ISHRAN DEVI OBERAI Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) By this writ petition, the petitioner has challenged the notice dated March 7, 1983, issued under Section 148 of the Act for the assessment year 1966-67. Dr. Pal, in support of this writ petition, contends that the concerned respondent has no jurisdiction to issue the notice unless certain conditions mentioned in the aforesaid section are fulfilled. In this case, though it is mentioned in the impugned notice that he has reason to believe that the petitioner has escaped assessment of an income but in fact there cannot be any reason to believe nor the same has been spelt out in the affidavit-in-opposition. In the affidavit-in-opposition it has been stated that since the petitioner enjoyed interest-free loan and such benefit of non-payment of interest cannot be termed to be an income within the meaning of Section 2(24) of the Income-tax Act, 1961. Dr. Pal contends that a Division Bench of this court has held, while deciding the question as to whether a benefit and/or enjoyment of interest-free loan can be termed to be an income within the meaning of Section 2(24)(iv) of the Act, that non-charging of interest or for that matter non-payment of interest on the loan cannot be termed to be a benefit so as to be described as an income. This judgment has been rendered in a case of CIT v. P. R. S. Oberoi. Dr. Pal further contends that the aforesaid ratio of the judgment of the Division Bench of this court has been entirely approved by a later judgment of the Supreme Court reported in V. M. Salgaocar and Bros. P. Ltd. v. CIT . Dr. Pal further contends that unless both the conditions which are sine qua non for issuance of a notice, are satisfied the authority concerned cannot issue such notice. In support of his submission he has relied on Calcutta Discount Co. Ltd. v. ITO ; ITO v. Lakhmani Mewal Das ; Indian Oil Corporation v. ITO and Coca-Cola Export Corporation v. ITO .

(2.) Mr. Agarwal, appearing for the respondents, contends that the judgment of the Division Bench as well as the Supreme Court have been rendered on the question of benefit given interest-free loans to the salaried employees concerned. The aforesaid judgment cannot help this case as the petitioner herein is not a salaried employee and this loan was obtained without paying any interest. Therefore, it will come within the definition of Section 2(24)(iv) and it is a benefit which was derived by the petitioner so as to render the same being an income. Therefore, the reason for which the impugned notice was issued has got solid foundation as there is no jurisdictional error on the part of the respondents in issuance of the aforesaid impugned notice.

(3.) Having heard respective contentions of learned counsel. I am of the view that the question falling for consideration is as to whether the impugned notice issued by the respondent is sustainable on the basis of the disclosed reasons mentioned in the affidavit. Mr. Agarwal is not really disputing under what circumstances the aforesaid impugned notice should be issued. I am of the further view and it is a settled position of the law that there are conditions which are to be fulfilled before exercising of power under Section 148 for issuance of the impugned notice. These conditions are that the concerned authority must have reason to believe that there is escapement of income. In order to explain the aforesaid position first of alt there should be an income within the meaning of the Income-tax Act and then question of escapement will arise. Unless there is an income and followed by escapement the question of issuance of notice under the aforesaid section does not and cannot arise. In order to examine whether there is an income in the true sense as per the affidavit-in-opposition or not, I am of the view that the benefit enjoyed by the petitioner by way of exemption of payment of interest cannot be termed to be an income in any sense. The Revenue has tried to bring this case within the purview of Section 2(24)(iv) of the Income-tax Act. The Division Bench of this court has categorically held as follows (page 109 of 183 ITR) :