DATCHINAMURTHY V Vs. ASSISTANT DIRECTOR OF INSPECTION

JUDGEMENT

(1.) THESE are two writ petitions, which were originally posted along with W. Ps Nos. 828 and 2120 of 1977 and 3307 of 1978. As the points raised in these writ petitions required certain other contentions to be considered, these petitions on January 23, 1979. In both these write petitions the respective write petitioners have prayed for issue of a write of prohibition prohibiting the first respondent, that is the Assistant Director of Inspection from taking and proceedings under s. 131 of the I.T. Act or any other provision for the purpose of summoning the petitioners and taking evidence or recording statements in respect of any proceedings relating to the second respondent, viz., the Tamil Nadu Farmers Service Co-operative Federation. The learned counsel, Mr. S. Gopalaratnam, who appeared for these two write petitioners, wanted the write of prohibition to be issued in a modified form and not in the form in which it is set out in the petitions, as it was realised that a bald prohibition from enquiry would not be appropriate in the circumstances of the case. We shall indicate the modified prayer in due course.

(2.) THE Tamil Nadu Farmers Service Co-operative Federation, which is the second respondent in these writ petitions, was registered on December 4, 1974. It executed a promissory note in favour of the writ petitioner in W.P.No. 3306 of 1978, for a sum of Rs. 14,700 on April 8, 1975, by name Datchinamurthy, agreeing to repay the amount set out in the promissory note with interest. THE second respondent Federation was started with the object of helping the farmers by providing them integrated credit and other services. THE membership of the Federation was open to the Farmers Service Co-operative Societies and persons over 18 years of age from the Government of Tamil Nadu. THE total individual members was not to exceed 20. THE Federation was taking deposits on payment of 10% interest. A large number of farmers are said to have lent monies on interest to the Federation, of whom the write petitioners, Datchinamurthy and Natarajan were two. Datchinamurthy claims to own lands in Karungulam Village. He was a member of the Tirunelveli District Farmers' Co-operative Society. He come to know that in 1976 the Federation had some problems with I.T. Department and therefore, demanded repayment of the amount advanced to the Federation. As the amount was not paid, he filed O.S. No. 474 of 1977, in the City Civil Court, Madras, as a summary suit under order 37, rule 1, C.P.C. THE Federation filed an application for leave to defend, which was dismissed by the trial court and the suit was decreed on March 7, 1977, for a sum of Rs. 16,145 together with interest and costs. THE claims to have come to know that similar decrees had been obtained by several of the farmers, who had made deposits and who had obtained decress. When the Federation was approached for payment of the decree amount, the petitioner was said to have been informed that the Assistant Director of Inspection, the first respondent, had issued prohibitory order under s. 132(3) of the I.T. Act, 1961, prohibiting the managing director of the Federation from removing, parting with or otherwise dealing with the amount deposited in the bank accounts in specified banks, on June 1 and 2, 1976. Notices were issued under s. 148 read with s. 139 of the I.T. Act, for the purpose of making an assessment for the assessment year 1975-76 on July 1, 1976. On April 21, 1977, the ITO, City Circle I(2), was vested with the jurisdiction to make the assessment on the Federation and he issued the statutory notice. THE Federation filed a return showing loss of Rs. 36,070 on April 28, 1977, and a revised return on May 7, 1977, showing a loss of Rs. 21,890. THE Federation was represented by an auditor who filed his power on May 28, 1977.

(3.) THE Assistant Director of Inspection has filed counter-affidavits in which he has questioned the correctness of the several allegations made in the affidavit in support of the writ petitioners. In substance, he has stated that the enquiries were being proceeded with only in the manner contemplated by the Act and that all statements were being taken from the deponents in accordance with law and without any exercise of any coercion as alleged. He has stated that a number of officials had to be taken for the purpose making these enquiries on the spot, as a large number of deponents to the affidavits had to be examined, their whereabout ascertained and the correctness of their averments in the affidavits investigated. It has been alleged in the counter-affidavits that the writ petitioners were making mala fide attempts on their part to subserve the interest of the Federation and to thwart the enquiry and the assessment to be made on the Federation.