# State of U.P v. Presiding Officer, Labour Court Varanasi and another

- **Citation:** (2005) 1 ILRA 42
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2005
- **Case number:** Civil Misc. Writ Petition No. 851 of 1995
- **Bench:** R.K. Agrawal, K.N. Ojha
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/state-of-u-p-v-presiding-officer-labour-court-varanasi-and-another-40373
- **Pages:** 13

## Headnote

Sri Bharat Ji Agrawal
Sri Ashok Kumar
Sri S. Chopra
Sri G. Krishna
Sri A.N. Mahajan
S.C.

Income Tax Act, 1961-Ss. 147 and 148Search and seizure- Notices under S. 148
to
petitioners-Writ
against-held,
according to claim made by petitioners
amount in question belonged to 's' who
bequeathed
same
to
them-Not
withstanding fact that said amount has
been assessed to tax in hands of 'P', he
took stand that seized amount did not
belong to him and instead belonged to
'S'-thus it is not clear as to in whose
hands said amount is to be assessedHence, I.T.O. was, held, justified in
taking proceedings under S. 147 for
assessing amounts in question at hands
of petitioners according to claims made
by petitioners-Writ petition dismissed.

Held: Para 40

Applying the principle laid down in the
aforesaid cases to the facts of the
present case, we find that according to
the claim made by the petitioners the
amount in question belonged to Smt.
Shyama Devi who had bequeathed the
same to them. Notwithstanding the fact
that the said amount has been assessed
to tax in the hands of Prem Chandra
Jain, he has taken a stand that the
amount does not belong to him and
instead belonged to Smt. Shyama Devi.
Therefore, it is not clear as to in whose
hands the amount in question has to be
assessed. Thus, the Income Tax Officer
was justified in taking proceedings under
Section 147 of the Act for assessing the
aforesaid amounts at the hands of the
petitioners according to the claim made
by the petitioners.
Case law discussed:
(1961) 43 ITR 287 (SC)
(1976) 103 ITR 579 (P&H)
(1980) 122 ITR 105 (P&H)
(1992) 195 ITR 582 (Kant.)
(1986) 161 ITR 505 (SC)
(1994) 207 ITR 55 (Kant)
(1998) 234 ITR 249 (All)
(2001) 247 ITR 271 (SC)
(2000) 247 ITR 436 (All)
(2003) 259 ITR 19 (SC)
(2003) 264 ITR 472 (All)
(2003) 264 ITR 566 (SC)
(2004) 266 ITR 553 (P&H)
(2004) 267 ITR 200 (Bom)
(1996) 222 ITR 831 (Guj)
187 CTR 462 (Uttaranchal)
187 CRT 557 (Delhi)
(2004) 266 ITR 597 (All)
(1963) 47 ITR 472 (All)
(1969) 73 ITR 226 (All)
(1972) 84 ITR 616 (Delhi)
(1986) 158 ITR 174 (Delhi)
(1960) 38 ITR 301 (Cal)
(1968) 69 ITR 461 (All)
(1961) 41 ITR 191 SC
(1975) 98 ITR 486 (Pat)
(1965) 57 ITR 637 (SC)
(1981) 130 ITR 1 (SC)
(1967) 63 ITR 219 (SC)
(1967) 63 ITR 638 (SC)
(1970) 77 ITR 268 (SC)
(1968) 70 ITR 79 (SC)
(1976) 103 ITR 437 (SC)
(1974) 97 ITR 239 (SC)
(1973) 31 STC 293 (SC)
(1994) 3 SCC 2999
(1973) 88 ITR 439 (SC)
(1971) 82 ITR 147 (SC)
AIR 1954 SC 207
AIR 1955 SC 425
AIR 1957 SC 882
AIR 1958 SC 86
AIR 1966 SC 1089
(2003) 2 SCC 107
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 INDIAN LAW REPORTS ALLAHABAD SERIES

## Text

_Characters 0–39,976 of 42,485. This is a partial read: ask again with offset=39976 for what follows._

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42
4. In this writ petition an interim
order dated 2.4.1999 has been passed by
this Court wherein the petitioner was
directed to comply with the provisions of
Section 17-B of the Industrial Disputes
Act which admittedly they have not
complied with. However, they have
deposited the same amount towards back
wages and have filed the Photostat copies
of the certificate regarding deposits made
before the labour Court.

5. The labour Court after hearing the
parties and looking into the record held
that the petitioner-employer had since
accepted the fact that prior to the
termination of the services of the
workman-respondent
no.2
no
notice
whatsoever
was
sent
nor
any
retrenchment compensation was paid in
compliance of the provisions of Section 6N of the Industrial Disputes Act the
termination of the services of the
workman-respondent no.2 was wrong,
bad and illegal.

6. I have looked into the record of
the case and find that, after thorough
examination and critical scrutiny of the
pleadings and relevant material and
evidence
available
on
record
the
respondent no.1 has passed a well
reasoned
award
dated
25.5.1997
(annexure-1 to the writ petition) on the
basis of the findings of fact arrived at by
it. The petitioner has not been able to
demonstrate before this Court that the
findings of fact recorded in the impugned
award
suffers
from
any
illegality,
perversity or any manifest error apparent
on the face of the record. More so, the
said findings of fact, arrived at by the
respondent on the basis of which the
impugned award has been passed, being
based on relevant material on record, is
not open to challenge before this Court
while exercising its special and extra
ordinary jurisdiction under Article 226 of
the Constitution of India.

