COMMISSIONER OF INCOME TAX Vs. BALAKRISHNA TEXTILES

JUDGEMENT

(1.) IN these tax case references under S. 256(2) of the IT Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue, the following questions of law have been referred to this Court for its opinion in relation to the asst. yrs. 1962 -63 to 1964 -65:

(2.) SINCE all the assessees in these tax case references belonged to the same group and the assessments and the penalty proceedings in respect of all the assessees in the group were common, we propose to deal with the questions referred to above also by a common order. We may now proceed to set out the facts relevant for a consideration of the questions referred to this Court. The assessees in all these cases, during the relevant assessment years, carried on a business, including export, in art silk fabrics, handloom cloth, handicrafts, etc. In respect of the asst. yrs. 1962 -63 to 1964 -65, the assessees had filed returns disclosing in some cases loss and in some others, a marginal income, based on accounts maintained by them. Some time in January, 1965, there was a raid on the business premises of most of the assessees by the Economic Offences Wing. Thereafter, in May, 1965, the assessees came forward with certain disclosures under S. 68 of the Finance Act, 1965. Later, the assessees purported to file revised returns and in January, 1969, the assessees accepted and agreed to offer large amounts for assessment. Again, the assessees admitted non -disclosure of substantial amounts running into several lakhs and agreed to offer those amounts also to assessment. The ITO who finalised the assessments of the several assessees found that there had been a very large scale suppression of income by the assessees in respect of the assessment years and, on the basis of the particulars furnished by the assessees and the large amounts offered by the assessees themselves for assessment, determined the income of the assessees, as agreed to by the assessees themselves, and assessed the same in the hands of the different assessees for the respective assessment years. In view of the finalisation of the assessments in the manner aforesaid, proceedings under S. 271(1)(c) of the Act were also initiated and the cases for levy of penalty were referred to the IAC, Madras, under S. 274(2) of the Act. After the issue of a show -cause notice and considering the stand taken by the assessees in response thereto, the IAC found that the assessees had admitted that the books of account maintained by them were manipulated and that they had not utilised the import licences issued to them, but had sold them suppressing the price for which they had been sold and the profits realised thereby, and that the revised returns had also not reflected the correct income of the assessees. It was also further found that the assessees had agreed for large amounts to be assessed as their income by addressing communications to that effect and, in the context of the assessments so made on an agreed basis, the assessees cannot be heard to contend that they had not concealed their income or furnished inaccurate particulars thereof. In the view so taken, the IAC levied penalty of different amounts with reference to each one of the assessees for the assessment years in question, inclusive of the asst. year 1964 -65 in respect of which the Explanation inserted by the Finance Act, 1964, w.e.f. 1st April, 1964, stood attracted. Aggrieved by this, the assessees preferred appeals before the Tribunal contending that penalty ought not to have been levied upon the assessees. In the course of its order, the Tribunal found that the assessees had trafficked in the licences obtained by them without actual utilisation and their case that there was no sale of the licences was unacceptable. However, the Tribunal pointed out that, as the assessees did not claim the utilisation of the licences for purposes of their own production and did not sell the licences, there is no factual inaccuracy or concealment on the part of the assessees. Referring to the sale of the import licences by the assessees, the Tribunal found that the ITO, by several of his communications, had informed the assessees that the estimate of profit made by them from the sale of licences should be much more than what had been disclosed and ultimately had assessed the profits at a higher rate, and, at best, as against the estimate given by the assessees, a higher estimate had been arrived at by the Department and there could, therefore, be no levy of penalty. Yet another aspect emphasized by the Tribunal was that the revised returns had been filed by the assessees before any detection. Finally, the Tribunal opined that it was impossible to state what income was concealed by any particular assessee for any particular assessment year and, therefore, any charge of concealment cannot be specific, but could only be indefinite and penalty cannot be levied on such a basis. On the aforesaid reasonings as well as conclusions, the Tribunal deleted the penalty levied on the assessees for all the three assessment years in question, viz., 1962 -63 to 1964 -65. That is how the two questions earlier set out have been referred to this Court for its opinion.

(3.) WE may now proceed to consider the reasoning of the Tribunal bearing in mind the aforesaid background. It is extremely difficult to understand and appreciate the view of the Tribunal that there had been no concealment on the part of the assessees. The only reason given in support of this is that there was no claim by the assessees at any point of time that they had utilised the licences for the purpose of production in their factory and did not sell the licences. The assessees' claim that the licences had been utilised by them or not, or that they did not sell them, would not, in our view, on the facts herein, have any bearing upon the question of concealment of particulars of income or of furnishing of inaccurate particulars of income, falling under S. 271(1)(c) of the Act. Even according to the Tribunal, that there was no sale of licences by the assessees does not seem to be a fact. If that be so, we fail to see how the claim of the assessees that the licences were utilised and were not sold, would not be furnishing of inaccurate particulars or concealment of particulars of income. We are, therefore, unable, in the undisputed facts and circumstances of this case, to agree with the Tribunal that there was no concealment on the part of the assessees.