The judgment of the court was delivered by
Dr. Satish Chandra,J.-By this writ petition (amended) the assessee has made following prayers.
"(I) issue a writ, order or direction in the nature of certiorari and to quash the order dated 23.3.2000 passed by learned Joint Commissioner of Income Tax, Range-I, Kanpur (Annexure-1 to the writ petition).
Further, to quash the re-assessment proceeding initiated against the petitioner vide notice dated 21.3.1997 for the assessment year 1988-89, (Annexure-2 to the writ petition) "and the approval granted by the Commissioner of Income Tax dated 21.3.1997".
(II) award cost of this petition to the petitioner."
Sri S.D. Singh, learned Senior Counsel assisted by Sri Krishna Dev Vyas, learned counsel for the assessee submits that assessee is engaged in the manufacturing and sale of the yarn. He purchased the raw materials from various sources including the Government undertakings. For the assessment year under consideration, the notices were issued under Section 148, but the same were dropped on 08.01.1997 and 03.03.1997 respectively. However, second notices under Section-148 were issued on 04.03.1997, where various discrepancies in the accounts were mentioned. He submits that earlier and subsequent notices were having the same nature/reason. When the first notices were dropped then there was no occasion to issue fresh notices on IInd time. The notices are ab-nitio null and void and the same will have to be canceled. He admits that the raw materials was purchased from U.P. State Spinning Mill Ltd.; and U.P. State Trading Ltd. through their branches. If there is some discrepancy in the book of accounts then the sellers of the raw materials will have to be held responsible and certainly, not the assessee. No prima-facie material was found for the discrepancy. The creditors are liable and not the debtors. For the purpose he relied the ratio laid down in the following cases:-
1. Satyamangalam Agricultural Producer's Co-operative Marketing Society Ltd. Vs. Income-TAx Officer [2013] 357 ITR 347 (Mad.);
2. Sahara India (Firm) Vs. Commissioner of Income-Tax and another [2008] 300 ITR 403 (SC);
3. Income-Tax Officer, I Ward, Distt. VI, Calcutta, and others Vs. Lakhmani Mewal Das. [1976] 103 ITR 437 (SC);
4. Indra Prastha Chemicals Pvt. Ltd. and others Vs. Commissioner of Income- Tax and another [2004] 271 ITR (All.);
5. M.L. Shukla & Co. Vs. The Sales Tax Officer, Sector 17, Kanpur [1981 U.P.T.C. 396];
6. The General Electric Company of India Ltd., the Mall, Kanpur Vs. The Sales Tax Officer, Sector IV, Kanpur [1973 U.P. T.C. 386]; and
7. Chhugamal Rajpal Vs. S.P. Chaliha [1971]79 ITR 603 (SC).
The learned counsel further submits that there is only right to suspect for which no notice can be issued under Section-148. There is no reason to believe in the instant case. Lastly, he made a request to allow the relief as prayed.
On the other hand Sri Sambhoo Chopra, learned counsel for the department justified the impugned order and submits that the assessee is a firm. For the assessment year under consideration, original assessment orders were passed under Section-143(1) (a) of the Act. However, the department had received the information that assessee has escalated its liability to reduce the tax burden. So, the notices were issued under Section-133(6) of the Act to U.P. State Spinning Mill Ltd.; and U.P. State Trading Ltd. to verify the liability shown by the assessee in its book of accounts. After receiving information, the department found that there were discrepancies in the book of accounts, the same were reflected in the notices dated 04.03.1997. No reply has been received from the assessee, till date.
Regarding the last notice, he submits that the first notice was withdrawn on technical reasons, as reasons to believe were not mentioned. There is no bar for issuing the second notice. So, after completing the formalities and recording the reasons to believe, notices were issued IInd time on 04.03.1997, where the details of the discrepancies were communicated to the petitioner, but no reply is received. To support his arguments, he relied on ratio laid down in the case of GKN Driveshafts (India) Ltd. Vs. I.T.O. [2003] 259 ITR 19 SC'.
Lastly, he justified the impugned notices.
We heard both the parties at length and gone through the materials available on record. From the record, it appears that assessee prima-facie has reduced its tax liability by escalating the debit and other expenses in the book of accounts. For the purpose, the department has verified the information under Section-133(6) of the Act. After receiving the information, the discrepancies were recorded in detail and mentioned in the impugned notice which comes to tune of Rs. 24,65,238/-. The amount of liability does not tally with the accounts of creditors and debtors for the assessments year under consideration, no scrutiny was made ever. The discrepancies will have to be explained by the assessee. Till date, no explanation is being filed. So, we uphold the validity of the notices.
When the discrepancies are there, the same will have to be clarified by the assessee. So the notices were rightly issued under Section 148 of the Act. The assessee has an opportunity to explain the same by filing the reply to the notices or during the proceedings under Section-147 of the Act. Hence, we decline to interfere with the orders passed by the authorities.
In view of above, the petitions filed by the assessee is devoid on merit and same is hereby dismissed. Interim order granted earlier is hereby vacated. The A.O. is directed to complete the proceedings expeditiously as the matter is too old, say within a period of three months from the date of receipt of the certified copy of this order. No cost.