7. Under the above said facts and
circumstances of the case, I do not find
that any illegality has been committed by
the respondent no.1 in passing the
impugned
award-dated
25.5.1997
(annexure-1
to
the
writ
petition).
However, looking into the facts and
circumstances of the case and also since,
there is no averment made by the
workman that he was not gainfully
employed anywhere else nor there is any
such finding to this effect that the
workman-respondent
no.2
was
not
gainfully employed at any other place
during the period he was not permitted to
work he shall not be entitled to full back
wages.
The
impugned
award-dated
25.5.1997
(annexure-1
to
the
writ
petition) is modified to the extent that
50% of the back wages shall be payable to
the workman-respondent no.2 from the
date of the termination till the date of the
passing of the award.

With the above said observations the
writ petition is dismissed. No order as to
costs.
Petition dismissed.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 05.11.2004

BEFORE
THE HON'BLE R.K. AGRAWAL, J.
THE HON'BLE K.N. OJHA, J.

Civil Misc. Writ Petition No. 851 of 1995

Sunil Kumar Jain

...Petitioner
Versus
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1All] State of U.P. V. Presiding Officer, Labour Court Varanasi and another
43
The Income Tax Officer Ward 3 (4),
Kanpur and others
 ...Respondents

Counsel for the Petitioner:
Sri R.S. Agrawal
Sri Shalabh Singh

Counsel for the Respondents:
Sri Bharat Ji Agrawal
Sri Ashok Kumar
Sri S. Chopra
Sri G. Krishna
Sri A.N. Mahajan
S.C.

Income Tax Act, 1961-Ss. 147 and 148Search and seizure- Notices under S. 148
to
petitioners-Writ
against-held,
according to claim made by petitioners
amount in question belonged to 's' who
bequeathed
same
to
them-Not
withstanding fact that said amount has
been assessed to tax in hands of 'P', he
took stand that seized amount did not
belong to him and instead belonged to
'S'-thus it is not clear as to in whose
hands said amount is to be assessedHence, I.T.O. was, held, justified in
taking proceedings under S. 147 for
assessing amounts in question at hands
of petitioners according to claims made
by petitioners-Writ petition dismissed.

Held: Para 40

Applying the principle laid down in the
aforesaid cases to the facts of the
present case, we find that according to
the claim made by the petitioners the
amount in question belonged to Smt.
Shyama Devi who had bequeathed the
same to them. Notwithstanding the fact
that the said amount has been assessed
to tax in the hands of Prem Chandra
Jain, he has taken a stand that the
amount does not belong to him and
instead belonged to Smt. Shyama Devi.
Therefore, it is not clear as to in whose
hands the amount in question has to be
assessed. Thus, the Income Tax Officer
was justified in taking proceedings under
Section 147 of the Act for assessing the
aforesaid amounts at the hands of the
petitioners according to the claim made
by the petitioners.
Case law discussed:
(1961) 43 ITR 287 (SC)
(1976) 103 ITR 579 (P&H)
(1980) 122 ITR 105 (P&H)
(1992) 195 ITR 582 (Kant.)
(1986) 161 ITR 505 (SC)
(1994) 207 ITR 55 (Kant)
(1998) 234 ITR 249 (All)
(2001) 247 ITR 271 (SC)
(2000) 247 ITR 436 (All)
(2003) 259 ITR 19 (SC)
(2003) 264 ITR 472 (All)
(2003) 264 ITR 566 (SC)
(2004) 266 ITR 553 (P&H)
(2004) 267 ITR 200 (Bom)
(1996) 222 ITR 831 (Guj)
187 CTR 462 (Uttaranchal)
187 CRT 557 (Delhi)
(2004) 266 ITR 597 (All)
(1963) 47 ITR 472 (All)
(1969) 73 ITR 226 (All)
(1972) 84 ITR 616 (Delhi)
(1986) 158 ITR 174 (Delhi)
(1960) 38 ITR 301 (Cal)
(1968) 69 ITR 461 (All)
(1961) 41 ITR 191 SC
(1975) 98 ITR 486 (Pat)
(1965) 57 ITR 637 (SC)
(1981) 130 ITR 1 (SC)
(1967) 63 ITR 219 (SC)
(1967) 63 ITR 638 (SC)
(1970) 77 ITR 268 (SC)
(1968) 70 ITR 79 (SC)
(1976) 103 ITR 437 (SC)
(1974) 97 ITR 239 (SC)
(1973) 31 STC 293 (SC)
(1994) 3 SCC 2999
(1973) 88 ITR 439 (SC)
(1971) 82 ITR 147 (SC)
AIR 1954 SC 207
AIR 1955 SC 425
AIR 1957 SC 882
AIR 1958 SC 86
AIR 1966 SC 1089
(2003) 2 SCC 107
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 INDIAN LAW REPORTS ALLAHABAD SERIES [2005
44
(Delivered by Hon'ble R.K.Agrawal, J.)

