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Swadeshi Polytex Ltd. vs Income-Tax Officer, Special Ward

High Court Of Judicature at Allahabad|30 June, 1980

JUDGMENT / ORDER

JUDGMENT Yashoda Nandan, J.
1. The petitioner, Swadeshi Polytex Ltd., is a public limited company incorporated under the Indian Companies Act and having its registered office at Ghaziabad in the State of Uttar Pradesh. It is engaged in the business of manufacturing, processing, distributing and dealing in polyester fibre, organic and inorganic heavy chemicals, etc. It follows the mercantile system of accounting and the financial year of the company ends on the last day of September every year. In respect of the financial year ending 30th September, 1973, relating to the assessment year 1974-75, it submitted its return on the 22nd February, 1975, showing a loss of Rs. 5,47,44,770. Subsequently, it submitted a revised return on the 31st December, 1976, showing a loss of Rs. 6,09,42,720. Another revised return was filed by the petitioner on the 26th November, 1977, showing a loss of Rs. 6,37,49,940. In regard to the aforesaid returns and revised returns pursuant to notices issued under Section 142(1) of the I.T. Act (hereinafter referred to as "the Act") requiring it to produce accounts, documents and information, etc., it claims to have furnished all such records, accounts and documents as were required from time to time by the respondent-ITO, Special Ward, Ghaziabad. By means of a communication dated 17th December, 1977, addressed to the principal officer of the petitioner-company, the respondent intimated to him that "having regard to the nature and complexity of the accounts of M/s. Swadeshi Polytex Ltd., Ghaziabad, and in the interest of revenue I am of the opinion that it is necessary to do so, I direct you under Section 142(2A) of the I.T. Act, 1961, with the previous approval of the Commissioner of Income-tax, Meerut, to get the accounts audited by Sri K. Annadhanam of M/s. Khanna and Annadhanam, Chartered Accountants, New Delhi, who has been approved by the Commissioner of Income-tax, Meerut, to conduct the audit of your company, vide Ms order dated December 15, 1977,...a copy of which has already been sent to you..." By means of this very letter, the respondent-ITO further directed the petitioner to furnish "a report of said audit within 60 days in the prescribed Form No. 6B as given in Rule 14A of the I.T. Rules, 1962, duly signed and verified by the said accountant..." A copy of this order was endorsed and forwarded to the chartered accountants mentioned therein. By means of a letter dated 19th December, 1977, Sri K. Annadhanam, the chartered accountant nominated by the Commissioner, required the petitioner to supply to him copies of profit and loss accounts and balance-sheets for the three years ending 30th September, 1973, 30th September, 1974, and 30th September, 1975, relevant to the assessment years 1974-75, 1975-76 and 1976-77, names of various officers of the company with powers vested in them, etc. It is asserted, and has not been disputed, that the petitioner did supply the relevant information to the chartered accountant nominated by the Commissioner. Subsequently, the chartered accountant asked the petitioner to supply him certain other papers including a copy of the company petition which had been filed by M/s. Swadeshi Cotton Mills Co. Ltd. against the petitioner-company in this court, being Company Petition No. 21 of 1976. It appears that a copy of the company petition mentioned above was supplied by the petitioner-company to the chartered accountant. By means of a letter dated 19th January, 1978, a true copy of which has been filed as annexure V to the petition, addressed to the Commissioner, Meerut, the chartered accountant intimated to him that when he had a talk with the Deputy Secretary of Inspection (Inv.), Special Cell, he was under the impression that it was going to be purely an audit of the accounts of the company as envisaged by Section 142(2A) of the Act and under that impression had written to the company on 19th December, 1977, for lists of books and other particulars. The chartered accountant went on to state :
2. Copies of this letter, extracts from which have been quoted above, were forwarded by the chartered accountant to the Deputy Director of Inspection (Inv.), Special Cell, New Delhi, the respondent-ITO as well as to the petitioner.
3. After receipt of the above letter from the chartered accountant, no other chartered accountant was nominated to carry out the audit of the petitioner-company. A letter dated 14th February, 1978, was addressed by the assistant secretary of the petitioner-company to the respondent inviting his attention to the above-mentioned letter of the chartered accountant addressed to the Commissioner, Meerut, and intimating to him that, "in the view of the said letter, the question of compliance of your notice dated December 17, 1977, and January 6, 1978, for the assessment years 1974-75 to 1976-77 do not arise". It may be mentioned here that the letter dated January 6, 1978, was one addressed by the respondent to the principal officer of the petitioner-company similar to that dated December 17, 1977, relating to the assessment year 1976-77. In response to the letter of the 14th February, 1978, of the petitioner, the respondent issued a letter dated 18th February, 1978, a true copy of which has been filed as annex. VIII to the petition. The relevant part of this letter is in the following terms :
"The time limit of 60 days will be expiring on or around 20-2-78. Your above letter dt. 14-2-78 was filed before me on 16-2-78. In case you had any difficulty whatsoever, you should have come up to me much earlier which, however, you have not done..."
