V.K Gupta, J.:— This appeal by the appellants, Indo Asahi Glass Company Ltd., and Shri Purnendu Narain Roy, director of Indo Asahi Glass Company Limited, is against the judgment and order dated July 18, 1996, in C.O No. 8405 (W) of 1996, passed by the learned single judge of this court disposing of the writ application filed by the appellants challenging the legality and validity of a show-cause notice, dated May 16, 1996, issued by respondent No. 1, Income-tax Officer (TDS), Ward-21(1), Calcutta.

2. The appellants have entered into a collaboration agreement with Asahi Glass Company Ltd. a company incorporated in Japan, with regard to manufacture of sheet glass in India. The collaboration agreement was executed on May 20, 1983, between the appellants and the aforesaid Asahi Company Ltd. It appears that the appellants engaged some Japanese nationals as their technical personnel for manufacturing operations and also obtained the requisite permission from the Government of India and the Reserve Bank of India for such engagement of foreign nationals and for regulating their terms and conditions, including the payment of salary and other perquisites. It appears that some information came to be received by the respondents with regard to some alleged payments made to the foreign nationals employed and engaged by the appellants and accordingly, respondent No. 1 started proceedings against the appellants with regard to their alleged liability of deducting income-tax at source arising out of these salaries allegedly received by the abovementioned foreign nationals in yen in Japan, while they were in the service of the appellants in India. On January 24, 1995, respondent No. 2 sent a communication to the principal officer of appellant No. 1 requesting him to submit the information and the copies of the documents mentioned in paragraph 4 of this communication. The reply having been sent by the appellants on February 23, 1995, the matter was processed further by the respondents, ultimately culminating in the issuance of the show-cause notice on May 16, 1996, by respondent No. 1, wherein certain factual aspects relating to the subject-matter of controversy were highlighted and ultimately the appellants were asked to show cause as to why they should not be held liable for not having deducted income-tax at source in respect of these monies received by the foreign nationals as salaries in yen in Japan while they were in service in India. In terms of section 201(1A) of the Income-tax Act, the appellants were also asked to show cause as to why the demand under sections 201 and 201(1A) of the Income-tax Act may not be raised against them. They were accordingly requested to appear before the respondents on June 5, 1996, at 11.30 a.m for showing such clause. They were also called upon to submit copies of the collaboration agreement or other documents which guided payment to the foreign employees and receipts of the filing of the annual returns towards the payment of salaries, dividends, etc., in respect of the subject-matter of the controversy.

3. Feeling aggrieved by the issuance of the aforesaid show-cause notice, the appellants filed a writ application under article 226 of the Constitution of India challenging the legality and the validity of the show-cause notice by contending, inter alia, that respondent No. 1 should not have issued the show-cause notice to the appellants because the appellants were not liable to pay any income-tax, much less make deductions at source because they were not basically liable or responsible to deduct any tax at source for any alleged payment allegedly having been received by the foreign nationals in yen in Japan where they might have been residing, even though being in the service of the appellants and working for them.

4. The learned single judge disposed of the writ application by making certain observations but by issuing the following directions to respondent No. 1:

“For the reasons aforesaid, I am, therefore, of the view that the jurisdiction under article 226 of the Constitution should not be invoked at this stage without directing the writ petitioners to satisfy the concerned Income-tax Officer that the show-cause notice must be dropped in view of the submissions made herein earlier on behalf of the writ petitioner No. 1. Accordingly, without going into the question raised against the issuance of the show-cause notice, I dispose of this writ application by the following directions:

(a) The writ petitioners shall file reply to the show-cause notice within a month from date. In that reply to show-cause notice, it would be open to the writ petitioner to take all the points that have been taken in this writ application.

(b) The Income-tax Officer (T.D.C), Ward No. 21(1), Calcutta, after giving hearing to the writ petitioners and after considering the reply filed against the show-cause notice shall pass a final reasoned order in accordance with law within four months from the date of filing the reply to the show-cause notice by the writ petitioner.”

