LAHERCHAND DHANJI Vs. UNION OF INDIA

JUDGEMENT

(1.) BY this applications under article 226 of the Constitution of India, the petitioners challenge the legality and correctness of the order dated March 23, 1978, passed by the Commissioner of Income -tax, Pune -II, Pune.

(2.) THE petitioners is a partnership firm. The petitioners carry on business as cotton and grain merchants and commission agents at Shirpur in Dhulia District. The firm is assessed under the provisions of the I.T. Act, 1961. For the assessment year 1969 -70, the petitioner's assessment was completed on March 18, 1970, by the third respondent, namely, the ITO, A Ward, Dhulia, by assessing the income at Rs. 12,140. Subsequently, a notice was issued by the ITO under s. 148 of the I.T. Act. In response to that notice the petitioners filed a return for a total income of Rs. 52,140. The additional income of Rs. 40,000 was to cover certain cash credits appearing in the books of account of the petitioners. The said amount of Rs. 40,000 was included in the said return after the notice under s. 148 of the I.T. Act was given. It is the contention of the petitioners that the said amount of Rs. 40,000 was included in the return with a view to enter into a settlement with the department by surrendering the said amount of Rs. 40,000 for assessment, praying for non -levy of penalty in respect of the same. The negotiations between the petitioners and the ITO were going on. Meanwhile the Voluntary Disclosure Scheme, 1975, was introduced under an Ordinance known as the Voluntary Disclosure of Income and Wealth Ordinance, 1975 (XV of 1975). The said Ordinance of 1975 was repealed and replaced by the Voluntary Disclosure of Income and Wealth Act, 1976 (Act No. VIII of 1976) (hereinafter referred to as 'the said Act'). During the course of settlement between the petitioners and the ITO, it is contended by the petitioners that the ITO suggested to take the benefit of the said Voluntary Disclosure Scheme, 1975, and, accordingly, the petitioners accepted the said suggestion, and initially they filed a declaration under s. 3(1) of the said Act for a total income of Rs. 45,000. The said declaration was made on October 30, 1975. In the said declaration it was specifically stated by the petitioners as Under :

(3.) THE ITO in the course of assessment for the assessment years 1967 -68, 1968 -69 and 1969 -70, and other years was investigating in respect of certain cash credits and sales appearing in the books of account of the petitioners. The petitioners explained to the ITO that these cash credits and sales were in respect of the income which was disclosed in the disclosure made by the petitioners and as per the provisions of the said Act the same could not be taken into account for the purpose of assessment, the same being assessed under the provisions of the said Act. The ITO, however, was of the opinion that the disclosure made by the petitioners was not made in accordance with law and, therefore, he was entitled to ignore the said disclosure made by the petitioners. In spite of the submission made by the petitioners that the said disclosure could not be taken into account for the purpose of assessment for the said assessment years, the ITO proceeded to assess the petitioners' income, ignoring the certificate issued by the Commissioner. Ignoring the contention of the petitioners, the ITO completed the assessment for the relevant assessment years, ignoring the said certificate, and passed orders of assessment. The said orders of assessment are annexed to the petition as ex. 'C'. It appears that the petitioners feeling aggrieved by the said orders of assessment, had preferred appeals before the AAC of Income -tax.