BADRILAL BHOLARAM Vs. B K SRIVASTAVA ITO

JUDGEMENT

(1.) BY this application under article 226 of the Constitution, the petitioners, M/s. Badrilal Bholaram, Indore, and its partners, apply to this court for a writ of certiorari for quashing an order of the Income-tax Officer, Special Investigation Circle, Indore, dated 27th February, 1965, rejecting their application under Section 45 of the Income-tax Act, 1922 (Act No. XI of 1922), and for a writ of mandamus requiring him to forbear from enforcing the demands raised by him, for the assessment year 1959-60, till the disposal of the appeals filed by the partnership firm for the assessment years 1956-57 and 1958-59, and not to take any coercive measure for the enforcement of the demand.

(2.) THE facts leading to this application, shortly stated, are these. THE petitioners constituted a Hindu undivided family and were assessed n that status after the assessment year 1956-57. THEre was a partial partition of the family on 11th September, 1955, and on the next date, the petitioners entered into a partnership agreement to carry on the business which was previously carried on. THE trend of assessment of the Hindu undivided family up to the assessment year 1956-57, is reflected in annexure "A" to the petition. THE assessments were arrived at only after making substantial additions to the result obtained from the books of accounts of the family. After the formation of the partnership firm, the income of the firm and its individual partners for the assessment year 1956-57 onwards was determined by the Income-tax Officer, Special Investigation Circle, Indore, under Section 23(3) of the Income-tax Act, 1922, after rejecting the books of accounts and applying proviso to Section 13. THE Income-tax Officer also made additions on account of profits from undisclosed sources and from the business carried on benami in other names. In the appeal for the assessment year 1956-57, preferred by the partnership firm, M/s Badrilal Bholaram, the Appellate Assistant Commissioner of Income-tax, by his order dated 7th February, 1963, remanded the case to the Income-tax Officer, Special Investigation Circle, Indore, with a direction to submit his report on certain points after an enquiry within six weeks from the receipt of the order. Similarly, in the appeal preferred by the firm for the assessment year 1957-58, the Appellate Assistant Commissioner remanded the case, by his order dated 22nd November, 1963, with a direction to submit a report within two months. Both these appeals were pending on the date this application was moved. In the meanwhile, the Income-tax Officer, Special Investigation Circle, Indore, made an assessment of the firm for the year 1958-59, and as against Rs. 85,521 returned as loss, he determined that profits amounting to Rs. 2,09,619 had been earned by the partnership firm, during the relevant year, and raised a demand for payment of Rs. 91,377-42 P. as tax. Against this order of assessment, the firm preferred an appeal which was still pending. Similarly, for the assessment year 1959-60, the Income-tax Officer, Special Investigation Circle, Indore, made an assessment of the partnership firm on 31st March, 1964, by which he rejected the books of accounts and resorted to the proviso to Section 13, whereby, he raised a tax demand to Rs. 3,16,423. THE petitioners allege that the assessments were wholly arbitrary and unwarranted, and were deliberately made at the close of limitation. THEse are, however, matters not relevant for our present purposes. THE appeals preferred against the assessments for these years are pending.

(3.) HOWEVER, so long as the Income-tax Officer has exercised his discretion fairly and reasonably, the court should have no power to interfere. In the special circumstances of the present case, the Income-tax Officer, Special Investigation Circle, Indore, found on enquiry that the petitioners had wilfully failed to comply with the notice of demand although they were possessed of sufficient assets to enable them to meet the demand. The Income-tax Officer in holding them to be "assessees in default", and in not staying the demand or granting any extension of time to them for payment of the tax by instalments or otherwise, has exercised his power fairly and reasonably. The entries in their books of accounts clearly show that the petitioners have been diverting very large sums of money with a view to withhold payment of tax in their design to defeat the tax demand.