JUDGMENT This is a writ petition under article 226 praying that a writ of certiorari be issued quashing the assessment order dated the 19th of November 1962, for the year 1959-60 passed under section 23(4) of the Income-tax Act, 1922 (hereinafter referred to as the Act).
The facts leading up to his petition are these : The petitioner company is a private limited company duly incorporated on the 29th of May 1957, under the Companies Act, 1956. A notice under section 22(2) of the Act dated 5th May, 1959, was issued to the petitioner calling for a return for the assessment year 1959-60. In compliance with the aforesaid notice a return declaring a loss of Rs. 28,214.63 nP. for the assessment year 1959-60 along with audited balance-sheet profit and loss account and auditors report was furnished on 8th of July 1959. Thereupon the Income-tax Officer issued a notice under section 23(2) of the Act dated the 31st of July 1959, requiring compliance thereof on the 5th of August, 1959. On the 4th of August, 1959, the petitioner asked for adjournment which was granted and the date fixed was the 8th of August 1959. On that date the petitioner produced his cash book journal ledger, wages register, voucher, bills, invoices and bank pass book. Certain further details were required by the Income-tax Officer. The case was adjourned for this purpose. The next date fixed was 14th August, 1959 on which date again the account books were produced and the details required were furnished. The information required by the Income-tax Officer presumably under section 23(3) regarding the margin of profit was also furnished on that date still more details were required and the case was adjourned to the 22nd of August 1959. Time was again asked for to get the necessary details. The case was, therefore adjourned at the request of the petitioner to the 5th of October 1959. On that date the petitioner was not able to furnish the information required regarding the account books of the predecessor firm and had therefore requested for some more time up to the end of the month as the old firm had promised to produce the account books. It was also stated that if the petitioner failed to get the account books of the old firm over which it had no control the Income-tax Officer might himself summon the account books of the old firm under section 37 of the Act. The case thereafter was fixed for 4th of August, 1959, 11th of December, 1959, 18th of December, 1959, 22nd of December, 1959, 28th of December, 1959, and 7th of January, 1960. The case however could not be taken up by the Income-tax Officer on any of these dates. The next date fixed was 20th of January 1960. On this date the request of the petitioner the case was adjourned to the 28th of January, 1960. Finally the case was fixed for the 12th of February, 1960. Admittedly the books were produced by the petitioner and the accounts were examined by the Income-tax Officer on the 12th of April, 1960, 20th April 1960, 29th of April 1960 and 12th of May 1960. The account books, thus between 8th of August, 1959, and the 12th of May, 1960, were admittedly produced by the petitioners and examined by the Income-tax Officer on a number of occasions. After the 12th of May, 1960, which was the last date on which the books were examined there was silence on the part of the Income-tax Officer till the 10th of August 1962, i.e. for period of nearly 26 months in the meanwhile on the 24th of August 1961 the Special Police Establishment Fraud Squad of Delhi raided the petitioners premises and seized the books for the accounting years 1957-58, 1958-59 and 1959-60 relating to the assessment years 1959-60 to 1961-62 respectively. By a notice dated 19th July 1962 the Income-tax Officer issued the following notice for the assessment year 1959-60 :
"In connection with the above you are hereby informed that the case is fixed for hearing on the 10th of August, 1962, at 12 a.m. Please comply with the terms of the notices already served on you."
It is difficult to understand what this meant because the only notice which had been served was the notice issued 3 years earlier on the 31st of July 1959, under the provisions of section 23(3) of the Act. The petitioner replied by his letter dated 6th of August, 1962, stating that the books were removed by the Special Police Establishment Fraud Squad of Delhi and they were not in a position to produce the books of account and therefore the case be adjourned till the books were returned to them. Again a letter was addressed by the Income-tax Officer dated the 8th November 1962, asking the petitioners to comply presumably with the aforesaid notice under section 23(2) issued three years earlier. On the 17th of November 1962 again the petitioner replied "that the books are lying with the police authorities at Delhi and he had not succeeded in getting them back so far and in the absence of those books the assessment could not be finalised. Hence requested that the books be got produced direct by your goodself from the above authorities to finalise the assessment." No information was given to the petitioner that his application was rejected but the counter-affidavit of the Income-tax Officer states that the application was rejected. Two days later an assessment was made under section 23(4) of the Act for default under section 23(2) of the Act. The petitioner filed an appeal against the quantum of the assessment by way of abundant precaution. He did not however file any application under section 27 of the Act. The present petition is directed against the aforesaid assessment made under section 23(4) dated the 19th of November 1962.
