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SHAKUMBARI SUGAR & ALLIED INDUSTRIES LTD. THRU' DIRECTOR versus UNION OF INDIA & OTHERS

High Court of Judicature at Allahabad

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Shakumbari Sugar & Allied Industries Ltd. Thru' Director v. Union Of India & Others - WRIT TAX No. 307 of 2007 [2007] RD-AH 5527 (28 March 2007)

 

This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).

HIGH COURT OF JUDICATURE OF ALLAHABAD

Reserved

Civil Misc. Writ Petition No.307 of 2007

Shakumbari Sugar and Allied Industries Ltd.,

Saharanpur v. Union of India and others

Hon'ble R.K.Agrawal, J.

Hon'ble Bharati Sapru, J.

(Delivered by R.K.Agrawal, J.)

By means of the present writ petition filed under Article 226 of the Constitution of India, the petitioner, Shakumbari Sugar and Allied Industries Ltd., seeks the following reliefs:-

"(i) issue a suitable writ, order or direction in the nature of certiorari calling for the record of the case and to quash the order dated 8.2.2007 passed by the respondent no.2 as contained in Annexure - 7 to this writ petition.

(ii) issue a suitable writ, order or direction in the nature of certiorari calling for the record of the case and to quash all the notices dated 15.2.2007 issued by the respondent no.3 as contained in Annexure - 8 to this writ petition.

(iii) issue any other suitable writ, order or direction which this Hon'ble Court may deem fit and proper in the facts and circumstances of this case.

(iv) award cost of the writ petition to the petitioner."

Briefly stated, the facts giving rise to the present petition are as follow:-

According to the petitioner, it is a public limited company incorporated under the Companies Act, 1956. It has its Registered Office at Jagran Building, 2, Sarvodaya Nagar, Kanpur. It is engaged in the business of manufacture and sale of sugar, ethanol and rectified spirit. The factory is situate at village and post Todarpur, District Saharanpur. It is a member of All India Distillers' Association and the U.P. Distillers' Association. It is being assessed to income tax with the Deputy Commissioner of Income Tax, V, Kanpur. A search and seizure operation was conducted on 14.2.2006 under the provisions of Section 132(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") by the Income Tax Department in the business and other premises of M/s Radico Khaitan Ltd. Simultaneous search and seizure operation was also carried out at the residence of Sri R.K.Miglani, Secretary General of the U.P.Distillers' Association, and a survey was done also at the office of the U.P.Distillers' Association. Incriminating materials and documents were seized therefrom. The Joint Director of Income Tax (Investigation) O.S.D. Unit 11, New Delhi issued summon under Section 132 of the Act on 17.3.2006 requiring the personal attendance of the Principal Officer of the petitioner's Distillery Division on 30.3.2006 alongwith the books of account of the petitioner company for the financial years 2001-02 to 2005-06. The petitioner's representative personally appeared before the Joint Director of Income Tax (Investigation) O.S.D. Unit 11, New Delhi on the date fixed. A reply dated 5.4.2006 was also filed wherein the details of payment upto Rs.10/- lacs in aggregate or above to any party was also disclosed. Another notice/summon under Section 131 of the Act was issued on 24.4.2006 requiring the personal attendance and production of certain documents on 28.4.2006, which was complied with. According to the petitioner, the Joint Director of Income Tax (Investigation) O.S.D. Unit 11, New Delhi after reading the reply dated 29.4.2006 declined to take the same on record saying that it was not required. Subsequently, the Commissioner of Income Tax, Kanpur issued a notice dated 10.11.2006 under Section 127 of the Act calling upon the petitioner to show cause as to why the cases be not centralised with the cases of M/s Radico Khaitan Ltd. with the Deputy Commissioner of Income Tax, Central Circle, 19, New Delhi. The petitioner submitted its reply on 15.11.2006 denying any connection, relationship or nexus of any kind with M/s Radico Khaitan Ltd. and its group. The Commissioner of Income Tax , vide order dated 8.2.2007, had transferred all the cases of the petitioner from the Deputy Commissioner of Income Tax, V, Kanpur to the Deputy Commissioner of Income Tax, Central Circle, 19, New Delhi. Pursuant to the order of transfer passed by the Commissioner of Income Tax, Kanpur, the Deputy Commissioner of Income Tax, Central Circle, 19, New Delhi, respondent no.3, had issued six notices, all dated 15.2.2007, under Section 153A/153C of the Act in respect of the assessment years 2000-01 to 2005-06. By the aforesaid notices, the petitioner has been asked to furnish return of income in respect of the aforementioned assessment years.  The order dated 8.2.2007 passed by the Commissioner of Income Tax, Kanpur, transferring the cases of the petitioner from Kanpur to Delhi as also the notices dated 15.2.2007 are under challenge in the present writ petition on the ground that the petitioner is merely a member of the U.P.Distillers' Association and has no other monetary transaction with the aforesaid Association except paying the amount of subscription fee and, therefore, it is neither responsible nor related in any manner whatsoever with the alleged illegal activities of the aforesaid Association or its any other member. No reasons have been stated in the order dated 8.2.2007 centralising the cases of the petitioner company with the cases relating to search and seizure at New Delhi. It has not indulged in any kind of illegal activity whatsoever. The mandatory requirement of recording reasons as well as its communication under Section 127 of the Act has not been complied with nor reasons given therein are relevant or have any nexus with the alleged illegal activities with M/s Radico Khaitan Ltd. The details mentioned in the chart given in the order dated 8.2.2007, does not contain the name of the petitioner and, therefore, making it a basis for transfer is wholly extraneous. Even on merits, the plea of alleged evasion of tax is based on pure surmises and conjectures. The order has been passed without application of mind in a mechanical manner and the Commissioner of Income Tax has failed to consider the reply submitted by the petitioner. The order dated 8.2.2007 is, therefore, wholly illegal and without jurisdiction and is liable to set aside. Under the garb of the order dated 8.2.2007, the respondent no.3 cannot assume the jurisdiction to proceed under Section 153A/153C of the Act by issuing the notices dated 15.2.2007 and the said notices are also illegal and without jurisdiction.