1. Civil Misc. Writ Petition No. 851
of 1995 has been filed by Sunil Kumar
Jain whereas Civil Misc. Writ Petition
No. 852 of 1995 has been filed by Suresh
Chandra Jain, Hindu Undivided Family
seeking a writ, order or direction in the
nature of certiorari quashing separate
notice dated 31st March, 1995 issued
under Section 148 of the Income Tax Act,
1961 (hereinafter referred to as the Act)
by the Income Tax Officer, Ward 3(4),
Kanpur-
respondent
no.1
for
the
Assessment Year 1986-87 and other
consequential reliefs.

2. Briefly stated the facts giving rise
to the present petition are as follows:

3. According to the petitioner in
Civil Misc. Writ Petition No. 851 of 1995
he is carrying on business of Electronic
goods on small scale basis under the name
and style of Anu Electronics and is being
assessed to tax by the Income tax Officer
ward 3(4), Kanpur-respondent no.1 since
the Assessment Year 1981-82. The grand
father of the petitioner late Darbari Lal
was the Karta of the Hindu Undivided
Family which owned certained moveable
and immoveable properties in Jasrana
town, district Mainpuri (now in the
district of Firozabad). After the death of
Sri Darbari Lal, Suresh Chandra Jain, the
father of the present petitioner, became
the Karta of the Hindu Undivided Family.
Suresh Chandra Jain, the Karta, has filed
Writ Petition No. 852 of 1985. It is
alleged by the petitioners that on 6th June,
1995
the
Income
Tax
Department
conducted a search at the residential and
business premises of one Sri Prem
Chandra Jain, Mohalla Baniyat, Jasrana,
district
Mainpuri
(now
district
Ferozabad). During the course of search
the
Officers
of
the
Income
Tax
Department
forcibly
entered
the
residential premises of Suresh Chandra
Jain without there being any warrant
under Section 132 (1) of the Act. It may
be mentioned here that the house of
Suresh Chandra Jain is adjacent to the
house of Prem Chandra Jain. The search
party broke open the locks and entered the
premises. Smt. Shyama Devi, the mother
of Suresh Chandra Jain had gone to
Kanpur
for
treatment
since
Suresh
Chandra Jain was residing at Kanpur as
he was in service there. In the house there
was a steel safe belonging to Smt.
Shyama Devi which was locked. The
officers of the search party with the help
of gas cutter cut open the safe and took
away the sum of Rs. 2,19,000/- and
pawned articles valued at Rs. 10,506/-
kept therein on the ground that it
belonged to Prem Kumar Jain. In the
course of search Prem Chandra Jain gave
his statement stating therein that the cash
and pawned articles found from the safe
of Smt. Shyama Devi did not belong to
him, it either belong to Smt. Shyama Devi
or to her son and he had nothing to do
with
the
same.
According
to
the
petitioners there have been a family
partition in the year 1937 between their
forefathers and of Prem Chandra Jain and
thereafter they are residing separately.
Vide letter dated 12th August, 1985, the
petitioners prayed for return of the
pawned articles. It may be mentioned here
that the petitioners claim that Smt.
Shyama Devi had executed a will and this
fact had been corroborated by the writer
and the witness. However, the Income
Tax Officer while passing the order under
Section 132(5) of the Act on 1st October,
1985 had held that the cash and pawned
articles belonged to Prem Chandra Jain
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1All] Sunil Kumar Jain V. The Income Tax Officer, Kanpur and others
45
and was his undisclosed income. An
objection against the said order had been
filed under Section 132(5) of the Act by
the petitioners.

4. The proceedings under Section
148 has been initiated against Prem
Chandra Jain under Section 147 of the
Act for the Assessment Year 1986-87 and
the cash amount of Rs. 2,19,000/- and the
pawned articles valued at Rs. 10,506/- has
been assessed as belonging to Prem
Chandra Jain. However, in the appeal
preferred by Prem Chandra Jain, the
Commissioner of Income Tax (Appeals)
vide order dated 5th December, 1994 had
set aside the assessment on the ground
that it was barred by limitation against
which the Department preferred an appeal
before the Tribunal. The Tribunal vide
order dated 27th February, 2004 had
allowed
the
appeal
filed
by
the
Department and remanded the matter to
the
Commissioner
of
Income
Tax
(Appeals) for deciding the appeal afresh
in accordance with law. Thereafter the
Income Tax Officer Ward 3 (4), Kanpur,
respondent no.1 had issued notice under
Section 148 of the Act for the Assessment
Year 1986-87 to both the petitioners. In
compliance to the notice the petitioners
filed their return under protest and had
requested that the reason for issuing
notice under Section 148 of the Act be
communicated to them in writing. The
Income Tax Officer Ward 3(4), Kanpur,
respondent no.1 had communicated the
common reasons which are as follows:

"However, keeping in view the
contents made in the alleged 'Will' dated
2.6.85, wherein Smt. Shyama Devi had
bequethed the above assets to his grand
son Sri Sunil Kumar Jain, has not been
considered as genuine in the assessment
order in the case of Sri Prem Chand Jain,
HUF. In the interest of revenue the
explained
cash
and
jewellery,
as
mentioned above are to be assessed in the
hands of Sri Sunil Kumar Jain in his
individual capacity on pretective basis as
precautionary measure in the Assessment
Year 1986-87.
In view of the above facts it is found that
the source of acquiaition of cash and
jewellery amounting to Rs. 2,19,000/- and
Rs. 10,506/- respectively have not been
satisfactorily explained either by Sri
Suresh Chand Jain HUF or Sri Sunil
Kumar Jain, therefore, I have reasons to
believe that income chargeable to tax
amounting to Rs. 2,19,000/- and Rs.
10,506/- has escaped assessment in the
hands of Sri Suresh Chand Jain (HUF)
and Sri Sunil Kumar Jain for the
Assessment Year 1986-87. Therefore, it is
a fit case for taking action u/s 147."

