The Judgment of the Court was delivered by
Anil Kumar Sinha, J.:— This rule was obtained by the petitioner for quashing several notices under section 148 of the Income-tax Act, 1961, (referred to herein as the Act), proposing to reopen the assessment for the assessment years 1957-58, 1958-59 and 1959-60.
2. Shortly put, the petitioner's case is that he is the karta of a Hindu undivided family, named as “Sagarmall Choudhury and others” (referred to herein as “the family”) which has been or is still being regularly assessed under the Act. The family has income from house properties and rice mill known as “Chowdhury Rice Mill”. For the assessment years 1957-58, 1958-59 and 1959-60, the family has been duly assessed by the respondent No. 3 after verbal discussion with the petitioner.
3. On 19th March, 1965, three notices were issued to Chowdury Rice Mill by the respondent No. 1 for the very same years with a direction to submit returns of income on the ground that the respondent No. 1 had reasons to believe that income of the petitioner escaped assessment within the meaning of section 1.47 of the Act for which it is also stated that necessary satisfaction of the Commissioner of Income-tax, West Bengal I, has been obtained. Thereafter, three notices were issued under section 142(1) of the Act, all dated January 7, 1966, asking for production of books of accounts and bank pass books by 17th January, 1966. Further notices for the same purpose were received on 24th January, 1968, demanding production of those account books and other papers by the respondent No. 4, but it is alleged that the petitioner gave explanations and he was assured by respondents Nos. 1 and 4 that proceedings under section 148 of the Act would be dropped. Even so, a letter of 18th February, 1969, was received by which he was intimated by respondent No. 2 that the hearing of the petitioner's case was finally fixed for 25th February, 1969, with a request to produce the books of accounts and bank statements, etc. Then the petitioner by his letter dated 24th February, 1969, requested the respondent No. 2 to furnish materials on which he had reasons to believe that the income of the family had escaped assessment but nothing was given. It is alleged that there was no material before the Income-tax Officer concerned on which he might have reasons to believe that the petitioner's income for the disputed period escaped assessment on account of omission or failure on his part to disclose the material particulars before the Income-tax Officer in connection with the assessment for the relevant years. It is alleged that on the insistence of the Income-tax Officer, however, the petitioner had to file returns on 25th February, 1970, and then the case was finally fixed for hearing on 6th March, 1970. Then, in spite of the petitioner's demand for justice the proceedings were not dropped. That is how, in short, the petitioner felt aggrieved and obtained the present rule.
4. The main grievance of the petitioner in this case is that the impugned notices for reopening assessment were issued without jurisdiction as conditions precedent for the issuing of such notices were absent. Since the decision of the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Calcutta [1961] 41 I.T.R 191, which was a case under section 34 of the Indian Income-tax Act, 1922, the law is fairly settled so far that the question as to whether the Income-tax Officer had reason to believe is dependent upon two conditions. First is that the Income-tax Officer must have reason to believe that the income of the assessee had been under-assessed. The second is that he must have also reason to believe that such underassessment occurred by reason of, (a) omission or failure on the part of the assessee to make a return under section 22, or (b) omission or failure to disclose fully and truly all material facts necessary for the disputed years. Both these conditions were conditions precedent before the Income-tax Officer could have jurisdiction for the assessment or reassessment within the period of limitation imposed by the Act. In two later decisions of the Supreme Court, Commissioner Of Income Tax, Gujarat v. A. Raman & C. [1968] 67 I.T.R 11, a case under section 147(b) of the present Act, and R.B Bansilal Abirchand Firm v. Commissioner of Income-tax [1968] 70 I.T.R 74 S.C., substantially the same view was adopted. So set with the above principle it has got to be seen as to whether the two conditions precedent to the issue of notices have been satisfied in the instant case, for only on fulfilment of these two conditions, the Income-tax Officer can be said to have jurisdiction to initiate a proceeding under section 147(b) of the Act.
5. Now, coming to the facts of the present case, the impugned notices for reopening the assessment relate to three years, i.e, 1957-58 to 1959-60. It is stated in paragraph 13 of the affidavit-in-opposition by the Income-tax Officer for himself and on behalf of other respondents that subsequent to the completion of the assessments for those assessment, years materials came into his possession that the assessee had certain other businesses of his own in benami names during the relevant years which were not disclosed by the assessee at the time of original assessment for those years. Consequently, it is stated that the income of the said assessee from those businesses escaped assessment on account of omission or failure on the part of the assessee to disclose fully or truly all necessary or material facts for those years. In the premises the Income-tax Officer had asserted that he had reasons to believe that the petitioner failed to disclose fully or truly all material facts necessary for its assessment as a result whereof the income of the assessee chargeable to tax escaped assessment for those years. It is not denied, however, in this case that these are the reasons which were recorded at the time of issuing notices under section 148 upon the petitioner. In the affidavit-in-reply by the petitioner it has been categorically denied that there were certain other businesses in benami names during the relevant assessment years which were not disclosed by the assessee at the time of the original assessments as alleged. The precise question, therefore, is whether the reasons as recorded disclosed prima facie materials to enable the Income-tax Officer to issue the impugned notices under section 148 for the proposed assessments.
