AUTO AND METAL ENGINEER VS COMMISSIONER OF INCOME-TAX
1991 P T D 80
[Punjab and Haryana High Court (India)]
Before Gokal Chand Mital and S.S. Sodhi, JJ
AUTO AND METAL ENGINEER
versus
COMMISSIONER OF INCOME-TAX
'Income-tax Reference No. 10 of 1980, decided on 19/01/1989.
Income-tax---
----Assessment---Limitation---Extension of period---Search of premises of firm and partners of firm---Assessment order stayed---Clarification by High Court that stay order operated in case of firm also---Limitation for passing assessment order on firm was also extended.
In April 1971, the business premises of the firm and the residential premises of the partners were searched by the Officers of the Income-tax Department and records and documents were seized. The partners and the general manager filed separate writ petitions in the Delhi High Court to impugn the raid and seizure of books and documents and initially obtained an order staying final decision by the Income-tax Authorities on the basis of information gathered during the raid. The Income-tax Department filed an application for clarification and the Delhi High Court on March 5, 1973, passed an order stating that the stay order would operate for the assessment of the firm as well as the partners. When the Income-tax Authorities took up the matter to finalise the assessments, the assessee-firm contended that there was no extension of limitation with regard to its assessments. The Tribunal negatived the contention. On a reference:
Held, that a reading of the order of the High Court, dated March 5, 1973, clearly showed that the stay order operated in favour of the firm as well. Since the Income-tax Authorities could not frame the assessment in view of the stay order, the Tribunal was right in law in coming to the conclusion that limitation under section 153(3) of the Indian Income-tax Act, 1961, was extended in the firm's case also.
Nemo for the Assessee.
Ashok Bhan and Ajay Mittal for the Commissioner.
JUDGMENT
GOKAL CHAND MITAL, J.--Auto and Metal Engineer, Faridabad, the assessee, was a partnership concern consisting of Smt. Sunanda Rani Jain having 2/3rd share and Smt. Karuna Rani Jain having 1/3rd share. Both are sisters. V.K. Jain, husband of Sunanda Rani Jain, was the general manager of the firm. On April 24, 1971, the business premises of the firm and the residential premises of the partners were searched by the Officers of the Income-tax Department and records and documents were seized. The partners and the general manager filed separate writ petitions in the Delhi High Court to impugn the laid and seizure of books and documents and initially obtained an order staying final decision by the Income-tax Authorities on the basis of information gathered during the raid. The Income-tax Department filed an application for clarification of the stay order as to whether the Income-tax Authorities were permitted to use the information derived from the seized records in respect of the assessment year 1970-71 and onwards. The Delhi High Court, on January 24, 1973, passed the following order on the application:
"Further proceedings for assessment for the year 1970-71 onwards are stayed pending disposal of the application."
The aforesaid order was confirmed on February 12, 1973.
On March 1, 1973, the Income-tax Department filed another application before the Delhi High Court for clarification as to whether the stay order operated in regard to the assessments of the partners or operated in favour of the assessee-firm also. In para. 4 of the application, it was specifically mentioned that the stay order had been granted by that Court staying further proceedings for the year 1970-71 and onwards. On March 5, 1973, the following order was passed:
"This is an application seeking clarification of my order, dated November 23, 1971. The clarification sought is whether the stay order given by me would cover only the case of the firm or the partners or both. The stay will naturally operate for the assessment of the firm as well as the partners till the disposal of the writ petition. I order accordingly."
The Income-tax Department yet filed another application before the Delhi High Court on March 7, 1973, for clarification as to whether the order, dated March 5, 1973, would hold good in respect of the order, dated January 24, 1973, confirmed on February 12,1973. Again, in para. No. 4 of the application, it was mentioned that the seized material was also to be utilised in respect of the assessment year 1970-71 and onwards and that, vide stay orders, further proceedings for the assessment year 1970-71 and onwards were already stayed. Vide order dated March 8, 1973, it was clarified by the Delhi High Court that the clarification made, vide order dated March 5, 1973, also holds good in respect of the order dated January 24, 1973 confirmed on February 12, 1973. Finally, the writ petitions were dismissed on August 12, 1974.
When the Income-tax Authorities took up the matter to finalise the assessments, two points amongst others which deserve to be noticed were raised on behalf of the assessee: (i) that there was no stay for the assessment year 1970-71, and (ii) since no writ petition was filed on behalf of the firm which was the assessee, there was no extension of limitation for the period during which the stay operated in the case of the partners and the managing director of the firm, Both the points were rejected up to the Tribunal. The Tribunal, in its detailed order, noted the various applications and orders passed and came to the conclusion that the stay was for the assessment year 1970-71 and was also for the firm. Feeling aggrieved, the assessee filed an application under section 256(1) of Income-tax Act, 1961 (hereinafter referred to as "the Act"), for reference of four questions for the opinion of this Court for the. assessment year 1970-71 out of which two questions related to the points noticed above. The Tribunal declined to refer three questions and question No. 3 suggested by the assessee was refrained and the reference was made only on the following question:
"Whether the Tribunal was in error in law in holding that the limitation under section 153(3) of the Act was extended in the firm's case also?"
Actual date of notice of the proceedings of the High Court was issued to the assessee and in spite of service, none appeared. Accordingly, we proceed to decide the referred question without any assistance on behalf of the assessee.
A reading of the order of the Delhi High Court dated March 5, 1973, reproduced above clearly goes to show that the stay order operated in favour of the firm as well. Since the Income-tax Authorities could not frame the assessment in view of the stay order, the Tribunal was right in law in coming to the conclusion that limitation under section 153(3) of the Act was extended in the firm's case also. We accordingly answer the referred question in favour of the Revenue, i.e., in the negative with no order as to costs.
Z.S./776/TQuestion answered in the negative.