We have heard Sri V.K.Upadhaya, assisted by Sri Ritvik Upadhaya, Advocate, appearing for the petitioner, and Sri A.N.Mahajan, learned Standing Counsel appearing for the respondents.

Sri V.K.Upadhaya submitted that the petitioner is only a member of the U.P.Distillers' Association and in the search and survey conducted on 14.2.2006 in the business premises of M/s Radico Khaitan Ltd. and the residence of Sri R.K.Miglani, Secretary General of the U.P.Distillers' Association and the office of the U.P.Distillers' Association, no incriminating material whatsoever has been found, which may point out the involvement of the petitioner in any illegal activity, therefore, the order of transfer dated 8.2.2007, which is based upon the aforesaid search and seizure operations, is wholly illegal and without jurisdiction. He further submitted that the petitioner has no business dealings with M/s Radico Khaitan Ltd. and insofar as the U.P.Distillers' Association is concerned, it is only a member and had paid the subscription fee only. The order of transfer, therefore, is wholly illegal. He further submitted that in its reply dated 15.11.2006, filed before the respondent no.2, in response to the notice dated 10.11.2006, issued under Section 127 of the Act, the petitioner has specifically stated the aforesaid facts and had also filed the copy of the affidavit, reply/submissions filed by it before the Joint Director of Income Tax (Investigation) O.S.D. Unit 11, New Delhi in the enquiry conducted by him. The affidavit and the reply filed by the petitioner had not been taken into consideration by the Commissioner of Income Tax while passing the order of transfer dated 8.2.2007. He further submitted that no reasons have been recorded by the Commissioner of Income Tax while transferring the cases of the petitioner from Kanpur to Delhi and the order is, therefore, liable to be set aside on this ground. According to him, the notices issued under Section 153A/153C of the Act are also liable to fall.

In support of his various pleas, he has relied upon the following decisions:-

(i) Shyam and Company v. Commissioner of Income Tax and another, (1991) 192 ITR 387(Alld);

(ii) Rajesh Mahajan and others v. Commissioner of Income Tax, (2002) 257 ITR 577(P&H); and

(iii) R.K.Agarwal and others v. Commissioner of Income Tax and others, (2006) 283 ITR 532 (Alld).

Sri A.N.Mahajan, learned Standing Counsel, on the other hand, submitted that the order dated 8.2.2007 passed by the Commissioner of Income Tax whereby he has transferred the cases of the petitioner from Kanpur to Delhi, specifically mentioned that the papers seized in the search and seizure operations carried out under Section 132 of the Act at the residence of Sri R.K.Miglani, General Secretary of the U.P.Distillers' Association, and survey conducted at the office of the U.P.Distillers' Association, incriminating documents were found and seized, which depicted the actual payments outside the books of account made by the U.P.Distillers' Association including Shakumbari Sugar and Allied Industries Ltd. (the petitioner). He has further stated that the distillers have adopted a novel method for earning huge undisclosed income by making payments of these amounts. The Commissioner of Income Tax had repelled the argument of inconvenience and had rightly directed for transfer of the petitioner's cases for better investigation and coordinated assessment of group cases. According to him, the order dated 8.2.2007 does not suffer from any illegality. The notices dated 15.2.2007 issued under Section 153A/153C of the Act also does not call for any interference as the authority who had issued the notices had the jurisdiction to do so. In support of his various pleas, he has relied upon the following decisions:-

(i) M/s Bansal Sharevest Services Ltd. and others v. Commissioner of Income Tax, Kanpur, 206 UPTC 992 (2nd case);

(ii) M/s Radico Khaitan Ltd., Rampur v. Commissioner of Income Tax, Moradabad and others, 2006 UPTC 1202;

(iii) Virendra Kumar Jain v. Commissioner of Income Tax and others, (2006) 283 ITR 541 (Alld.);

(iv) Trimurti Fragrances P. Ltd. v. Commissioner of Income Tax and another, (2006) 283 ITR 547 (Alld);

(v) Civil Misc. Writ Petition No.134 of 2007, M/s Unnao Distilleries & Breweries Limited, Unnao, v. Commissioner of Income Tax, - II, Kanpur and others  decided on 21.2.2007, (unreported); and  

(vi) Civil Misc. Writ Petition No.132 of 2007, M/s Rimjhim Ispat Limited, Kanpur v. Commissioner of Income Tax - II, Kanpur and others, decided on 21.2.2007, (unreported).

