NABHA INVESTMENT PRIVATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) By this petition under Articles 226 and 227 of the Constitution of India, the petitioner, a private limited investment company, impugnes the legality and validity of the notice dated 7th April, 1999 issued by the Commissioner of Income-tax, Delhi-1 V. respondent No. 2 herein, in exercise of the powers conferred on him by Section 263 of the Income-tax Act, 1961 (for short the Act) to show cause as to why the assessments made by the joint Commissioner of Income-tax(Assessments). Special Range-VIII, on 24th February 1998 for the assessment years 1987-88,1989-90,1991-92,1992-93,1993-94 and 1994-95 be not set aside and suitable directions for re-doing the same as per law be not issued to the Assessing Officer as in his opinion the said assessment orders are erroneous insofar as they are prejudicial to the interests of the Revenue.

(2.) Shorn of unncessary details, the facts material for the purposes of this petition are: The petitioner deals in shares, stocks and securities. In its returns of income for the relevant assessment years the petitioner computed income on sale of certain shares under the head' income from capital gains' on the plea that these shares were not acquired for the purposes of business of the company but as an investment by the company.The Assessing officer did not agree with the petitioner;treated the receipts from sale of such shares as profits from business and accordingly taxed the same under the head profits and gains of business'.The petitioner challenged the said orders.It appears that in the first instance the Income-tax Appellate Tribunal set aside the assessments in respect of some of the years and restored back the same to the Assessing Officer for fresh assessments in accordance with its directions. Subsequently assessments in respect of other years were also set aside by the Commissioner of Income-tax(Appeals with a direction to the Assessing Officer to re-do the same as per the directions of the Tribunal.While re-assessment proceedings were pending, in the year 1997, the Government of India, respondent No. 1 herein, announced a Voluntary Disclosure if Income Scheme, 1997 (herein after referred to as the VDIS). It. was clarified by the Central Board of Direct Taxes that where an assessment order had been set aside, an assesseecould make a declaration under the VDIS.It is averred that in order to be absolutely certain about its status, the petitioner, through its Chartered Accountants, sought certain clarifications from the Commissioner if income-tax-I, Convener of the VDIS. The Commissioner, vide his letter dated 30th December, 1997, issued the following clarifications:

(3.) It is claimed that in the light of the said clarification, the petitioner filed its declaration under VDIS on 31st December, 1997 in respect of the aforenoted assessment years, declaring an additional income of Rs.4,31,50,728.00, representing the difference between the income by way of treatment of sale of shares as business income (as computed by the Assessing Officer) and income on account of the same being treated as capital gains (as computed by the petitioner).It appears that in order to determine as to what amount will become refundable to the petitioner, which could be deposited by the deparment on petitioner's account against the tax payable under VDIS, on 24th February, 1998, respondent No. 2 completed re-assessments in respect of the said assessment years, by taking into consideration the declaration made by the petitioner under the VDIS. The declaration made by the petitioner is said to have been accepted by the Department inasmuch as a certificate under Section 68(2)of the VDIS was issued to the petitioner on 7th April, 1998.