The main ground on which the petition is based is that in the circumstances of the case there was no non-compliance with the notice under section 23(2) of the Act for the assessment year 1959-60 and consequently the opposite party had no jurisdiction to assess the petitioner under section 23(4) of the Act. This contention has force. A notice was issued as already observed under the provision of section 23(2). That section reads :
"If the Income-tax Officer is not satisfied without requiring the presence of the person who made the return or the production of evidence that a return made under section 22 is correct and complete he shall serve on such person a notice requiring him on a date to be there in specified either to attend at the Income-tax Officer office or to produce or to cause to be there produced any evidence on which such person may rely in support of the return."
The choice necessarily is that of the assessee to produce or not to produce any evidence in support of his return. If no evidence is produced or the evidence produced is insufficient the Income-tax Officer has the right to proceed under section 23(3) by specifying the points on which he may produce he may produced to make an assessment under section 23(3) of the Act.
A notice under section 23(2), as already observed was issued only once and that was as far back as 31st of July, 1959, and that notice had been complied with to the best of the ability of the petitioner. It had produced the account books on which it relied in support of the return furnished by it. The account books were not produced once but several time and in these circumstances to say that there was no compliance with the order under section 23(2) would be a travesty of justice. The Income-tax Officer if he wanted the production of account books again had no alternative but to have issued a notice under section 23(4) of the Act. That notice admittedly for the assessment year 1959-60 was never issued and if he failed to issued such notice there was no obligation on the petitioner to produce its account books. The petitioners obligation only was to produce them under section 23(2) to support the return made by it and not for the purpose of giving the Income-tax Officer a handle to make an assessment under section 23(4), after it became impossible for it to produce the books as those books were in the possession of the Special Police Establishment Delhi. Thus court as far back as in 1937 laid down in Rajmani Devi v. Commissioner of Income-tax, that "the choice as to whether the assessee should attend the Income-tax Officers Officer or whether he should produce or cause to be produced any evidence on which he may really in support of the return in response to a notice under section 23(2) of the Income-tax Act lies with the assessee and not with the department." The attitude of the petitioner has not been un-co-operative as to have merited the drastic assessment made under section 23(4) of the Act. Up to the very last it had not refused to produce the account books although under section 23(2), as already observed, there was no obligation whatsoever on it to produce account books if it did not consider it necessary or advisable to do so. The petitioner however considered it to be in his own interest to produce the account books and it had therefore, requested the Income-tax Officer by its letter dated 17th November 1962, "that the books be procured direct by your goodself from the above authorities to finalise the assessment." It was the duty of the Income-tax Officer in the absence of a notice under section 22(4) to assist the assessee when it required his assistance by exercising his powers under section 37 of the Act and thus enable the petitioner to have access or procure the books of accounts which were required to support the return made by it. This application was rejected summarily as already stated but by rejecting this application the Income-tax Officer could not clutch at jurisdiction to make the assessment under section 23(4), which the law does not give him. The action of the Income-tax Officer therefore in making facts and circumstances of this case, and therefore that assessment order requires to be quashed.
For the reasons given above the assessment order dated 19th November 1962 is directed to be quashed by the issue of a writ of certiorari. The Income-tax Officer is further directed to proceed to make the assessment by assisting the petitioner to sumon the books or if the Income-tax Officer so desires by deputing his Inspector or some other Income-tax Officer to Delhi to inspect the account books and then to make an assessment in accordance with law.
The petition is allowed with costs. Counsels fee is assessed at Rs. 200.
Petition allowed.