In reply, Sri Upadhaya submitted that the orders passed under Section 127(2) of the Act by the Commissioner of Income Tax, Kanpur in the case of M/s Rimjhim Ispat and M/s Unnao Distilleries & Breweries Limited, wherein this Court had upheld the order, were differently worded and in those order, the Commissioner of Income Tax had dealt with the plea taken by the petitioner therein and had recorded reasons whereas, in the present case, no reason has been recorded nor the plea taken by the petitioner has been dealt with and, therefore, these two cases are distinguishable and have no application to the facts of the present case.

We have given our anxious consideration to the various pleas raised by the learned counsel for the parties.

We find that it is not in dispute that the petitioner has a distillery. It is a member of the U.P.Distillers' Association. A search and seizure operation was carried on 14.2.2006 at the business premises of M/s Radico Khaitan Ltd., the residence of Mr. R.K.Miglani who is the Secretary General of the U.P.Distillers' Association and a survey was made at the premises of the U.P.Distillers' Association where several incriminating material and documents were seized, which indicated illegal payments made on behalf of the member Distillers to various persons which are not reflected in the books of account. The Commissioner of Income Tax, Kanpur, in its order dated 8.2.2007 has narrated the fact found in the said search/survey wherein the name of the petitioner company also finds mention, therefore, it cannot be said that the petitioner did not have any business relationship with the U.P.Distillers' Association which was acting as a nodal agency for all the distillers. The petitioner has been put to notice and the Commissioner of Income Tax has considered its reply. The plea advanced by the petitioner has not been accepted. We, therefore, do not find that the order dated 8.2.2007 suffers from any illegality.

In the case of Shyam and Company (supra), this Court had held that an order of transfer of case without considering the objection of the assessee is not valid and is liable to be quashed. However, in the present case, we find that the Commissioner of Income Tax has given his reasons for transferring the case which cannot be said to be based on irrelevant material in the case.

In the case of Rajesh Mahajan (supra), the learned Single Judge of the Punjab & Haryana High Court has held that the financial nexus between the two have to be established before transferring the case. It has further held that a bona fide suspicion of financial dealings would not be sufficient and cannot be a valid justification for transfer of proceeding and material showing financial nexus, however trivial, can only be a valid basis for transfer of assessment proceeding. In the present case, we find that the Commissioner of Income Tax, as a matter of fact, has found that the petitioner's name finds mention in the seized documents regarding illegal payments to various persons, made by the U.P.Distillers' Association on its behalf. Thus, if all the cases in which such illegal payments have been found, are centralised, it cannot be said that the order of transfer has been based on irrelevant consideration.

Sofaras the decision in the case of R.K.Agarwal (supra), cited by the learned counsel for the petitioner, and the cases relied upon by the learned Standing Counsel appearing for the respondents, are concerned, they have all been considered in the case of M/s Unnao Distilleries & Breweries Limited and M/s Rimjhim Ispat Limited (supra). We adopt the reasonings given by this Court in the aforesaid cases.

There is yet another reason for this Court not to exercise its extraordinary equity jurisdiction under Article 226 of the Constitution of India. There is no dispute that in the search and seizure operation carried out by the Income Tax Department at the residence of Sri R.K.Miglani, Secretary, U.P.Distillers' Association, M/s Radico Khaitan Ltd. and survey conducted in the office of the U.P.Distillers' Association, incriminating material and documents have been seized which contains evidence of huge payments running into several hundred crores of rupees made to various persons on behalf of member distilleries. The petitioner is also one of the members and its name also finds mention, whether or not the petitioner has also indulged in such activities, is yet to be decided. The Income Tax Department in its effort to check the evasion of due taxes, if undertakes an exercise to centralise all such cases for assessment at one place and by one officer, then it will be easier to cross check the entries/transactions between the various persons. It is an earnest effort to check the growing menace of black money in which Courts should be slow to interfere. Moreover, the petitioner has an office at Delhi and all its accounts etc., according to the own showing of the petitioner, are available on computer floppy. It will not cause any inconvenience to the petitioner. We find that the facts of the present case are similar to that of M/s Rimjhim Ispal Ltd. and M/s Unnao Distilleries & Breweries Limited (supra).

We are, therefore, of the considered view that the order dated 8.2.2007 passed by the Commissioner of Income Tax does not suffer from any illegality. The order of transfer is, therefore, justified in law as the cases have been transferred from the Deputy Commissioner of Income Tax, V, Kanpur to the Deputy Commissioner of Income Tax, Centralised Circle, 19, New Delhi. The respondent no.3, i.e., Deputy Commissioner of Income Tax, Central Circle, 19, New Delhi, was wholly within his jurisdiction to issue notices dated 15.2.2007 under Section 153A/153C of the Act.

In view of the foregoing discussions, we do not find any merit in this petition. It is dismissed in limine.

28.3.2007

vkp


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Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites

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