Income-tax---

----Revision---Notice---Writ---Notice issued by C.I.T. who had jurisdiction to do so ---Assessee had opportunity to explain his case---Writ would not issue to quash notice---Indian Income Tax Act, 1961, S.263---Constitution of India, Art.226.

It is not open to a party to invoke the writ jurisdiction of the Court upon receipt of a mere show-cause notice. The party should avail of the alternative remedy of replying to the show-cause notice and submit its explanation .to the authority who issued the notice so that the matter is decided at his level:

Held, that the jurisdiction of the Commissioner of Income-tax to invoke his power under section 263 of the Income Tax Act, 1961, had not been disputed by the appellant. The appellant initially sought time from the Commissioner of Income-tax to submit reply to the show-cause notice, on the ground that it needed to collect information and data. After the time was granted, it chose to send a detailed reply to the show-cause notice and, despite having submitted such a detailed reply, without waiting for the outcome of the proceedings, it filed a writ petition. The notice could not be quashed.

Indo Asahi Glass Co. v. ITO (1996) 222 ITR 534 (Cal.) fol.

Dr. Debi Pal, Pronob Pal and Sint. Manisha Sill for Appellant.

R. Mitra and Ramesh Chowdhury for Respondents.

JUDGMENT

V.K. GUPTA, J.---This appeal against the judgment of the learned Single Judge of this Court passed on July 16, 1996, has been filed by Brooke Bond Lipton India Ltd., an existing public company incorporated under the Companies Act, 1956, and having its registered office at Brooke House, Calcutta.

Tea Estates India Limited was a company in existence prior to the year 1993, and was engaged in the business of growing green tea leaves in its tea gardens and manufacturing black tea and selling the same in the market. The method of accounting of the said company was mercantile and the accounting period of this was the financial year. This company was a regular income-tax assessee under the Income Tax Act, 1961, and was being assessed by the Income-tax Department, Sector-10, Calcutta, for all the relevant assessment years including the assessment year 1993-94. It is claimed that in computing the taxable income, Tea Estate India Limited was entitled to benefits under provisions of section 32-AB and section 33-AB of the Income Tax Act, apart from other benefits and reliefs allowable thereunder. It is further claimed that in the assessment years 1987-88, 1988-89, 1989-90 and 1990-91, Tea Estates India Limited made deposits in the accounts opened under the Investment Deposit Accounts Scheme (Tea), 1986, under section 32-AB(1)(a) of the Income Tax Act. In the previous years relevant to the assessment years, the said assessee-company had also purchased assets in terms of sections 32-AB and 33-AB of the Act. In the said four assessment years, the company claimed deductions under section 32-AB(1) of the Act, which were allowed by the Assessing Officer while making assessments for the relevant assessment years.

Certain other assessments for other accounting periods relevant for other assessment years were also made by the Assessing Officers. For instance, in the accounting period relevant for the assessment year 1993-94, the company made deposits under section 33-AB(1) of the Income Tax Act and as such claimed deductions under the relevant section. This claim was, however, disallowed by the Assessing Officer.

It is claimed that with effect from January 1, 1993, Tea estate India Limited merged and amalgamated with Brooke Bond India Limited along with another company called Doom Dooma Tea Limited. The said scheme of amalgamation was mace under section 391(2) and section 394 of the Companies Act, 1956, and it is claimed that this amalgamation was approved and sanctioned by the Madras High Court, vide its order, dated April 27, 1993, as well as by this Court vide order, dated April 6, 1993. On this said amalgamation, by operation of law, it is further claimed that all the assets and liabilities of Tea Estates India Limited and Doom Dooma Tea Limited stood vested in Brooke Bond India Limited and that the said Tea Estates India Limited went into liquidation. Subsequently, with effect from March 7, 1994, even the aforesaid Brooke Bond India Limited got merged with Lipton India Limited and is now known as Brooke Bond Lipton India Limited, of which Tea Estates India Limited is one of the divisions.

On May 2, 1996, the Commissioner of Income-tax, West Bengal-11, respondent No. 1, in this appeal issued a notice to Tea Estates India Limited. Brooke House No. 1, Post Office Road, Coonoor, under section 263 of the Income Tax Act calling upon the said Tea Estates India Limited to explain and submit as to why the said Commissioner of Income-tax may not exercise the powers available to him in terms of section 263 of the Income Tax Act to direct the Assessing Officer to revise the assessment bringing to tax the amount of Rs.89389258 and Rs.332291765 in the light of the details contained in the said notice. It shall be advantageous to reproduce the text of the notice, which reads thus:

"I found on perusal of the assessment records that the assessment for the assessment year 1993-94 has been completed in your case on March 28, 1996, under subsection (3) of section 143 of the Income Tax Act, 1961, and that the total income stood determined at Rs.4,62,19,080. I further found that your claim for deduction under section 33-AB of the Income Tax Act for an amount of Rs.72,63,966 had been rejected as the Assessing Officer found that you leave transferred all your assets to Brooke Bond (India) Ltd. on December 31, 1993, the transfer took place before the expiry of 8 (eight) years from the end of the previous year in which the assts have been acquired. But it is observed that the deduction under section 33-AB allowed for the earlier years remained to be withdrawn. Year-wise details of the deduction are as under:

The aforesaid amount of Rs.8,93,89,258 should have been assessed to tax for the assessment year 1993-94. The Assessing Officer should have included this amount in the total income. Secondly, it appears that the deductions under section 32-AB of the Income Tax Act have been allowed to you for the assessment years 1987-88, 1988-89 and 1989-90 as below:

Owing to the transfer of the assets, the provisions of section 32-AB applied and an amount totalling Rs.3,22,91,765 is assessable in the assessment for the assessment year 1993-94. The Assessing Officer, however, omitted to bring this to tax.

