SIRPUR PAPER MILLS LIMITED Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE Sirpur Paper Mills Ltd. (hereinafter referred to as "the company") seek a writ of mandamus interdicting the Income-tax Officer, "A" Ward, Companies Circle, not to give effect to notice dated March 23, 1974, and reopen the assessment order of 1965-66.

(2.) THE company, in their return for the assessment year 1965-66, disclosed the profit and loss account, the balance-sheet and other necessary particulars. THE Income-tax Officer, thereupon, determined the total income as Rs. 7,95,575. This income was assessed. THE total income was ascertained by the Income-tax Officer having allowed Rs. 20,000 under the head "Workmen and staff welfare expenses". THE deduction of Rs. 20,000, it is alleged in the impugned notice, resulted "in the escape of" tax which is sought to be remedied by the revenue through the impugned notice. THE assessment order in regard to some minor particulars was rectified on October 25, 1967, and on December 7, 1967, by separate orders of the Income-tax Officer. On appeal, by the petitioner-assessee, the Income-tax Appellate Tribunal allowed the appeal on October 3, 1969, in some aspects (the particulars are not necessary to be specified in these proceedings). On January 17, 1973, this court in R.C. No. 33/71 [Commissioner of Income-tax v. Sirpur Paper Mitts Ltd. [1978] 112 ITR 778 (AP) [since affirmed by the Supreme Court, page 776 ibid--Ed.] answered the reference in favour of the assessee.

(3.) THE Commissioner of Income-tax in his counter avers that his satisfaction was not mechanical, while the Income-tax Officer, in a separate counter stated, the then Income-tax Officer "appears to have accepted that a sum of Rs. 20,000 was paid to Sri I. M. Bhandari, now the vice-president, for pacifying the troublesome elements in the mills as is evident from the endorsement made by the Income-tax Officer in the records. THE assessee did not bring to the notice of the Income-tax Officer at the time of assessment that staff welfare expenses include lump sum amount spent by its vice-president as per his discretion. Had the assessee brought this fact to the notice of the Income-tax Officer, the Income-tax Officer would have disallowed the same". THE expenditure, according to the department, was not incidental to business. This fact, they assert, the department found when they scrutinised the assessee's accounts for purposes of 1968-69 assessment. THE claim for similar expenditure by the assessee was disallowed and the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. In the orders of assessment in 1972-73 and 1973-74, such an expenditure was disallowed. Based on this record, the Income-tax Officer, it is urged, "had reason to believe that by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year 1965-66 income chargeable to tax has escaped assessment". THE petitioner-company, the respondents allege, have effective and alternative remedy by way of appeal under the Act. THErefore, this court should not interfere with the orders of the respondents at this stage of the proceedings.