COMMISSIONER OF INCOME TAX Vs. LOK PRAKASHAN LTD

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Ahmedabad Bench 'A' has made this Reference on an application by the Revenue under Section-256[1] of the INCOME TAX ACT, 1961 for opinion of this Court on the following question arising out of Income Tax Appeals No. 1965, 1966, 1967 and 1968/Ahd/1987 pertaining to Assessment Years 1973-74, 1974-75, 1975-76 and 1976-77.

(2.) During course of the assessment proceedings for the Assessment Year 1982-83, the Assessing Officer found that more than 50% of the shares of the assessee company were held by the family of Shri Shantilal A. Shah and his two sons and control over the affairs of the company was with less than five persons of that family. The Assessing Officer recorded statement of one Ratilal Khushaldas, one of the directors of the assessee company, who stated that the company was managed by Shantilal A. Shah, his daughter-in-law Smt. Smrutiben and his son, Babulal Shah. After the facts started floating on the surface of the record, Shri Shantilal A. Shah, by his application/letter dated 30.5.1985, stated that he had control over the management of the assessee company. Vide his letter dated 13.8.1985, he prayed that the matter be referred to the Settlement Commission. Vide letter dated 17.10.1985, Shri Shantilal A. Shah admitted before the Assessing Officer that the company was closely held company and it be so treated for the Assessment Year 1982-83.

(3.) The Income Tax Officer, on the above basis, formed an opinion and recorded reasons to believe that the assessee had omitted/failed to furnish the details relevant for Section 2[18] of the Act and the same had resulted into assessment of the company at lower rate of tax for the Assessment Years 1969-70 to 1981-82. He accordingly issued notices under Section 147[a] read with Section 148 of the INCOME TAX ACT, 1961, 1961 for reopening of the assessment relating to Assessment Years 1969-70 to 1976-77 after obtaining due approval from the Central Board of Direct Taxes. The notice was served upon the assessee on 25.2.86. For Assessment Years 1977-78 to 1980-81, the Income Tax Officer obtained necessary approval from the Commissioner of Income tax, Gujarat-I Ahmedabad and issued notices on 27.1.86, which was served on 31.1.86. The assessee filed on 30.3.1986 returns of income in response to the notice under Section 149 for all the Assessment Years from 1969-70 to 1980-81.