NATWARLAL JOITRAM RAVAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE appeal filed by the writ petitioner impugns the order of summary rejection of his writ petition. At the stage of the admission of the appeal, the Division Bench took the view that "at the hearing of the appeal what should be gone into is not only the propriety of the order rejecting the writ petition in limine but the entire writ petition on merits. . . . ". We have, accordingly, treated the writ petition as having been admitted and so heard the matter.

(2.) THE writ petitioner (whom we shall refer to as "the assessee") was, according to the returns of income filed by him, carrying on the business of running a saving unit scheme. He was assessed to income-tax for the asst. yrs. 1974-79 onwards under s. 143 (1) of the IT Act, 1961. During the course of the assessment proceedings for the asst. yr. 1980-81, the ITO noticed transactions in the assessee's book of account which he found suspicious. He impounded the books of account. On 26th November, 1981, he carried out a survey operation of the assessee's premises under s. 133a which, on the same day, was converted into a search under s. 132. Cheque books with cheques signed by different parties were found in the course of the search. Examination of the seized material seemed to suggest that the assessee had been carrying on the business of bogus 'havala' transactions by receiving unaccounted moneys in cash and returning the same by way of loans. The assessee made statements to the Revenue authorities that appeared to confirm that he had been doing such bogus 'havala' business in his own name and in the names of his friends, in their personal names as also in the names of proprietary concerns. On 7th December, 1981, the assessee retracted the statements. Upon examination of the seized material, the ITO found that, out of the loans advanced in the names of the assessee, his friends and relatives, loans aggregating to Rs. 42,43,200 were still outstanding. The ITO issued prohibitory orders to the parties to whom the loans had been given prohibiting them from returning them to the assessee, his friends and associates. The ITO then reopened the assessment of the assessee for the asst. yr. 1979-80, which had been finalised for a total income of Rs. 17,340, and made a fresh assessment for a total income of Rs. 8,52,940. The assessee filed an appeal, and the CIT (A) reduced the total income by Rs. 2,30,000. For the asst. yr. 1980-81, the ITO finalised the assessment for a total income of Rs. 4,74,899. The assessee filed an appeal, and the CIT (A) reduced the total income by Rs. 2,27,200. On 6th February, 1984, a notice was issued to the assessee under s. 148 for the asst. yr. 1981-82.

(3.) ON 11th December, 1984, the assessee petitioned to the CIT XII, Bombay, for the settlement of his income-tax matters and made proposals. The petition referred to discussions which had already been held. It suggested that the entire income of the six persons named therein in their individual and proprietary names should be taxed only in the assessee's hands. In other words the total business done by all of them should be considered his own. In doing so, the appropriate peak should be worked out in each case and a combined peak, which worked out to approximately Rs. 50. 67 lakhs, should be the total income to be considered for the purposes of the settlement. Thereout a fair portion should be considered as genuine and the balance as additional income in the hands of the assessee alone. Tax would be levied on the additional income and would be paid within a reasonable time. No proceedings would be initiated for levying penalty or interest and no prosecutions would be launched. Immunity should be granted to the assessee, the six named persons and all persons and parties to whom loans had been given from penalty and interest proceedings and prosecutions. On 22nd December, 1984, the assessee addressed a letter to the Member (Investigation), CBDT, and asked that the loans given by him to M/s. Suresh K. Mehta and M/s. Raja Pictures and their Associates in the sums of Rs. 1 lakh and rs. 3. 25 lakhs respectively should be collected directly from them and the assessee should be asked to pay only the balance.