The notices dated 31st March, 1995
are under challenge in both the writ
petitions.

5. We have heard Sri Shalabh Singh,
learned counsel assisted by Sri R.S.
Agrawal,
learned
counsel
for
the
petitioners and Sri A.N.Mahajan, learned
standing counsel for the respondent.

6. The learned counsel for the
petitioner submitted that the notices under
Section 148 of the Act are wholly illegal
and without jurisdiction as they have been
issued on a change of opinion and there
was no basis or justification nor any
material before the respondent no.1 to
form a belief that the income had escaped
assessment to tax. He further submitted
that from the reasons recorded by the
respondent no.1 it is absolutely clear that
he had not come to a definite conclusion
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46
that the income of the petitioner had
escaped assessment to tax and in whose
hands it has to be assessed and that too on
the protective basis and, therefore, the
entire proceedings are liable to be
quashed. In support of the aforesaid pleas
he
had relied
upon
the
following
decisions:
1. Lalji Haridas vs. Income Tax
Officer and another [(1961) 43 ITR
287 (SC)]
2. Jagmohan Mahajan and another
vs. Commissioner of Income Tax,
Punjab, and others [(1976) 103 ITR
579 (Punjab & Haryana)]
3. Smt. Sita Devi vs. Commissioner of
Income Tax, Patiala, and others
[(1980) 122 ITR 105(Punjab &
Haryana)]
4. Nenmal Shankarlal Parmer vs.
Assistant Commissioner of Income
Tax, (Investigation) [(1992) 195 ITR
582 (Karnataka)
5. Commissioner
of
Income
Tax,
Haryana, Himachal Pradesh and
Delhi and others vs. Tarsem Kumar
and another [(1986) 161 ITR 505
(SC)]
6. Southern Herbals Ltd. vs. Director
of Income Tax (Investigation) and
others
[(1994)
207
ITR
55
(Karnataka)]
7. Commissioner of Income Tax, vs.
Smt. Durgawati Singh [(1998) 234
ITR 249 (Alld.)]
8. Comunidado
of
Chicalim
vs.
Income Tax Officer and others
[(2001) 247 ITR 271 (SC)]
9. Foramer
vs.
Commissioner
of
Income Tax, and others [(2001) 247
ITR 436 (Alld.)]
10. GKN Driveshafts (India) Ltd. vs.
Income Tax Officer and others
[(2003) 259 ITR 19 (SC)]
11. Smt. Kavita Agarwal and another
vs.
Director
of
Income
Tax
(Investigation) and others [(2003)
264 ITR 472 (Alld.)]
12. Commissioner of Income Tax, and
others vs. Foramer France [(2003)
264 ITR 566 (SC)]
13. V.K. Packaging Industries vs. Tax
Recovery Officer and others [(2004)
266 ITR 283 (Alld.)]
14. Naresh
Kumar
Kohli
vs.
Commissioner of Income Tax, and
others [(2004) 266 ITR 553 (P&H)]
15. Ajanta Pharma Ltd. vs. Assistant
Commissioner of Income Tax and
others [(2004) 267 ITR 200(Bom.)]
16. Banyan
and
Berry
vs.
Commissioner
of
Income
Tax,
[(1996) 222 ITR 831 (Guj)]
17. Oil and Natural Gas Corporation
Ltd. vs. Deputy Commissioner of
Income Tax and others [187 CTR
462 (Uttaranchal)]
18. AMS Jewellers vs. Commissioner of
Income Tax, and another [187 CRT
557 (Delhi)]
19. Dr. Anita Sahai vs. Director of
Income Tax (Investigation) (2004)
266 ITR 597 (Alld.)

7. The learned standing counsel,
however, submitted that even though the
Department has taken a stand that the
amount of Rs.2,19,000/- and the pawned
articles worth Rs.10,506/- belongs to
Prem Chandra Jain but as the petitioners
have claimed that the said amount belongs
to them, the respondent no.1 was well
within his jurisdiction to form a belief that
the income has escaped assessment and
initiated proceedings under Section 147 of
the Act as it is always open to the Income
Tax Officer to assess the income in the
right hands notwithstanding the fact that
the same amount has been assessed in the
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1All] Sunil Kumar Jain V. The Income Tax Officer, Kanpur and others
47
hands of another person. He further
submitted that the petitioners have already
filed objection in response to the notice
under section 148 of the Act and had also
been supplied reason for reopening the
assessment and, therefore, they should
contest the matter before the authorities
and the writ petition is not maintainable.
In support of his aforesaid pleas he has
relied upon the following decisions:
1.
Lalji Haridas vs. Income Tax
Officer and another [(1961) 43 ITR 287
(SC)]
2.
S. Gyani Ram and Co. vs. Income
Tax
Officer,
A.Ward,
Firozabad
[(1963) 47 ITR 472 (Alld.)]
3.
Sidh Gopal Gajanand and others
vs. Income Tax Officer, Central Circle
(III), Kanpur and others [(1969) 73 ITR
226 (Alld.)]
4.
R. Dalmia vs. Union of India and
others [(1972) 84 ITR 616 (Delhi)
5.
Sohan Singh vs. Commissioner of
Income Tax, Delhi [(1986) 158 ITR 174
(Delhi)]
6.
GKN Driveshafts (India) Ltd. vs.
Income Tax Officer and others [(2003)
259 ITR 19 (SC)]