5. Feeling aggrieved, the appellants have come up in appeal before us.

6. The various provisions of the Income-tax Act were referred to and relied upon by learned counsel for the parties before us during the course of hearing, including sections 9, 129, 194, 201 and 204 of the Act. It was contended before us on behalf of the appellants during the course of arguments that the appellants had no connection with Asahi Company Ltd. of Japan in so far as any question relating to the alleged payments to Japanese nationals in Japan was concerned. The main thrust of the arguments of learned counsel for the appellants was that the appointments were guided by the sanction and permission granted by the Government of India and the Reserve Bank of India regarding payment of salaries to the foreign nationals in India and since the appellants had nothing to do with any payments allegedly made in Japan, they were not responsible for any deduction of any income-tax at source for such payments made in yen and, therefore, the Income-tax Officer was not correct in fastening any liability in respect of any failure for such deducting at source. The main thrust of the arguments of learned counsel for appellants mainly revolved about this basic question regarding the liability of the appellants to deduct tax at source. It was repeatedly argued before us that even if all the facts alleged in the impugned show-cause notice were assumed to be correct, the liability of the appellants to deduct any tax at source did not still arise. In support of his submissions, Dr. Pal also relied upon three following judgments of the Supreme Court:

1. Raza Textiles Ltd. v. Income Tax Officer, Rampur , [1973] 87 ITR 539 (SC);

2. Union of India v. Brij Fertilizers Pvt. Ltd., (1993) 3 SCC 564;

3. East India Commercial Co. Ltd. v. Collector of Customs, AIR 1962 SC 1893.

7. After hearing learned counsel for the parties, we are of the view that the judgment of the learned single judge does not suffer from any illegality or irregularity which may call for any interference by us. The view taken by the learned single judge about the jurisdictional aspect of the case is wholly unassailable. The learned single judge is wholly correct in observing and holding that the Income-tax Officer has merely issued the show-cause notice and that it is up to the appellants to explain before him that they are not liable for any action either under the Income-tax Act or under any other law. Even though Dr. Pal repeatedly argued before us that the facts alleged in the show-cause notice may be assumed to be correct, yet we found that certain facts could be disputed at a certain stage, at least the question of liability of the appellants surely is a fact in dispute. We are also fully conscious of the fact that so far the Income-tax Officer has not returned any positive finding, one way or the other, and, therefore, any comments by us regarding the factual aspects of the case or any opinion that we may express regarding the merits of the controversy can either influence the decision-making process or prejudice the interests of either of the parties. We, therefore, refrain from expressing any opinion or making any comments about the merits of the controversy which is the subject-matter of the impugned show-cause notice. We, however, are taking pains to stress and observe that the Income-tax Officer has not so far returned any finding of fact in the impugned show-cause notice nor has he reached any conclusion regarding any point of controversy which forms the subject-matter of the notice. If, in the course of the preamble to the notice, or the recitals of certain factual aspects the Income-tax Officer by inadvertence happened to state certain factual aspects in a particular manner, at best they can be construed as his tentative opinion which may have been stated in the impugned show-cause notice only by way of explaining the background of the case and the factual aspects of the controversy. In fact, learned counsel for the respondents very clearly stated before us that the purpose of issuing the show-cause notice was to enable the appellants to explain all the factual aspects of the case and to produce before the Income-tax Officer required documents so as to satisfy him regarding the facts of the case. Learned counsel for the respondents repeatedly also stated before us that even the tentative conclusions had not been arrived at by the Income-tax Officer and that there is no question of his having decided any issue relating to the liability of the appellants and that all the issues are wide open, subject to the explanation that the appellants may choose to offer and the examination and consideration of relevant facts and documents. According to learned counsel for the respondents, if it was ultimately found that the appellants were not liable to deduct tax at source, the respondent would have no hesitation in dropping the proceedings.

8. This is not a case where the jurisdiction of the Income-tax Officer to issue the show-cause notice is under challenge. It is not disputed by any one that the Income-tax Officer did have the jurisdiction to issue the show-cause notice. What is disputed by the appellants is their liability to pay tax, on the basis of the facts alleged in the notice. If the appellants say that they are not liable to pay tax, the best course for them would be to appear before the Income-tax Officer, offer their explanation and plead before him that they are not liable to pay any tax and that unnecessarily notice has been issued to them. That is what the learned single judge has done by issuing the directions to the Income-tax Officer by disposing of the writ application. The Supreme Court decisions therefore referred to and relied upon by the appellants are of no help to them because in none of the abovereferred three Supreme Court judgments, it has been held that where the statutory authority issuing show-cause notice has the jurisdiction to do so and where the party has the opportunity to explain, the show-cause notice could be or should be quashed by the High Court at the very threshold in the exercise of the power under article 226 of the Constitution of India.

9. For the foregoing reasons, therefore, we find no merit in this appeal and dismiss the same but without any order as to costs.

10. After the judgment was pronounced, learned counsel for the appellants pray that operation of the judgment may be stayed.

11. We do not find any good reason to stay the operation of the judgment.

12. Hence, the prayer is refused.

V.N Khare, C.J:— I agree.