UNION OF INDIA Vs. SINGHVI BROTHERS

JUDGEMENT

(1.) THE Union of India being aggrieved by part of the order of the learned single judge dated May 9, 1990 (Shree Singhvi Brothers v. Union of India [1991] 187 ITR 219), has preferred this special appeal.

(2.) THE material facts giving rise to the instant appeal are that the respondent Shree Singhvi Brothers, the original writ petitioner (hereinafter referred to as "the respondent") is a registered partnership firm. It is alleged that a search was conducted at the business premises as well as the residential premises of the partners, namely, Kushal Singh and Laxman Singh, under the provisions of Section 132(1) of the Act on May 6, 1981. During the course of the search 65 kgs. of silver was found, out of which 16 kgs of silver/silver ornaments were treated as unexplained by the authorised officers of the Income-tax Department. THErefore, the Department included its value amounting to Rs. 32,000 in their income for the assessment year 1982-83 while making the regular assessment. THE respondent-assessee explained that the said silver belonged to Shri Mohansingh, Shri Banshilal and Shri Abdul Mazid. After an order under Section 132(5) of the Act, the respondent-firm filed its return on October 1, 1982. THE Assessing Officer rejected the explanation given by the assessee and included the value of 16 kgs, silver amounting to Rs. 32,000 in their income and also imposed a penalty of Rs. 29,600 under Section 271(1)(c) of the Act on the tax amount of Rs. 14,880. THE Commissioner of Income-tax (Appeals) dismissed the appeal against the order of assessment. On further appeal the Tribunal sustained the addition to the tune of Rs. 28,800. With respect to the penalty under Section 271(1)(c) an appeal was filed before the Commissioner of Income-tax (Appeals). An application was filed before the Commissioner of Income-tax under Section 273A for waiver or substantial reduction in the penalty imposed. It is averred that during the course of hearing of the application under Section 273A on the assurance given by the appellate authority that on payment of tax due the penalty of Rs. 29,600 shall be waived, the respondent-assessee deposited tax due of Rs. 7,230 in the account of the firm and Rs. 10,330 in the account of Kushal Singh Singhvi. However, the application for the waiver was rejected by the Income-tax Commissioner. THE respondent-assessee aggrieved by the order of the Income-tax Commissioner filed an application under Section 154 of the Act. However, the said application was also rejected. It is further averred that a notice was served on the respondent-assessee by the Department regarding launching of the prosecution. A sanction for the prosecution of the partners of the firm was granted by the order dated May 31, 1988. A complaint was also filed in the Court of the Chief Judicial Magistrate (Economic Offences), Jaipur, for offence under Section 276C(1) of the Income-tax Act. THE respondent-assessee prayed in the writ petition that the order of the Income-tax Commissioner dated May 31, 1988, passed under Section 273A and 273A(4) may be quashed. A further direction was sought for reconsideration of the waiver petition by the tax authority. A further direction was sought to quash the complaint filed in the Court of Chief Judicial Magistrate (Economic Offences), Jaipur. THE learned single judge refused to interfere with the order imposing penalty particularly for the reason that an appeal against the said order was pending before the competent authority. THE prayer with respect to quashing of the order rejecting the application for waiver and also the application under Section 154 was rejected. However, the prayer with respect to quashing of the proceedings was granted. THE learned single judge observed that in the instant case four alternate remedies were available to the Department and the remedy of launching the prosecution being one of the remedy was optional. In such circumstances it was obligatory on the part of the Department to afford an opportunity of hearing to the respondent-assessee before launching of the prosecution. In view of the finding the learned single judge quashed the complaint filed against the respondent-assessee pending in the Court of Chief Judicial Magistrate (Economic Offences), Jaipur.