4. After quoting Sub-section (2C) of Section 142 of the Act, the respondent went on to state :
"In terms of the provisions of law reproduced above, you were thus required to furnish to me within 60 days the report required under Section 142(2A) of the I.T. Act, 1961, which you have not done so far and ostensible compliance within the permitted time would not be taking place. By not complying with the direction you have brought me to a situation where, inter alia, the provisions of Section 144 of the I.T. Act, 1961, with particular reference to Clause (b) of that section would get attracted. Considering the facts and circumstances stated by you in your aforesaid letter and particularly the fact that you have come up to me almost near the expiry of time granted, I hereby extend the time already granted up to 180 days from the date of receipt of my directions dated 17-12-77 by you. Please ensure that the audit report is furnished within the aforesaid time so that consequences that may follow on non-compliance of the direction are avoided.
With respect to the circumstances placed by the auditors before you, you should take steps, if so advised by your legal advisers, that may be necessary so as to ensure compliance of my direction in the period above mentioned. In order to enable you to seek proper advice in the matter and to take steps that you may be advised, I have given you the maximum time that is permitted by the income-tax statute."
5. A letter dated 23rd February, 1978, was thereafter addressed on behalf of the petitioner-company to the respondent, the relevant portion of which is as follows ;
"You will thus find that the work of the audit was not taken in hand by the auditor and, therefore, the question of informing you of any of our difficulties in advance does not arise in this case. It is the auditor who have themselves refused to conduct the audit and intimation was sent to you well in advance. It is not within the provisions of Section 142(2A) of the Income-tax Act, 1961, where the accounts have not been taken for audit. Since the auditor has addressed the letter to the Commissioner of Income-tax and endorsed the copy to you the position was quite clear and you were fully aware of the legal position. In view of the circumstances, it was not incumbent upon us to take any farther action in this regard. Since the provisions of Section 142(2A) were never made applicable, therefore, the question of application of Section 144(b) does not arise in this case as contemplated by you. Since the auditors have themselves refused to conduct the audit, the question of extending time for conduct of the audit is also not warranted. No such request has been made by us and there is no reason at all to extend the said period. In view of the fact that the auditors nominated by the Commissioner of Income-tax refused to audit our books of accounts the provisions of Explanation 1(iii) to Sub-section (3) of Section 153 are not applicable to our case and we submit that the assessment for the said year has become barred by limitation.... "
6. By an order dated 27th February, 1978, the respondent purporting to act under Section 144(b) of the Act on the ground of non-compliance by the petitioner with his direction dated 17th December, 1977, estimated the petitioner's income at Rs. 1 lakh in the year in question discarding the claim made by it that it had suffered a loss of Rs. 6,37,49,840 as shown in its revised return. Penalty notices were also ordered to be issued to the petitioner under Section 271(1)(b) for default to comply with the directions issued by the respondent by the order dated 17th December, 1977.
7. By means of this petition, the petitioner prays for a writ, direction or order in the nature of certiorari quashing the order of the ITO dated 27th February, 1978, and further for an order, direction or writ in the nature of mandamus commanding the respondent not to enforce his order dated 27th February, 1978.
8. A counter-affidavit has been filed by Sri K. K. Sinha, ITO, Special Ward, Ghaziabad, in which the stand has been taken that the petitioner-company failed to comply with the direction dated 17th December, 1977, issued under Section 142(2A) and consequently an order under Section 144 of the Act was passed by him in accordance with the requirements of law. It has been disclosed in the counter-affidavit that on the basis of warrants of authorisation issued by the Director of Inspection (Inv.), New Delhi, searches under Section 132(1) of the Act were conducted on 23rd December, 1975, at various offices of the petitioner-company and the residences of its officers during which, besides cash, incriminating documents were seized disclosing considerable tax evasion by the petitioner.
9. In the rejoinder-affidavit the allegations made in the petition have been reiterated and it is unnecessary to set out in any detail the assertions mentioned therein.
