-43, 1943-44 and 1944-45 and were addressed to: (i) Mrs. Doris Marzano, postal receipt No. 838, (ii) I.E. John, postal receipt No. 840; (iii) Cap. M. L. John, postal receipt No. 842 ; and (iv) M/s. M. B. Tawakley and P. S. Mathur, postal receipt No. 841. They were despat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through process server, Narain. On November 26, 1953, notice under s. 22(4) fixing December 7, 1953, addressed to M/s. John Mills and Co., Agra, was issued and served on Mrs. D. Marzano, partner on November 29, 1953. On December 7, 1953, L. John, a partner, applied for adjournment so as to enable him to comply with the notice under s. 22(4) and the case was fixed for January 10, 1954, at 11.30 A.M. However, neither any account book was produced nor was any return filed up to January 29, 1954, on which date the assessment under s. 23(4)/34 was made. Subsequently, notice under s. 28(3) was issued in the name of John Mills and Co., Agra. Documents relating to the service of these order and notices etc., are, however, not available on the record. The material on the record, however, indicates that the partners were fully aware of the proceedings. It may, at this stage, be mentioned that the petitioners, in their writ petitions, had complained that the respondents did not permit them to effectively inspect various records in relation to impugned assessment orders and the raising of the demand against them. This court, while permitting the respondents to file a supplementary counte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the aforementioned notices), on August 26, 1951, the ITO sent a letter. (Annex. 13 to the supplementary counter-affidavit of Sri K. K. Saxena) which runs thus. " Dear Sirs, Ref. : John Mills-Assessments to I.T. assessment year 1942-43, 1943-44, 1944-45, your letter No. 188/73, dated July 9, 1951 and your No. 207 dated July 28, 1951. Kindly refer to above. I enclose herewith fresh notices under s. 22(4) in respect of the assessment years mentioned above for favour of due compliance. You attention is invited to s. 41 of the I.T. Act, 1922, under which you, as receiver, are liable to income-tax, etc. It is suggested that you should please get into touch with the proprietors of the John Mills and Co. and obtain the relevant books, etc., from them to enable you to comply with the requirements, under the I.T. Act, 1922, failing which the cases will have to be disposed of under s. 23(4) of the Indian I.T. Act. Please note that the date fixed is September 7, 1971. (Sd.) Income-tax officer, 'A' Ward, Agra. Copy forwarded to Mrs. D. Marzano. Copy forwarded to Captain M. L. John. Copy forwarded to Captain I. E. John." This letter addressed to M/s. M. B. Tawakley ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivers by the Civil Courts at Agra, in suit No. 76 of 1949 on May 21, 1949, they had not been so appointed in connection with the business or assets of John Mills and Co. and, as such, they could not be deemed to be representatives of the assessee within the meaning of s. 41 of the Indian I.T. Act. It is not disputed that by May 21, 1949, the business activity of John Mills and Co. had come to an end. A new firm by the name of John Jain Mehra Co. had been constituted. Some of the assets which at one time belonged to M/s. John Mills Co. had been taken over by the firm John Jain Mehra Co., M/s. P. S. Mathur and M. B. Tawakley were appointed as joint Receiver on May 21, 1949. According to the respondents, they were so appointed over the share of the Johns in that firm. Even though the receivers might have come into possession of some of the assets, which at one time belonged to the firm M/s. John Mills Co. (the original assessee), they had not been appointed to receive any business or property income for and on behalf of M/s. John Mills Co. Section 41(1) of the Indian I.T. Act, 1922, runs thus: " 41. Courts of Wards, etc.-(1) In the case of income, profit, or gains chargeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under assessed at a lower rate, or had been the subject of excessive relief under the Act or that excessive loss or depreciation allowance had been computed. They submitted that in this case when the ITO originally assessed M/s. John Mills Co., to tax for the years 1942-43 to 1947-48, all the necessary information and facts were available to him. He knew that the receiver appointed by the Bombay High Court had claimed depreciation in respect of the mills' properties in connection with the income derived by him for the assessment years 1942-43 to 1943-44 and the same had been allowed to a certain extent. After taking into consideration this fact as well, the ITO came to the conclusion that the assessee was entitled to depreciation allowance in respect of the Mills' properties. In the Circumstances, the action of the ITO in reopening the firm's assessment on the basis of observations made by the ITAT, Bombay Bench, while increasing the amount of depreciation claimed by the receivers appointed by the Bombay High Court, did not amount to an " information " within the meaning of the expression as used in s. 34(b) of the Indian I.T. Act, 1922. The ITO had merely changed his opinion a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson has to be reassessed in consequence of or to give effect to any finding or direction in the appellate order passed by the ITAT. The claim of the Revenue is that in the instant case, the bar of limitation is lifted as the present assessee (whether it be M/s. John Mills and Co., or the two receivers appointed by the Civil Court, Agra) falls within the ambit of the expression " any person " used in the said proviso and reassessments were being made in