8. Having heard the learned counsel
for the parties, we find that in the present
case the notice under Section 148 of the
Act and the reasons which have been
recorded for initiating proceedings for
reassessment has been challenged on the
ground that from the material on record
the Income Tax Officer could not have
formed any belief that any part of the
income has escaped assessment to tax
which is the prerequisite condition for
assuming the jurisdiction of the Assessing
Authority to initiate proceedings under
section 147/148 of the Act.

9. Under Section 147 of the Act the
proceedings for the assessment can be
initiated only if the Assessing officer has
reason to believe that any income
chargeable to tax has escaped assessment
for any assessment year. The question
whether
the
Assessing
Officer
had
reasons to believe is not a question of
limitation only but is a question of
jurisdiction, a vital thing, which can
always be investigated by the Court in an
application under Article 226 of the
Constitution as held in Daulatram
Rawatmal v. ITO (1960) 38 ITR 301
(Cal); Jamna Lal Kabra v. ITO, (1968)
69 ITR 461(All); Calcutta Discount
Co.Ltd. v. ITO, (1961) 41 ITR 191 (SC);
C.M. Rajgharia v. ITO, (1975) 98 ITR
486,
(Pat).
and
Madhya
Pradesh
Industries Ltd. v. Income Tax Officer,
(1965) 57 ITR 637 (SC).

10. The words "has reason to
believe" are stronger than the words "is
satisfied". The belief entertained by the
Assessing Officer must not be arbitrary or
irrational. It must be reasonable or, in
other words, it must be based on reasons
which are relevant and material as held by
the Apex Court in Ganga Saran & Sons
P. Ltd. v. ITO, (1981) 130 ITR 1 (SC).

11. The expression "reason to
believe" in Section 147 does not mean
purely subjective satisfaction on the part
of the Assessing Officer. The belief must
be held in good faith; it cannot be merely
a pretence. It is open to the Court to
examine whether the reasons for the belief
have a rational connection or a relevant
bearing to the formation of the belief and
are not extraneous or irrelevant to the
purpose of the section. To this limited
extent, the action of the Assessing Officer
in starting proceedings under Section 147
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 INDIAN LAW REPORTS ALLAHABAD SERIES [2005
48
is open to challenge in a Court of law as
held
in
S.
Narayanappa
v.
Commissioner of Income Tax, (1967) 63
ITR
219(SC);
Kantamani
Venkata
Narayana & Sons v. Addl. ITO, (1967)
63 ITR 638 (SC); Madhya Pradesh
Industries Ltd. v. ITO, (1970) 77 ITR
268 (SC); Sowdagar Ahmed Khan v.
ITO, (1968) 70 ITR 79 (SC), ITO v.
Lakhmani Mewal Das, (1976) 103 ITR
437 (SC); ITO v. Nawab Mir Barkat Ali
Khan Bahadur, (1974) 97 ITR 239(SC);
CST v. Bhagwan Industries (P) Ltd.,
(1973) 31 STC 293(SC) and State of
Punjab v. Balbir Singh, (1994) 3 SCC
2999.

12. The formation of the required
opinion and belief by the Assessing
Officer is a condition precedent. Without
such
formation,
he
will
not
have
jurisdiction to initiate proceedings under
Section 147. The fulfillment of this
condition is not a mere formality but it is
mandatory. The failure to fulfil that
condition
would
vitiate
the
entire
proceedings as held by the Apex Court in
the case of Johrilal v. CIT, (1973) 88
ITR 439 (SC) and Sheo Nath Singh v.
AAC, (1971) 82 ITR 147 (SC). The
reasons for the formation of the belief
must have rational connection with or
relevant bearing on the formation of
belief. Rational connection postulates
that there must be a direct nexus or live
link between the material coming to the
notice of the Assessing Officer and the
formation of his belief that there has been
escapement of income of the assessee
from assessment in the particular year. It
is not any and every material, howsoever
vague and indefinite or distant, remote
and farfetched, which would warrant the
formation of the belief relating to
escapement of income of the assessee
from assessment as held by the Hon'ble
Supreme Court in the Case of I.TO v.
Lakhmani Mewal Das (1976) 103 ITR
437. If there is no rational and intelligible
nexus between the reasons and the belief,
so that, on such reasons, no one properly
instructed on facts and law could
reasonably
entertain
the
belief,
the
conclusion would be inescapable that the
Assessing officer could not have reason to
belief. In such a case, the notice issued
by him would be liable to be struck down
as invalid as held in the case of Ganga
Saran & Sons P. Ltd v. ITO, (1981) 130
ITR 1(SC).