For the reasons relevant for the preceding paragraphs, I consider the order of assessment for the assessment year 1993-94 erroneous and as such prejudicial to the interests of the Revenue and propose to exercise the powers available in section 263 of the Income Tax Act, 1961, to direct the Assessing Officer to revise the assessment bringing to tax the amounts of Rs.8,93,89,258 and Rs.3,22,91,765 as aforesaid stated. If you have submissions to make in the matter you may do so either in person or through your authorised representative on May 15, 1996, at 11.30 a.m. at my chamber at Aayakar Bhawan (2nd floor, Room No.34). Should you prefer to make written submissions please ensure that the papers reach me on or before the date fixed hearing."

On May 15, 1996, the appellant sent a communication to respondent No. l pleading for time to submit a reply to the notice because of some administrative difficulties and for collecting relevant data from remote hilly areas of Tamil Nadu. Finallyon June 10, 1996, a detailed reply running into seven pages was submitted by the appellant to respondent No. 1 in which the liability was denied and it was pleaded that the conditions for assumption of jurisdiction under section 263 of the Income Tax Act have not been satisfied and that the notice in question and all proceedings thereunder being wholly illegal, invalid and inoperative, as also without jurisdiction and authority of law, be withdrawn, cancelled or rescinded. Even while the aforesaid reply was submitted by the appellants and respondent No l was seized of the matter, on June 25, 1996, the appellant moved a writ application under Article 226 of the Constitution of India for the issuance of a writ of certiorari for quashing and setting aside the impugned notice, dated May 2, 1996, by respondent No. l and all proceedings arising thereunder and for a writ of mandamus consequently commanding the respondents to act according to law and to cancel and withdraw the aforesaid notice, dated May 2, 1996. Various other consequential and ancillary reliefs were also claimed in this said writ application filed by the appellant.

After a detailed consideration, the learned Single Judge vide the judgment under appeal passed on July 16, 1996, dismissed the writ application but issued the following two directions to respondent No. 1:

"(a)The writ petitioner may file another reply ,o the notice under section 263 of the Act within a month from this date or can treat the letter, dated 10th June, 1996, to be a reply to the aforesaid notice issued under section 263 of the Act. If any further reply is filed by the writ petitioners it would be open to them to take all the points that have been taken in this application.

(b)The concerned Income-tax Commissioner after hearing the writ petitioner and after considering the reply filed and to be filed in terms of this order against the notice under section 263 of the Act, shall pass a reasoned order in accordance with law within four months from the date of filing the additional reply to the notice under section 263 of the Act by the writ petitioner."

Aggrieved, the appellant has come up in appeal before us.

In somewhat similar circumstances, in F.M.A.T. No.2278 of 1996 Indo Asahi Glass Co. v. ITO (1996) 222 ITR 534, vide our judgment pronounced today itself, we have held that it is not open to a party to invoke the writ jurisdiction of this Court upon receipt of a mere show-cause notice and that the party should avail of the alternative remedy of replying to the show-cause notice and submit its explanation to the authority who issued the notice so that the matter is decided at his level. As in the case of indo Asahi Glass Co. (1996) 222 ITR 534 in the present case also the jurisdiction of the Commissioner of Income-tax to invoke his power under section 263 of the Income Tax Act has not been disputed by the appellant. Only the liability has been disputed. In fact the case of the appellant in the present appeal is on a weaker footing than the case of Indo Asahi Glass Co. (1996) 222 ITR 534 because in that case, the appellant had not submitted any reply to the impugned show-cause notice and had straightaway come to the High Court seeking its quashing by issuance of a writ of certiorari. As is seen in the present appeal, the appellant initially sought time from the Commissioner of Income-tax to submit a reply to the show-cause notice, on the ground that it needed to collect information and data. After time was granted, it chose to send a detailed reply to the show-cause notice and, despite having submitted such a detailed reply, without waiting for the outcome of the proceedings, it rushed to this Court seeking this Court's intervention in the matter. It is indeed very surprising that the appellant did not pursue the matter to its logical conclusion after submitting the reply to the show-cause notice and, rather than having the matter adjudicated at the level of the Commissioner of Income-tax, it attempted to pre-empt proceedings pending before him and rushed to this Court seeking the reliefs, as indicated above. In the light of the observations made by us in the case of Indo Asahi Co. Ltd. (1996) 222 ITR 534, we have no reason to take a different view in the present case, even though we have already indicated that the present appeal is on a weaker rooting than the indo Asahi Co. Ltd. Without therefore commenting upon the merits of the controversy between the parties and without expressing any opinion with regard to their respective contentions, finding ourselves in complete agreement with the views expressed by the learned Single Judge, we uphold that judgment under appeal and dismiss the appeal, but without any order as to costs.

V.K. KHARE, C.J.---I agree.

M.B.A./1569/FCAppeal dismissed.