COMMISSIONER OF INCOME TAX Vs. KOTRIKA RAMASWAMY CHETTY

JUDGEMENT

(1.) THE respondent, who will hereinafter be mentioned as the assessee, is a registered firm at Vijayawada consisting of five partners. The assessment year is 1945 46 for which the accounting year is the Deepavali year ending on October 16, 1944. The assessee worked a groundnut oil mill on lease and carried on the business of manufacture and sale of groundnut oil and forward transactions in groundnuts and groundnut oil. It claimed to have paid losses amounting to Rs. 65,805 in forward transactions and returned an income of Rs. 39,764, after deducting the net loss. The ITO found that the alleged payment of losses to the extent of Rs. 57,739 was not proved and that the losses were fictitious. He gave effect to this finding in his assessment orders dated 31st Jan., 1948, and also initated proceedings to levy penalty under S. 28(1)(c) of the IT Act (XI of 1922) and S. 16 of the EPT Act (XII of 1940). On the appeals preferred by the assessee against the assessment orders, the AAC held in his order dt. 11th May, 1951, that "the disallowance of the losses amounting to Rs. 57,739 was proper and justified." On the assessee's further appeals, the Appellate Tribunal also held in its order dt. 22nd Sept., 1952, "we are not satisfied that the losses were paid as claimed by the assessee. Their disallowance by the Department is correct". It appears from the Tribunal's order that the learned counsel for the assessee did not go into the individual cases of payments made of the losses but argued the case as a whole. The Tribunal, however, went into the evidence relating to various payments and reached the conclusion that the view taken by the Department was right. The result of the Tribunal's conclusion was that the impugned losses could not be taken into account for determining the profits and gains of the business under s. 10(1) of the IT Act.

(2.) IN the proceedings taken for the levy of penalty, the assessee maintained that neither the losses nor the payments thereof were fictitious. But it did not adduce any further evidence. By his orders dt. 16th Jan., 1959, the ITO held that the assessee had "deliberately concealed the particulars of his income by claiming fictitious payments of speculation losses". He imposed penalties of Rs. 10,000 under S. 28(1)(c) of the IT Act, and of Rs. 20,000 under S. 16 of the EPT Act. The appeals preferred by the assessee were dismissed by the AAC. On the assessee's further appeals to the Tribunal under S. 33 of the IT Act and S. 19(2) of the EPT Act, a preliminary objection was taken by the Department that as the findings in the assessment proceedings had become final, they were not open for reconsideration in the penalty proceedings. The Tribunal overruled this preliminary objection on the ground that the relevant considerations were different in penalty proceedings and that in view of the materials on record, the findings in the assessment proceedings were not binding on it. It considered the evidence afresh, came to the conclusion that the evidence was not sufficient to prove that the assessee was guilty of deliberate concealment of income and allowed both the appeals. The CIT applied under S. 66(1) for a reference. The Tribunal held that the questions of concealment of income or of deliberately furnishing inaccurate particulars of income were questions of fact on which its findings based on appreciation of the evidence were final and that the only question of law which arose was :

(3.) THE learned Judges referred to Viscount Haldane's observations in Local Government Board vs. Arlidge (1915) AC 120, that administrative Tribunals must act judicially and must come to a decision in the spirit and with the sense of responsibility of a Tribunal whose duty it is to mete out justice. In Trustees, Nagore Durgah vs. CIT (1954) 26 ITR 805, Satyanarayana Rao and Rajagopalan JJ. said :