13. In the case of GKN Driveshafts
(India) Ltd. (supra) the Apex Court has
held as follows:
"When a notice under section 148 of
the Income-tax Act, 1961, is issued, the
proper course of action for the notice is to
file the return and, if he so desires, to seek
reasons for issuing the notices. The
Assessing Officer is bound to furnish
reasons within a reasonable time. On
receipt of reasons, the noticee is entitled
to file objections to issuance of notice and
the Assessing Officer is bound to dispose
of the same by passing a speaking order.
On receiving notices under section 148
the appellant filed the returns. The
appellant also received notices under
section
143(2)
calling
for
further
information
on
certain
points
in
connection with the returns. Thereupon
the
appellant
filed
writ
petitions
challenging the notices. The High Court
dismissed the writ petitions holding that
the petitions were premature and the
appellant could raise its objections to the
notices by filing reply to the notices
before the Assessing Officer (see e.g.
[2002] 257 ITR 702). The appellant
preferred appeals and the Supreme Court
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49
dismissed the appeals, observing that
since the reasons for reopening of
assessments under section 148 had been
disclosed in respect of five assessment
years, the Assessing Officer had to
dispose of the objections, if filed, by
passing
a
speaking
order
before
proceeding with the assessments for those
years"

14. The Constitution Benches of the
Hon'ble Supreme Court, in K.S. Rashid
and Sons v. Income tax Investigation
Commission and others, A.I.R. 1954 SC
207;
Sangram
Singh
v.
Election
Tribunal, Kotah and others, A.I.R. 1955
SC 425; Union of India v. T.R. Varma,
A.I.R. 1957 SC 882; State of U.P. and
others v. Mohammad Nooh, A.I.R. 1958
SC 86 and M/s K.S. Venkataraman and
Co. (P) Ltd. v. State of Madras, A.I.R.
1966 SC 1089 has held that Article 226 of
the Constitution confers on all the High
Courts a very wide power in the matter of
issuing writs. However, the remedy of
writ is an absolutely discretionary remedy
and the High Court has always the
discretion to refuse to grant any writ if it
is satisfied that the aggrieved party can
have an adequate or suitable relief
elsewhere. The Court, in extraordinary
circumstances, may exercise the power if
it comes to the conclusion that there has
been a breach of principles of natural
justice or procedure required for decision
could not be adopted.

15. In Harbans Lal Sahnia v.
Indian Oil Corporation Ltd., (2003) 2
S.C.C. 107, the Hon'ble Supreme Court
has held that the rule of exclusion of writ
jurisdiction by availability of alternative
remedy is a rule of discretion and not one
of compulsion and the Court must
consider the pros and cons of the case and
then may interfere if it comes to the
conclusion that the petitioner seeks
enforcement of any of the fundamental
rights; where there is failure of principle
of natural justice or where the orders of
proceedings
are
wholly
without
jurisdiction or the vires of an Act is
challenged.

16. As held by the Apex Court in the
case of Calcutta Discount Co. and
Madhya
Pradesh
Industries
Ltd.
(supra), this Court under Article 226 is
entitled to go into the relevancy of the
reasons as also to scrutinize as to whether
there was reasonable belief or not.

17. In the case of Comunidado of
Chicalim (supra) the Apex Court had
held that when an assessee challenges a
notice to reopen an assessment under
Section 147 of the Act on the ground that
no reasons under Section 148 had been
recorded or disclosed, the Court must call
for and examine the reason, and, in fact,
ordinarily, the reasons are set out by the
respondents to the writ petitioner in their
counter.

18. In the case of Foramer (supra)
this Court has held that notice under
Section 147 should not be given on mere
change of opinion and if notice under
Section 148 was without jurisdiction the
petitioner should not be relegated to the
alternative remedy and the writ petition
was maintainable, which has been upheld
by the Apex Court in the civil appeal filed
by the Department reported in (2003) 264
ITR 566 (SC).

19. In the case of Ajanta Pharma
Ltd. (Supra) the Bombay High Court has
held that GKN Driveshafts (India) Ltd.
(supra) nowhere lays down that the party
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50
is totally debarred from approaching the
High Court under Article 226 of the
Constitution of India when the exercise of
power by the authority under Section 148
of the Act, ex facie appears to be without
jurisdiction. Undoubtedly, whether such
an exercise is with or without jurisdiction
will have to be revealed from the notice
and reasons on the face thereof. At the
same time, it is also well settled, and
Calcutta Discourt Co. Ltd. (supra) is
very clear on the point, that mere
availability of alternative relief can be no
bar for exercise of writ jurisdiction when
the authorities seek to assume jurisdiction
which they do not possess or act in totally
arbitrary manner. The decision in GKN
Driveshafts (India) Ltd. (supra) reminds
the assessee that when a notice under
Section 148 of the Act is issued the proper
course of action is to file a reply with his
objections including those in relation to
the obsence of jurisdiction. However, it
does not lay down that when such an
objection is in relation to the absence of
jurisdiction and the same is revealed ex
facie or apparent on the fact of a notice or
reasons in support thereof, the assessee
has compulsorily to invite an order from
the Assessing Officer in relation to the
absence of jurisdiction.

20. This Court in Civil Misc. Writ
Petition No. 257 of 2004 (Indra Prastha
Chemicals Pvt. Ltd. and others vs.
Commissioner of Income Tax and
others) decided on 16.8.2004 has repelled
the similar arguments raised by the
department.

21. Thus, it is well settled that the
'reason to believe' under Section 147
must be held in good faith and should
have a rational connection and relevant
bearing on the formation of the belief and
should not be extraneous or irrelevant.
Further this Court in proceedings under
Article 226 of the Constitution of India
can scrutinize the reasons recorded by the
Assessing Officer for initiating the
proceedings under Section 147/148 of the
Act. The sufficiency of the material
cannot be gone into but relevancy
certainly be gone into.
Thus, the writ petition under Article
226 is maintainable.

22. Going to the merits of the case,
we find that it is not in dispute that the
cash amount of Rs. 2,19,000/- and the
pawned articles valued at Rs. 10,506/- has
been claimed by the petitioners as
belonging to them. Merely because it has
been taxed at the hands of Sri Prem
Chandra Jain will not preclude the Income
Tax Officer from assessing the same at
the hands of the right person. From the
reason recorded for reopening of the
assessment which has been reproduced
above it will be seen that the basis for
initiating proceedings is the claim made
by the petitioners on the basis of the
alleged will executed by Smt. Shyama
Devi, thus it cannot be said that there was
no
relevant
material
for
taking
proceedings under Section 147 of the Act.

23. In the case of Jagmohan
Mahajan (supra) the Punjab and Haryana
High Court has held that search and
seizure cannot be conducted on the basis
of the blank search warrant sent and
issued by the Commissioner.

24. In the case of Smt. Sita Devi
(supra) the Punjab and Haryana High
Court has held that provisions of Section
131 (1)(b)(iii) of the Act envisages that
the search of the premises had to be a
valid and authorised search in that there
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51
must be a legal and valid search warrant
for searching the premises of the persons
who, on information, are believed to
reside therein or occupy the same and it is
not necessary that the person against
whom the warrant is issued should be in
exclusive possession of specified portions
and proceeding was, therefore, valid.

25. In the case of Tarsem Kumar
(supra) the Apex Court has held that on a
construction of Section 132 of the Act and
the context in which the words "search",
"possession", and "seizure" had been used
in the section and the rules, there could
not be any order in respect of goods or
money or papers which were in the
custody
of
another
Government
Department under legal authority.

26. In the case of Nenmal
Shankarlal
Parmer
(supra)
the
Karnataka High Court has held that where
there was no reference at all in the
warrant of authorisation that any valuable
article or thing was in the possession of
the petitioner in his individual capacity as
a necessary consequence, the mere
mention of residential premises did not
enable the Department to effect seizure
either of gold, jewellery or other articles
or documents belonging to the partner
from such premises and, therefore, the
order of assessment passed under Section
132(5) of the Act was not valid and liable
to be quashed.

27. In the case of Southern Herbals
Ltd. (supra) the Karnataka High Court
has held that it is not for the Court to
examine the sufficiency of the material
leading to the belief of the authority that
search shall have to be conducted: the
Court has to see that the belief was
reasonable, in the sense, it was formed on
the
basis
of
relevant
material
(information): the Court cannot substitute
its own opinion as to the reasonableness
of the belief. The Court has to examine to
see whether the belief is an irrational or
blind belief, formed out of prejudice or
the result of relying on wild gossip or
baseless rumours, etc.

28. In the case of Naresh Kumar
Kohli (supra) the Punjab and Haryana
High Court has held that sub-section (3)
of Section 132B of the Act clearly
indicates that the seized assets or proceeds
thereof which remain after the liabilities
referred to in Clause (i) of Sub-section (1)
have been discharged, have to be
forthwith made over or paid to the
persons from whose custody the assets
were seized.

29. In the case of A.M.S.Jewellers
(supra) the Delhi High Court had only
directed the settlement commission to
decide the application for return of
jewellery which is not the case here.

30. In the case of Dr. Mrs. Anita
Sahai (supra) this Court has held that
before taking any action under Section
132 of the Act the condition precedent is
information in the possession of the
Director of Income Tax which gives him
reason to believe that a person is in
possession of some article, jewellery,
bullion or money which represents wholly
or partly his income which was not
disclosed or would not be disclosed. If the
aforesaid
condition
is
missing
the
Commissioner
or
Director
of
Investigation will have no jurisdiction to
issue the warrant of authorisation under
Section 132(1) of the Act. Search and
seizure cannot be a fishing expedition.
Before search is authorised the Director
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 INDIAN LAW REPORTS ALLAHABAD SERIES [2005
52
must on the relevant material have reason
to believe that the assessee has not or
would not disclose his income. The
reason to believe must exist and must be
taken into consideration bys the Director/
Commissioner at the time of issuing the
warrant of authorisation. If the reason to
believe comes into existence later, i.e.,
after
issuance
of
the
warrant
of
authorisation,
then
the
warrant
of
authorisation and entire search and
seizure will be illegal even if the material
on the basis of which the Director formed
his opinion that there was reason to
believe existed prior to the issuance of
warrant of authorisation. In the case of
Smt. Kavita Agarwal (supra) this Court
has taken the similar view.

31. Even though in the writ petition
a prayer for releasing the seized articles
has been made, it may be mentioned that
the seizure was effected on 6th June, 1985
and as the matter stands today it has been
held to be the belonging of Prem Chandra
Jain so long as it is not held that the
seized articles belonged to the petitioners,
it cannot be returned to them. It is another
thing that after assessment of individual
case of Prem Chandra Jain is taken as
satisfied, seized money and pawned
articles, after its return to Prem Chandra
Jain, can be claimed by the petitioners
from the said Prem Chandra Jain. All the
aforesaid decisions cited by the learned
counsel for the petitioner relate to search,
validity of search and seizure, which is
not in issue in the present writ petitions.

32. In the case of Lalji Haridas
(supra) the Apex Court has held that in
cases where it appears to the Income Tax
authorities that certain income has been
received during the relevant year but it is
not clear who has received that income;
and, prima facie, it appears that the
income may have been received by A or
by B or by both together, it would be open
to the Income Tax Authorities to
determine the question who is responsible
to
pay
tax
by
taking
assessment
proceedings both against A and B.

33. In the case of S. Gyani Ram
and Co. (supra) this Court has held that
mere fact that a particular income has
been assessed in the hands of a particular
person as his income will not prevent the
Income Tax Officer from coming to the
conclusion on fresh materials that that
income is the income of another person
and taking proceedings under Section 34
of the Act for reassessment against the
latter on the ground that this income had
escaped assessment in his assessment.

34. In the case of Sidh Gopal
Gajanand (supra) this Court has held that
the validity of notice under section 34 of
the Indian Income Tax Act, 1922 cannot
be impugned on the ground that the
assessment
proceeding
was
already
pending in respect of the same income
against another entity and where it
appears that the income may have been
received either by A or by B or by both
together, it would be open to the Income
Tax authorities to determine the said
question
by
taking
appropriate
proceedings against both A and B.

35. In the case of R. Dalmia (supra)
the Delhi High Court has held that where
the items of escaped income in respect of
which the assessment is proposed is
specific but the question as to whether the
income, if earned, was earned by one
person singly or by him along with others
is a matter of inquiry, if the Income Tax
Officer has reason to believe that it could
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53
have been earned either by one person
singly or by him along with others there is
nothing to prevent him from initiating
proceedings
against
the
concerned
assessees in both capacities. In such a
case where it appears to the Income Tax
Officer, that certain income had been
received during a particular year but it is
not clear who has received that income it
is open to the Income Tax Officer to start
proceedings
against
al
the
persons
individually or collectively to ascertain
the correct position. In the case of Sohan
Singh (supra) the Delhi High Court has
taken the similar view.

36. In the case of Smt. Durgawati
Singh (supra) this Court has held that it is
settled that when there is a doubt as to
which person amongst the two was liable
to be assessed, parallel proceedings may
be taken against both and alternative
assessments may also be framed. It is also
equally true that while a protective
assessment is permissible, it is not open to
the Income Tax Appellate Authorities
constituted under the Act to make a
protective order. The law does not permit
assessment
of
the
same
income
successively in different hands. The tax
can only be levied and collected and
collected in the hands of the person who
has really earned the income and is liable
to pay tax thereon.

37. In the case of Banyan and
Berry (supra) the Apex Court has held
that where there is doubt or ambiguity
about the real entity in whose hands a
particular income is to be assessed, the
assessing authority is entitled to have
recourse
to
making
a
protective
assessment in the case of one and a
regular assessment does not affect the
validity of the other assessment inasmuch
as if ultimately one of the entities is really
found to be liable to assessment, then the
assessment in the hands of the entity
alone remains the effective assessment
and the other becomes infructuous. The
levy is enforceable only under one
assessment and not under both.

38. In the case of Oil and Natural
Gas Corporation Ltd. (Supra) the
Uttaranchal High Court has held that the
assessee having disclosed all facts about
borrowings and investments in public
sector undertakings and the fact that there
was no cautious consideration of the
pointed facts at the time of assessment
could not be a ground for reopening of
assessment by virtue of proviso to Section
147 of the Act.

39. In the case of V.K. Packaging
Industries
(supra)
this
Court
has
observed that before parting with the case
we would like to state that we cannot
appreciate this practice of the Income Tax
Department
of
hurriedly
passing
assessment orders shortly before the
limitation period is about to expire and
justifying this practice by saying that
there was shortage of time and hence it
was impossible to verify the facts
properly, and hence the additions were
being made. It is common knowledge that
when the limitation for making as
assessment is about to expire (usually on
31st March) there is a sudden rush and
scramble to complete the assessments. If
this practice is countenanced the citizens
of the country will be put to great
harassment as exorbitant demands can be
made against them merely by saying that
there was shortage of time and hence
additions were being made for this reason
without verifying the facts correctly. It is
the duty of the Department to make a
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 INDIAN LAW REPORTS ALLAHABAD SERIES [2005
54
correct assessment and not to make an
excessive assessment merely on the
ground of shortage of time. No doubt the
Department has to assess and collect the
correct tax, but for this purpose it should
devise and set up a rational scheme in
accordance with law. It should certainly
not make assessment hurriedly merely by
saying that there is shortage of time (as
often happens), thus putting the citizens to
great harassment.

40.