10. The basic contention of Sri Jagdish Swarup, learned counsel representing the petitioner, is that in view of the fact that the chartered accountant nominated by the Commissioner had himself declined to carry out the audit of the accounts of the petitioner-company in spite of its having co-operated with him in every manner required, it cannot be held to have failed to comply with the direction issued under Sub-section (2A) of Section 142 and consequently Section 144(b) of the Act could not be pressed in aid for the purposes of making a best judgment assessment against the petitioner. The contention is that there could have been failure on the part of the petitioner only if by some act or omission it had prevented the chartered accountant nominated by the Commissioner from auditing its accounts. It was urged that the Commissioner had been directly intimated by the chartered accountant his inability to audit the petitioner's accounts and consequently no action on the part of the petitioner was called for. In the circumstances of the case, if the respondent required compliance with his direction, it was open to him to have nominated another chartered accountant to audit the petitioner's accounts. It was further urged that in view of the fact that the chartered accountant had categorically stated his inability to audit the petitioner's accounts, a mere extension of time for furnishing his report was futile and the petitioner was not in a position to compel the chartered accountant who was a nominee of the Commissioner to audit its accounts. It was also contended that in the company petition the petitioner under no provision of law could have applied for directions being issued to the chartered accountant, who was not a party to the proceedings, to carry out the audit of the petitioner's accounts in compliance with the orders of the respondent. In substance, the contention has been that since it was beyond the powers of the petitioner to comply with the directions of the respondent issued under Section 142(2A) in view of the express stand taken by the chartered accountant, a nominee of the Commissioner, the petitioner could not be held to have failed to comply with the directions so as to attract Section 144(b).
11. Before we proceed to consider this submission on its merits we might comment that though on the record as it stands it is not possible to hold that there was any collusion between the petitioner and Sri K. Annadhanam, it is obvious that the reason put forward by the chartered accountant for declining to audit the petitioner's accounts was patently frivolous.
12. A chartered accountant is not usually wholly ignorant of. law and it is inconceivable that Sri Annadhanam or his firm was unaware of the legal position that merely because in the company petition allegations of malfeasance, misfeasance or manipulations of the petitioner's books were sub judice, his auditing the petitioner's accounts and submitting his report in accordance with an order passed in exercise of a statutory power could not by any stretch of imagination be even remotely considered to be an act of interference with the pending proceedings in this court. Even during the hearing of this petition not even a faint endeavour was made to justify the stand taken by the chartered accountant.
13. It may further be stated that though in the writ petition there are allegations that the respondent mala fide issued directions under Section 142(2A) no prayer is contained in the petition challenging the direction dated 17th December, 1977, and no arguments were advanced supporting the vague and unjustified assertions.
14. Section 142 of the Act, to the extent relevant for our purposes, runs as follows:
"142. (2A) If, at any stage of the proceedings before him, the Income-tax Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Commissioner, direct the assessee to get the accounts audited by an accountant, as denned in the Explanation below Sub-section (2) of Section 288, nominated by the Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Income-tax Officer may require.
(2B) The provisions of Sub-section (2A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise.
(2C) Every report under Sub-section (2A) shall be furnished by the assessee to the Income-tax Officer within such period as may be specified by the Income-tax Officer:
Provided that the Income-tax Officer may, on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under Sub-section (2A) is received by the assessee.
(2D) .....
(3) The assessee shall, except where the assessment is made under Section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any enquiry under Sub-section (2) or any audit under Sub-section (2A) and proposed to be utilised for the purpose of the assessment."
