COMMISSIONER OF INCOME TAX Vs. SOMANI PILKINGTONS LTD

JUDGEMENT

(1.) IN this petition which has been filed under s. 256(2) of the IT Act, 1961, by the CIT, Central-I, Calcutta, the prayer is to direct the Tribunal to refer the following question of law for adjudication :

(2.) THE facts, on which question framed above emanates, need a necessary mention. Respondent- assessee filed its return of income on 28th June, 1985 and a revised return on 17th Feb., 1988 pertaining to the asst. yr. 1985-86. The income-tax assessment of the assessee for the asst. yr. 1985-86 was completed under s. 143(3) on 15th Feb., 1989 by the Dy. CIT, Special Range, Rohtak. A search and seizure operation was conducted by the Directorate of Revenue Intelligence (Anti Evasion) at the business premises of the assessee and also at the residential premises of one Mr. M.L. Vyas, an executive of the assessee-company. From the residence of Mr. Vyas certain documents were seized which revealed that the amount over and above the bill price Rs. 10 on onix variety, and Rs. 5 on other varieties was also charged from the customers. The Central Excise Department contacted some customers and recorded their statements, from where it revealed that said dealers had taken extra charges. This resulted into issuance of a show-cause notice by the Central Excise Department to the assessee. It is further clear from the facts, as enumerated in the petition itself, that the petitioner--IT Department had obtained from the Central Excise a copy of the show-cause notice and its annexures. The annexures which are only statements of some dealers revealed charging of over and above the bill price. It is on the basis of these annexures only that the assessee was required to explain as to why the annexures to the show-cause notice should not be made basis for income-tax assessment proceedings. Pursuant to the show-cause notice aforesaid, the assessee filed a reply wherein it was, inter alia, stated that it had already filed a suit before the Hon'ble Delhi High Court and the show-cause notice and an ex parte order issued by the Central Excise Department has been stayed by the Hon'ble Delhi High Court. It was further stated that the AO had observed that the department was relying on the annexures itself and not on the show-cause notice. Annexures to the show-cause notice were only an information relied in the show-cause notice by the Central Excise Department. This information was available even before the show-cause notice came into existence. The case of the Department was that the annexures served two purposes, namely, that the documents were in existence even before the show-cause notice and that the same had been made annexures to the show-cause notice. In the hands of the department this is the only information from the outside sources which can be utilised for the purpose of assessment. The AO, while disagreeing with the reply to the show-cause notice added an amount of Rs. 65 lakhs to the total income of the assessee subject to the filing of complete details of the onix and other varieties of tiles. This order of the AO was challenged by the assessee in an appeal before the CIT(A). The CIT(A) found that subsequent to the passing of the assessment order the Hon'ble High Court at Delhi, had already set aside the show-cause notice issued by Central Excise authorities. The decision of the Hon'ble Delhi High Court was, however, not available to the assessing authority at the time of passing the assessment order and, therefore, the CIT remanded the case to the AO for fresh decision. Being aggrieved by the said order of the CIT(A), both the IT Department and the assessee preferred appeal before the Tribunal, Delhi Bench "C", Delhi. The Tribunal held that the remand by the CIT(A) to the AO could have been avoided as the decision of the Hon'ble High Court, Delhi, was binding and required implementation and deleted the entire addition of Rs. 65 lakhs. Being aggrieved, the petitioner herein sought reference from Tribunal on the question reproduced above. When it failed in its endeavour to get the question referred, the present petition under s. 256(2) of the IT Act, 1961 was filed.

(3.) WE have given our thoughtful consideration to the contentions raised by Mr. Sawhney, as noted above, but in the facts and circumstances of this case, do not find any merit therein. As has been mentioned, in the earlier part of the judgment, it is conceded position that it is only annexures to notice, dt. 27th March, 1986, which were made the basis of the show-cause notice to the petitioner for adding to the income of the company and this very notice, which has been a subject-matter of decision before the Delhi High Court has since been quashed. Once, the very notice which contained annexures which were made basis of the show-cause notice has since been set aside, the annexures had lost all their validity. All the annexures tagged up with the notice would, at the most, support the contents of the notice only, and once notice is quashed, in our view nothing remains before the Department on the basis of which show-cause notice could be issued. The Delhi High Court judgment, may not be binding upon the IT Department, as such, but once, the very notice on the basis of which it was a case of the Department, that it required to add to the income of the assessee, has been quashed, no meaningful purpose shall at all be served in still persisting and proceeding with the show-cause notice. We may mention here at this stage, that while dealing with the core issue pertaining to extra charges disclosed by annexures by virtue of statement of dealers, the Delhi High Court held as follows: