COMMISSIONER OF INCOME TAX Vs. INDIA SEA FOODS

JUDGEMENT

(1.) This reference is at the instance of the Revenue. The assessment year concerned is 1967-68. The assessee-respondent filed a return of its income on 10th April, 1968 disclosing an income of Rs. 2,75,000 but stating that its accounts were pending finalisation and that the return was only provisional. It was stated that the return will be amended on the finalisation of the accounts. Thereafter, the managing partner of the assessee, who was also the managing partner of two other sister firms, sought settlement of the matters relating to income-tax by filing a petition before the CIT in which he disclosed the wealth position of the partners and of the firms as on 31st Dec., 1958 and 31st Dec., 1967. Discussions as well as correspondence went on between the parties and on 18th Dec., 1968 the assessee furnished a revised return showing the income of Rs. 3,07,428.04. The processing of the settlement proposal continued and eventually an agreement was entered into on 27th August, 1969 which is extracted in the order of the Tribunal. The settlement related to the tax liabilities of all the three firms and their partners upto the year 1968-69. The assessee agreed that a further sum of Rs. 7,00,000 may be treated as its income not disclosed in the returns for the years upto 1968-69. This was to be apportioned between the years 1964-65 and 1968-69 on the basis of the turnover of the assessee. Under cl. 6 of the agreement the assessee agreed that the Department may levy the minimum penalty prescribed under the Act for the years 1964-65 to 1968-69 relating to the added income of Rs. 7,00,000. Revised assessments were completed for all the years based on this agreement, the addition for the asst. yr. 1967-68 being Rs. 1,64,687. Based on this addition the IAC imposed a penalty of Rs. 1,64,687 under s. 271(1)(c) of the IT Act, 1961.

(2.) Dispute arose between the parties as to what was the rate at which the penalty envisaged by cl. 6 should be levied for the asst. yr. 1967-68. This was because of a change which was effected in s. 271, which came into force on 1st April, 1968. Till then the levy of penalty was related to the amount of tax while it was related to the income escaping assessment after 1st April, 1968. While the Department took the view that since the return in this case had been filed after 1st April, 1968 penalty has to be related to the income concealed, the assessee contended for the position that the penalty has to be geared to the tax payable on the alleged concealed income. The Tribunal held in favour of the assessee by its order dt. 9th April, 1973, a copy of which is Annexure C. This matter was taken up in reference to this Court and dealt with as IT Ref. Nos. 34 and 35 of 1975. But soon after the Tribunal passed its order Annexure C, the assessee filed a miscellaneous petition before the Tribunal stating that their agreement for the levy of minimum penalty will stand only if the penalty was leviable a per the 1st April, 1968 law and that if penalty was leviable as related to the income as under the post 1st April, 1968 dispensation, their contention that there was no concealment of income liable to be visited with penalty has to be considered. The Tribunal passed the order Annexure D accepting the petition and directing that the assessee will be heard at the time of passing order under s. 260(1) on the question whether there was concealment and whether penalty was impossible. This Court answered the reference IT Ref. Nos. 34 and 35 of 1975 against the assessee holding that since the return was filed after 1st April, 1968, the amount of penalty has to be related to the income concealed. In view of this decision, and having regard to the order Annexure D, the Tribunal passed fresh orders under s. 260(1) of the IT Act in which it went into the question whether there was any concealment of income on the part of the assessee and whether any penalty was impossible on it. After a detailed consideration of the facts, a Full Bench of the Tribunal held that there was no concealment of income by the assessee and that no penalty was liable to be imposed on it.

(3.) In the meanwhile penalty had been imposed on the assessee for the year 1968-69. The matter up to this Court under s. 256(2) when this Court declined to direct reference, in the view that the decision of the Tribunal was based on facts and no referable question of law arose therefrom.