RAJPUTANA MINING AGENCIES Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THESE 15 writ petitions raise common questions of fact and law and as such it would be convenient to dispose of them by a common order.

(2.) THE petitioners are the shareholders of M/s. Associated Stone Industries (Kotah) Ltd., Ramganjmandi (hereinafter referred to as "the company"). THE company was incorporated in the erstwhile-princely State of Kota on January 17, 1945, as a public limited company for carrying on the business of quarrying and polishing stones. THE then Maharaja of Kota granted a lease to the company on May 2, 1945, for a period of 15 years beginning from October, 1944. THE company distributed dividends to its shareholders, including the petitioners, for the assessment years 1957-58 to 1960-61. THE ITO, Kota, who was the assessing authority in respect of the petitioners did not gross up the dividends received from the company by the petitioners as shareholders thereof under Section 16(2) of the Indian I.T. Act, 1922 (hereinafter referred to as "the Act"), at the time of the original assessment of the petitioners on the ground that the company did not pay income-tax which it was liable to pay within three years. THE petitioners in Civil Writ Petitions Nos. 132 of 1963 and 133 of 1963, filed appeals against the aforesaid orders passed by the ITO, Kota, before the AAC of Income-tax, Jaipur, who held that the dividends paid by the company to the petitioners should be grossed up under Section 16(2) of the Act and credit for the tax should be allowed under Section 18(5) of the Act. After the aforesaid order was passed by the appellate authority, the ITO gave effect to the orders passed by the AAC of Income-tax, Jaipur, and although he did not pass any formal orders, yet he grossed up the dividend income allowing credit for tax and issued correction slips in respect of the tax payable by the petitioners in the aforesaid two writ petitions. In the case of the other petitioners, the Income-tax Officer, Kota, who was the assessing authority, allowed the dividend income received by the petitioners from the company to be grossed up and gave credit for tax to the petitioners under Section 18(5) of the Act.

(3.) LEARNED counsel for the petitioners relied upon the decision of the Madras High Court in CIT v. T.R. Rajakumari [1974] 96 ITR 78 and the decision of their Lordships of the Supreme Court in Sirpur Paper Mills Ltd. v. CWT [1970] 77 ITR 6, in support of his contention that the ITO should himself apply his mind and should be satisfied independently about, the existence of the alleged mistake apparent from the record and he should not act merely on the directions received from higher authorities. The Madras case referred to above related to proceedings for reassessment of tax under Section 147 of the I.T. Act, 1961, and it was held therein that initiation of reassessment proceedings by the ITO on the basis of directions received from the Commissioner were invalid, as a condition precedent for initiation of reassessment proceedings is a reasonable belief of the ITO him self that the income of the assessee had escaped assessment. In Sirpur Paper Mills' case [1970] 77 ITR 6 (SC) applications for revision under Section 25 of the W.T, Act, 1957, were disposed of by the Commissioner in accordance with the instructions of the Central Board of Revenue. In such circum stances, their Lordships of the Supreme Court set aside the order passed by the Commissioner and directed him to rehear and redecide the revision application afresh, according to law and uninfluenced by any instructions or directions given by the CBR. In the aforesaid case, their Lordships of the Supreme Court held that in the matter of exercise of quasi-judicial powers by the Commissioner he must apply his unbiased mind and consider the objections raised by the aggrieved party impartially, and decide the dispute according to the procedure consistent with the principles of natural justice and he cannot allow his judgment to be influenced by or dictated by any superior authority.