order to give effect to a finding recorded by the ITAT, Bombay Bench. It is, however, clear that if neither the firm M/s. John Mills and Co., nor the receiver appointed by the Civil Court, Agra, fall within the ambit of the expression " any person ", the bar of limitation in respect of their assessment would not be lifted and the reassessment proceedings would be without jurisdiction. The provisions of s. 34(1)(b) of the Indian I.T. Act, 1922, came up for consideration before the Supreme Court in the case of Prashar v. Vasant Sen Dwarkadas [1963] 49 ITR 1 (SC). The Supreme Court ruled that in so far as this provision affected persons other than the assessee, it contravened the equality clause enshrined in the Constitution and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessments of the excess profits tax payable by M/s. John Mills and Co., for the chargeable accounting periods ending between June 30, 1941 and June 30, 1946, which are now sought to be enforced against various petitioners are concerned, the case of the petitioners is that the authority reopening those assessments had no jurisdiction to do so. Further, those assessments had been illegally reopened without notice to the assessee, i.e., the firm M/s. John Mills and Co. The petitioners further claim that as these assessments had been reopened in consequence of reassessments made under s. 34 of the Indian I.T. Act, 1922, for the assessment years 1942-43 to 1947-48, they also would fall, in case, the reassessments made under s. 34 of the Indian I.T. Act, 1922, are found to be without jurisdiction. Learned counsel appearing for the Revenue, however, contended that the authority, making the reassessment under the Excess Profits Tax Act was fully competent to make the assessment and that the reassessment orders were not vitiated for that reason. He urged that the proceedings for reassessment taken under the Excess Profits Tax Act, are independent of the proceedings under the Indian I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be sustained at this stage. Assessees' right to challenge the assessment order by filing an appeal and the limitation for filing the same also accrues and commences from the (late on which the assessment order is served upon him. Accordingly, if and when such reassessment orders are served upon the assessee, it will be open to him to file in appeal and to urge before the appellate authority all the questions on which it seeks to challenge the validity of these orders before us. In these circumstances, while holding that the proceedings for recovery of tax as a result of reassessment made under the Excess Profits Tax Act are premature, we refrain from expressing any opinion on the validity of reassessment order which if necessary can be questioned by the assessee by way of an appeal under the provisions of the Act itself. 3. Validity of recovery proceedings in respect of the income-tax assessed against John Mills Co. for the years 1948-49 to 1956-57. It is only the petitioners in Writ Petition No. 523 of 1975 who are concerned with the assessment and recovery of tax from John Mills and Co. for the years 1948-49 to 1956-57. In para. 23 of the counter-affidavit, filed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment orders on the correct person and then to initiate proceedings for a recovery of the tax assessed for these years in accordance with law. When such a notice along with the copy of the assessment order is served upon the persons entitled to receive the same on behalf of the assessee, it will be open to the assessee to ventilate its grievance against various assessment orders by filing appeals under the provisions of the Indian I.T. Act. Accordingly, it is not necessary for as to express any opinion on the validity or propriety of the impugned assessment orders. We may also point out that learned counsel for the petitioners relied upon the provisions contained in s. 46(7) of the Indian I.T. Act, which lays down that save and in accordance with the provisions sub-s. (1) of s. 42 or of the proviso to s. 45, no proceedings for the recovery of any sum payable under that Act shall be commenced after the expiration of one year from the last date of the financial year for which any demand is made under the Act, and urged that the recovery proceedings have now become time-barred. A perusal of the aforesaid proviso, however, shows that the limitation provided therein becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that the respondents be restrained from realising the said rent during the pendency of the writ petition. This court permitted the petitioner N.K. Patni to realise the rent from his tenants and to deposit the same with the ITO. The petitioner has since been depositing the rent of the attached property with the respondents. As, however, we have come to the conclusion that the proceedings for recovery of tax from the petitioners are vitiated, the respondents should take immediate steps to pay back the amount of rent realised and deposited by the petitioner with them under the interim order passed by this court. The respondents are directed to refund the said amount to the petitioner, within two months from today. The petitioner, Munni Lal Mehra, in Writ Petition No. 79 of 1975, contended that a sum of Rs. 96,000 had been deposited on account of compulsory deposit in the year 1943. This amount was refundable to M/s. John Mills Co. in which the shares of M.L. John, which interest had since been purchased by the petitioner, was one half, the said amount has not been refunded to the petitioner so far and the respondent should accordingly be directed to refund the same to the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