15. Section 144 of the Act, under which the respondent passed the impugned order, runs as follows :
"144. If any person-
(a) fails to make the return required by any notice given under Sub-section (2) of Section 139 and has not made a return or a revised return under Sub-section (4) or Sub-section (5) of that section, or
(b) fails to comply with all the terms of a notice issued under Sub-section (1) of Section 142 (or fails to comply with a direction issued under Sub-section (2A) of that section), or
(c) having made a return, fails to comply with all the terms of a notice issued under Sub-section (2) of Section 143, the Income-tax Officer, after taking into account all relevant material which the Income-tax Officer has gathered, shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. "
16. The short question arising for consideration is as to whether the word "fails" which occurs in Clauses (a), (b) and (c) of Section 144 of the Act implies within it the idea of wilfulness or default on the part of an assessee or Section 144(b) is attracted irrespective of the existence or otherwise of any justification which had the consequence of the petitioner's inability to comply with directions issued under Section 142(2A) of the Act. The word "fails" is undefined in the Act and is one of common parlance. It is well established that where the language of a section is plain and unambiguous, it is not open to courts to read into it limitations which are not there based on an a priori reasoning, as to the probable intention of the legislature. Such intention can be gathered from the words actually used in the legislation and what is unexpressed has the same value as to what is unintended. This principle has been given effect to in Mahadeolal Kanodia v. Administrator-General of West Bengal [1960] AIR 1960 SC 936 and CIT v. Smt. Sodra Dm [1957] 32 ITR 615 (SC). If the contention of Sri Jagdish Swarup were to be accepted, it would necessitate our introducing words in Section 144 which Parliament chose not to employ. Acceptance of the contention of the learned counsel would involve our introducing the words "without sufficient cause" in between the words "fails" and "to comply with a direction issued under Sub-section (2A) of that section". Section 142(2A) and the later part of Section 144(b) were introduced in the Act by the Taxation Laws (Amend.) Act, 1975. Bearing in mind the objective of the Amending Act, which we shall presently advert to, and the context in which the amending provisions occur, we see no legal justification whatsoever for introducing words like "without sufficient cause" or "wrongfully" before the word "fails" in Section 144 or imparting to it an expanded meaning so as to, by implication, include within it the concept of "default" or "refusal and neglect" on the part of an assessee.
17. No pronouncement of any court interpreting the word " fails " as occurring in Section 144 was brought to our notice by counsel for the parties. A learned single judge of the Madras High Court in In re P. S. Subbarama Iyer [1951] 2 STC 71 (Mad) was, however, called upon to consider the scope of the words "fails to submit a return" as they occurred in Section 15(a) of the Madras General Sales Tax Act. The contention before the learned judge was that the words "fails to submit a return" must be read as "fails without reasonable cause". The contention was rejected by the learned judge, who held that though he entirely agreed "that if the natural meaning could lead to 'strangely anomalous' results, then the court could cut down or even contradict the language. But in this case I am not satisfied, how giving the natural meaning to the words, would lead to strangely anomalous results. I am not prepared, therefore, to read the section with the words 'without reasonable cause'" (p. 73), The nature of the legislation which the learned judge was called upon to interpret was the same as the one we are concerned with and practically identical words occur in Section 144(a) as well as Clauses (b) and (c) thereof. We find ourselves in respectful concurrence with the approach of the learned judge.
18. The petitioner in the instant case did make an endeavour according to its own claim, to comply with the requirements of the directions issued under Section 142(2A) but in vain. In our opinion, there is thus no scope for holding that the petitioner did not fail to comply with a direction issued under Sub-section (2A) of Section 142.
19. The law report is not itself available to us but relying on a decision of the Australian Court in Marousson v. Southern Shipping Co. Ltd. [1962] ALR 758, the following passage occurs in Words and Phrases Legally Defined, vol. 2, 2nd edn., at page 218 (Column 2) :
Australia.--"[Section 60(1) of the Excise Act 1901-1966 (Com.), deals with circumstances where a person who has or has been entrusted with the possession, custody or control of excisable goods which are subject to the control of the Customs 'fails' to keep those goods safely.]
20. 'Safely' seems to mean safe from loss or destruction : for the subject is excise duty, not the condition of the goods. The provision is pointed at the loss of goods involving the loss of excise duty......The hypothesis is that by the loss of the goods duty has beed escaped.
21. There must be some doubt whether the destruction of the goods was also contemplated but upon the words of the section destruction is certainly covered. It is said, however, for the defendant that 'fail' involves some want of care, some neglect or default. Considering the objects of the provision and the place it takes, this ground must ' fail'. It means to place on the person having possession, custody or control, an absolute duty......to keep the goods safe from loss or destruction......(per Dixon C.J., at pp. 759, 760) "
22. This quotation has been extracted from the judgment of Dixon C.J. In the same case, as would appear from the passage occurring in the same volume, Owen J. held that (p. 219) :
Taking into account the object which Section 142(2A) and Section 144(b) of the Act as introduced by the Taxation Laws (Amendment) Act, 1975, sought to achieve, in our judgment, the word 'fails' occurring in Section 144(b) must be interpreted according to the views expressed by Dixon C.J. and Owen J.
Referring to Maestas v. American Metal Co. of New Maxico, 20P. 2d 924, 928 ; 37 N.M. 203, it is stated in Words and Phrases--Permanent Edition, vol. 16, p. 43 (column 1), that 'fail' is distinguished from 'refuse' in that 'refuse' involves an act of the will, while 'fail' may be an act of inevitable necessity".
