VARDHMAN SPINNING AND GENERAL MILLS LTD Vs. INSPECTING ASSISTANT COMMISSIONER OF INCOME-TAX ASSESSMENTS

JUDGEMENT

(1.) The petitioner seeks the quashing of a notice issued by the Inspecting Assistant Commissioner of Income-tax (Assessment), Ludhiana, under Section 148 of the Income-tax Act. As a consequential relief, he sought a direction to prevent the Inspecting Assistant Commissioner of Income-tax (Assessment) from deducting tax under that provision against the petitioner. The petitioner contends that the issuance of notice was by an authority having no jurisdiction to issue such notice. The second ground raised by him is that there are no reasonable grounds for issuance of such a notice for reopening of the assessment of the income-tax for the year 1975-76. It was further claimed that such reopening of the assessment is barred by limitation. It was claimed that during the assessment of income-tax for the accounting year 1975-76, he had supplied full information regarding the financial position, and now there is no ground for reopening of the assessment. It is submitted that mere change of opinion of the subsequent Income-tax Assessing Officer would not justify reopening of the assessment.

(2.) On behalf of the respondents, it was submitted that by issuance of various orders in the form of a notification, the jurisdiction has been conferred on the officers as mentioned in the said orders and, therefore, the notice issued under Section 147 of the Income-tax Act was quite proper and correct. It was submitted that the issuance of notice was under Clause (a) of Section 147 of the Income-tax Act, and not under Section 147(b) as was wrongly assumed by the petitioner. My attention was also invited to the reasons that preceded the issuance of notice under Section 147(a) of the Income-tax Act. It was submitted that after the assessment of the year 1975-76 was over, it came to the notice of the assessing authority that the petitioner had undervalued the closing stock of raw material, and thereby concealed the income. It was claimed that the assessee had adopted the method of average cost of the raw material ranging over the whole accounting year, whereas the average rate for the month of February and March should have been mentioned while showing the closing stock of the raw material. It was further claimed that the assessee had also mis-stated the factual position as regards the development rebate, and thereby secured excess development allowance.

(3.) The first question pertains to the jurisdiction of the authorities issuing notice under Section 148 of the Income-tax Act. The provisions of the Income-tax Act, as were enforced in the year 1980, when notice was issued, should be taken into consideration for the purpose of this petition. That notice (annexure P-11) is dated March 28, 1980. It is issued by the Inspecting Assistant Commissioner of Income-tax (Assessment), Ludhiana. Counsel for the respondents brought to my attention Various orders issued from time to time under Section 125 of the Income-tax Act. Section 125 of the Income-tax Act empowers the Commissioner of Income-tax to confer powers on the Inspecting Assistant Commissioner in respect of any specified case or class of cases or of any specified person or class of persons. The proviso further states that the Commissioner shall not issue such orders under certain sections including sections 147 and 148 of the Income-tax Act unless he has been thus authorised to issue such orders by general or special orders issued by the Board (Central Board of Direct Taxes). Pursuant to those powers, various orders were issued from time to time to confer jurisdiction. The copies of these are at annexures R-3, R-4, R-5, R-6, R-8, R-9, R-10 and R-11. The last order (annexure R-11) is dated December 20, 1979, by which a concurrent jurisdiction has been conferred on the Inspecting Assistant Commissioner of Income-tax (Assessment), Ludhiana, over the cases assigned to the Income-tax Officer, Special Investigation Circle, Ludhiana. In view of those orders, notice was issued by the Inspecting Assistant Commissioner of Income-tax (Assessment), Ludhiana. It was contended that such orders cannot be issued without hearing the assessee affected thereby. I am unable to appreciate that submission. Section 125 coupled with Section 125A of the Income-tax Act makes it quite clear that a concurrent jurisdiction can be conferred on the Inspecting Assistant Commissioner and the Income-tax Officer. While conferring such jurisdiction, it is not obligatory that the assessee should be heard. The hearing of the assessee is contemplated only where as per Sub-section (3) of Section 125A of the Income-tax Act, instructions to be observed by the Income-tax Officer are issued. In that case such instructions prejudicial to the assessee shall not be issued without affording him an opportunity of being heard. In view of the orders issued by the Income-tax Commissioner, I find that the Inspecting Assistant Commissioner has jurisdiction to issue the notice in question. In the context of it, it also be noted that conferring jurisdiction under sections 125 and 125A of the Income-tax Act, should not be confused with the powers to transfer cases under Section 127 of the Income-tax Act. In the present case, there is conferment of the jurisdiction, and not the transfer of a case. I, therefore, find no substance in the submission that the notice was by the authority having no jurisdiction.