6. But before I proceed to decide this point I will deal with a preliminary objection raised as to the maintainability of the present writ petition on behalf of the respondents on the ground of delay. It is stated that the impugned notices were issued on 18th March, 1965, and the petitioner moved this court in writ jurisdiction after a lapse of about five years, i.e, on 27th February, 1970. It is, therefore, urged that this petition should be dismissed in limine on the ground of delay alone. It is admitted in paragraph 4 of the petition that these notices were received by the petitioner on 19th March, 1965. Then it appears that on 7th January, 1966, a notice under section 142(1) of the Act was issued fixing the hearing on January 17, 1966. Then again some notices of 18th January, 1968, and 24th January, 1968, fixing fresh dates of hearing were issued but the petitioner did neither file any return nor, as appears from the record, appeared before the Income-tax Officer on any of the dates. Although it is stated in paragraphs 5 and 8 of the petition that the petitioners' representative did not only appear once but on number of occasions and he was given assurance that the proceedings will be dropped, the respondent, however, denied these allegations in the affidavit-in-opposition. Then similar notices were issued again on 1st February, 1969, fixing hearing on 19th February, 1969, and then a letter was issued on 18th February, 1970, by the Income-tax Officer, stating that the petitioner's case will be finally heard on 25th February, 1970, when the petitioner filed his returns for the disputed years stating of course that he had no such business. On 26th February, 1970, again notices under section 142(1) were issued fixing the date of hearing on 6th March, 1970, by the Income-tax Officer. On the very same date, i.e, on 26th February, 1970, a letter addressed to the Income-tax Officer on behalf of the petitioner demanding justice for the first time was received and on 27th February, 1970, the petitioner obtained the present rule from this court. It would thus appear that the petitioner dragged on this proceeding for almost five long years from the date of receipt of the impugned notices under section 148 of the Act. For this inordinate delay I am not at all impressed with the explanation the petitioner tries to give on setting up a plea of so-called assurance to drop the proceeding given by the Income-tax Officer, which again is not corroborated by any materials on record.
7. It is difficult to see why in such cases the petitioner could not at the very outset file written objection stating all his points against the validity of the impugned notices before the Income-tax Officer. From the conduct of the petitioner I should have thought that he wanted to delay the proceedings as long as he could. It is, however, argued on behalf of the respondents that although in a proceeding for writ in the nature of mandamus the delay may be fatal, but it not so in the case of either certiorari or prohibition.
8. In support of this contention reliance is placed on a judgment of K.L Roy J. in Suniti Devi Jaipuria v. Income-tax Officer, Matter No. 537 of 1967 (unreported). It appears that in this judgment also the learned judge on facts came to the conclusion that there had been no delay on the part of the petitioner to seek the protection of the court in its writ jurisdiction. It is true that the learned judge on a discussion of two Bombay decisions, Madhavlal Sindhoo v. V.R Idurkar and P.C Doshi v. 7th Income-tax Officer, Bombay, in which the decision of the Privy Council in Estate & Trust Agencies (1927) Ltd. v. Singapore Improvement Trust A.I.R 1937 P.C 265. were referred to and also a decision of the Supreme Court in State of M.P v. Bhailal Bhai [1964] 15 S.T.C 450 were referred to, showed his leanings in favour of the argument as now sought to be made in this case, but, nevertheless, the learned judge does not seem to have ruled out the court's power to use discretion in such matters. I do not think that this judgment is of much assistance to the petitioner on the facts of the present case. It would be, I think, relevant in this connection to refer to two decisions of the Supreme Court in Chandra Bhushan v. Dy. Director of Consolidation, U.P AIR 1967 S.C 1272. and Moon Mills v. Industrial Court, Bombay AIR 1967 S.C 1450, 1454., where the principle indicated is that a writ of certiorari is largely a matter of sound discretion and that the writ will not be granted “if there is such negligence or omission on the part of the appellant to assert his right, as taken in conjunction with the lapse of time and other circumstances, cause prejudice to the adverse party”. In Moon Mills case, the Supreme Court substantially accepted the principle laid down in Lindsay Petroleum Co. v. Hurd [1874] L.R 5 P.C 221, 239., quoting the observations of Sir Barnes Peacock as follows:
“Now the doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But, in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”
9. The principle thus enuciated in the above decisions leaves me in little doubt that there is such negligence and laches on the part of the petitioner, in the instant case, considered along with the length of time taken by him in coming to this court as would undoubtedly “cause prejudice” to the respondents. In my opinion, in the facts and circumstances of this case, the petitioner has clearly been disentitled to grant of writ on the ground of delay.
10. In the view I have taken it is unnecessary to enter into the merits and examine the correctness of the contentions made on behalf of the petitioner and I am not expressing any opinion on them.
11. The result is that the petition fails. The rule is discharged but there will be no order as to costs.