24. In our view, the word "fails" in Section 144(b) is wide enough to include an act of inevitable necessity.
25. Other weighty reasons exist leading to this conclusion. There is intrinsic evidence in the Act to justify the view that the causes which lead to failure on the part of an assessee to comply with a direction under Section 142(2A) of the Act are immaterial to render him liable to a best judgment assessment under Section 144(b) of the Act. Section 144 of the Act empowers the ITO to make a best judgment assessment in the contingencies mentioned in Clauses (a), (b) and (c) of that provision. Section 146 of the Act runs as follows:
"146. (1) Where an assessee assessed under Section 144 makes an application to the Income-tax Officer, within one month from the date of service of a notice of demand issued in consequence of the assessment, for the cancellation of the assessment on the ground-
(i) that he was prevented by sufficient cause from making the return required under Sub-section (2) of Section 139, or
(ii) that he did not receive the notice issued under Sub-section (1) of Section 142 or Sub-section (2) of Section 143, or
(iii) that he had not a reasonable opportunity to comply, or was prevented by sufficient cause from complying, with the terms of any notice referred to in Clause (ii), the Income-tax Officer shall, if satisfied about the existence of such ground, cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of Section 143 or Section 144......"
26. It is significant that while in contingencies contemplated by Clauses (a), (b) and (c) of Section 144, an assessee can apply on sufficient cause being shown for cancellation of the assessment, he has no such right in a case where he fails to comply with a direction issued under Sub-section (2A) of Section 142. This clearly indicates that the reasons which result in the omission on the part of an assessee to comply with a direction issued under Section 142(2A) are wholly irrelevant. The failure thus may be on account of reasons within or without his control. In either case he or it incurs the liability to be assessed under Section 144(b) of the Act.
27. It is worthy of note that while Section 142(2A) of the Act imposes a duty on an assessee to furnish to the ITO the report of the chartered accountant nominated by the Commissioner, Section 16A(5) of the W.T. Act, 1957, requires the valuation officer to send a copy of his order to the WTO as well as to the assessee directly and does not make the assessee liable for its production.
28. Pressing in extrinsic aids for the interpretation of an expression used in a statutory provision is not called for in the absence of an ambiguity and, in our opinion, none exists in Section 142(2A) or Section 144(b) of the Act. None the less, the history of the Amending Act which introduced the provisions under consideration fortify us in the conclusion expressed by us earlier.
29. Bill No. 34 of 1973 to amend the LT. Act, 1961, the W.T. Act, 1957, the G.T. Act, 1958, and the Companies (Profits) Surtax Act, 1964, was introduced in the Lok Sabha on the 9th May, 1973. The Bill was published in the Gazette of India, Extry., Pt. II, Section 2, dated 9th May, 1973. The Gazette notification does not set out the reasons and objects of the Bill.
The Bill was referred to a Select Committee. The majority as well as the dissenting reports are to be found in the Gazette of India, Extry., Pt. II, Section 2, dated 20th March, 1975. In the dissenting report of M/s. Era Sezhiyan,. P. G. Mavlankar and S. M. Banerjee, the main objectives of the Bill have been set out as follows :
"(i) to unearth black-money and prevent its proliferation ;
(ii) to fight and curb tax evasion ;
(iii) to check avoidance of tax through various legal devices, including the formation of trusts and diversion of income or wealth to members of family;
(iv) to reduce tax arrears and to curb accumulation in future;
(v) to rationalise exemptions and deductions ;
(vi) to streamline the administrative set-up and make it functionally efficient."
30. Judicial notice can be taken of the fact that the commercial operations of multinationals and growth of industrial concerns with foreign collaboration gave rise not only to complexity in accounting but also to foreign exchange manipulations, tax evasions and black-marketing activities on a scale which were and are tending to bring the national economy to a condition of near collapse. The declared objective of the Bill was to curb these evils.
31. In the Bill which was presented before the Lok Sabha on 9th May, 1973, Clause 39, by which Section 139 of the Act was sought to be amended, was in the following terms [1973] 89 ITR (St.) 33, 50).
"39. In Section 139 of the Income-tax Act,--
(i) after Sub-section (1), the following sub-sections shall be inserted, namely:--
'(1A) Every person other than a company,--
(i) carrying on any business, whose total sales, turnover or receipts exceed or exceeds five hundred thousand rupees or whose profits before deducting the tax payable under this Act exceed fifty thousand rupees, in any previous year, or
(ii) carrying on any profession, whose total receipts exceed five hundred thousand rupees or whose income before deducting the tax payable under this Act exceeds fifty thousand rupees, in any previous year, shall, while furnishing a return of Ms income, also furnish a report of the audit of the accounts on which such return is based."
