COMMISSIONER OF INCOME-TAX Vs. INDO AFGHAN AGENCIES

JUDGEMENT

(1.) THIS is a petition under Section 256 (2) of the I. T. Act, 1961, at the instance of the Commissioner of Income-tax, Amritsar, seeking mandamus from this court requiring the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, to refer the following questions of law, said to arise in its decision dated November 14, 1975, in Income-tax Appeal No. 431 (Asr) of 1974-75:

(2.) THE assessee is a registered firm comprising of seven partners, three of whom are females each holding one-fourth share in the firm. The remaining four male partners share amongst themselves the remaining one-fourth share. The assessee carried on business in sale of imported wool tops. During the accounting period ending August 31, 1968, which was relevant to the assessment year 1969-70, the assessee received an import licence of the value of Rs. 3,59,123. This was in respect of exports made in earlier years for a higher value. For the said assessment year 1969-70, the assessee disclosed an income of Rs. 1,18,560 on the premium earned for the transfer of rights, in part, in the import licence to the value of Rs. 1,52,000 in favour of Messrs M. J. Spinners, Amritsar. The rate of the premium was as high as 78 per cent. The remaining value of the import licence was retained by the assessee and goods were imported by it. The ITO included the profit of Rs. 1,18,560 as disclosed by the assessee in the assessment for the year 1969-70 on a protective basis, taking the view that the transfer of the licence of the value of Rs. 1,52,000 was a measure calculated to stagger the profits over two to three years and hence came to the conclusion that the profit of Rs. 1,18,560 was in fact assessable in the assessment for the year 1970-71.

(3.) IT appears that Messrs M. J. Spinners too was a partnership concern, rather a sister concern of the assessee, in a sense. The partners in that firm were the respective husbands of the three female partners in the assessee-firm. Already suspicious on account of such relationship, the ITO during the course of assessment proceedings for the assessment year 1970-71 required the assessee to explain as to why the said profit of Rs. 1,18,560 be not added in the total income for the assessment year 1970-71. The basis for asking such an explanation from the assessee apparently was that the transferee-firm had in the assessment year 1970-71 effected imports on the basis of the transferred import licence. And since in his view the said licence had been acted upon in that assessment year, it could be taken to have been transferred in that year, especially when transfer of the import licence as such was not permissible under the Import Trade Policy, unless permission for the purpose had been sought from the concerned authorities. The assessee explained that it had utilised the import entitlement as permissible under the law. The ITO did not, however, accept the assessee's explanation and came to the conclusion that the assessee actually did not transfer the import replenishment licence to the transferee during the accounting period relevant to the assessment year 1969-70 but during the assessment year 1970-71. He, therefore, included the profit of Rs. 1,18,560 during the assessment year 1970-71. The assessee unsuccessfully appealed before the AAC. The Income-tax Tribunal, however, allowed the assessee's appeal on a factor which we notice in the very words of the Tribunal :