32. Clause 44 by which Section 142 of the Act was proposed to be amended ran as follows (p. 52):
"44. In Sub-section (1) of Section 142 of the Income-tax Act, for the words, brackets and figures 'or upon whom a notice has been served under Sub-section (2) of Section 139', the words, brackets and figures 'or to whom a notice has been issued under Sub-section (2) of Section 139' shall be substituted."
33. The Bill, however, contained no proposal for amending Section 144 of the Act.
34. The majority report of the Select Committee (see Gazette of India, Extry., Pt. II, Section 2, dated 20th March, 1975 ) proposed by Clause 35 the following amendment:
"35. Clauses 38 and 43 (original Clauses 39 and 44).--(i) The Committee feel that the proposed provisions of Clause 39 requiring compulsory audit of accounts of persons (not being companies) by chartered accountants are likely to cause harassment, inconvenience and unnecessary expense to the assessees particularly in the mofussil areas and other places where chartered accountants are not readily available, without any corresponding substantial benefit to the Government revenue.
Sub-clause (i) of Clause 39 has been omitted accordingly.
(ii) However, the Committee are of the opinion that in a case, where the nature and complexity of the accounts of the assessee and the interests of Government revenue so require, the department should be empowered to direct the assessee to get his accounts audited by a chartered accountant and furnish a report of such audit in the prescribed manner. In order to see that no harassment is caused to the assessee and he is not put to unnecessary expense, the decision to get his accounts audited should be taken at the level of the Commissioner of Income-tax and the chartered accountant for the purpose should also be nominated by him."
35. Clause 39 of the majority report is as quoted below (p. 26):
"39. New Clause 44.--The Committee feel that consequent upon the insertion of a provision in Clause 43 empowering the Income-tax Officer to direct an assessee to get his accounts audited, it is also necessary to empower the Income-tax Officer to proceed to make the assessment to the best of his judgment in a case where his direction to get the accounts audited has not been complied with."
36. Courts are not debarred from turning to such committee reports as aids in construing statutes enacted in accord with such recommendations (see Sutherland's Statutory Construction, vol. 2, p. 491, 3rd Edn). The view of the majority report as expressed in Clauses 35 and 44 finds expression in Section 142(2A) and Section 144(b) as they exist after the coming into force of the Taxation Laws (Amend.) Act, 1975.
37. The history of the legislation also consequently leads, in our judgment, to the inevitable conclusion that the word "fails" occurring in Section 144(b) does not involve any want of care, neglect or default on the part of an assessee but places on him an absolute duty to comply with the requirements of a direction issued under Section 142(2A) and in the event of his or its omission to do so the assessee incurs the liability to a best judgment assessment under Section 144(b) of the Act. The power to make a best judgment assessment was enlarged by the amending. Act to achieve the declared object of Parliament,
38. The principle of interpretation that a taxing statute should be, in the event of any ambiguity, interpreted in favour of the assessee has no application to the instant case in view of the clear language used in Section 142(2A) of the Act. An order under Section 142(2A) has to be passed if the ITO is of the opinion that it is necessary to do so "having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue". It is the interests of the revenue that is of paramount importance and consequently the provisions must be interpreted in favour of the revenue. It is true, as contended by Sri Jagdish Swamp, learned counsel for the petitioner, that the audited accounts submitted by the assessee had not been specifically rejected, none the less, the scheme of Section 142(2A) and (2B) clearly indicates that the ITO issues a direction under Sub-section (2A) only when he does not consider it possible in the interests of the revenue to rely on the accounts and the returns submitted by an assessee. Section 142(2B) clearly provides that "the provision of Sub-section (2A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise".
39. Before concluding this judgment, we must express our thanks for the valuable assistance rendered to us by Sri Jagdish Swamp, who appeared for the petitioner, and the learned Advocate-General and Sri R. K. Gulati, senior standing counsel for the department.
40. For the reasons given above, we find no force in this petition, which is hereby dismissed. The respondent shall be entitled to costs from the petitioner. Interim order dated 29th March, 1978, is hereby vacated.
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Title

Swadeshi Polytex Ltd. vs Income-Tax Officer, Special Ward

Court

High Court Of Judicature at Allahabad

JudgmentDate
30 June, 1980
Judges
  • Y Nandan
  • B Agrawal