TaxTMI 
TaxTMI 
1996 (12) TMI 3
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....ent years, the assessee received substantial quantities of stainless steel sheets from the M. M. T. C. claiming to be a manufacturer of sterilizers. It filed returns for the said three assessment years disclosing losses in sums of Rs. 1,31,143 (for the assessment year 1977-78), Rs. 39,939 (for the assessment year 1978-79) and a profit of Rs. 7,340 (for the assessment year 1979-80). Certain inquiries were made by the Income-tax Officer in the month of December, 1979. She also impounded the account books of the assessee. On February 13, 1980, the Income-tax Officer visited the premises of the appellant where the assessee was said to be carrying on the manufacturing activity. She found no such activity being carried on there. On February 14, 1980, the Income-tax Officer issued a notice proposing addition of three items of income. At this stage, i.e., on February 29, 1980, the assessee filed an application before the Settlement Commission seeking settlement of its case relating to all the said three assessment years. By its letter dated March 1, 1980, the assessee informed the Income-tax Officer that it has filed an application before the Settlement Commission in respect of the said th....
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....nt while one member dissented. The dissenting member was of the opinion that the application for settlement should be rejected for the other two assessment years also. In its application under section 245C, the assessee stated the following facts : the assessee, a partnership firm, is engaged in manufacture and sale of stainless steel utensils, sterilizers and other items in its factory located at Chandigarh. For the two assessment years 1977-78 and 1978-79, it had filed returns disclosing loss in a sum of Rs. 1,31,113.06 and Rs. 39,939, respectively. For the assessment year 1979-80, it returned a profit of Rs. 7,340. It is holding a quota for the purchase of stainless steel sheets from the M. M. T. C. During the accounting years relevant to the said three assessment years, the assessee could not carry on the manufacturing activity on account of acute shortage of funds. With a view to ensure that its quota does not lapse, it obtained the quota and sold it to various brokers in Bombay, Delhi and Madras. The assessee set out the arrangement with those brokers. From these sales, the assessee said it derived a profit of Rs. 1,28,691 in all the three assessment years put together. It....
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....ry strong case to raise objection on the ground that concealment of particulars of income or perpetration of fraud by the applicant has been or is likely to be established -- particularly so in regard to the perpetration of fraud. In so far as this year is concerned, there is clear fabrication of accounts, the balances in the accounts have been fudged ; the sale vouchers and goods receipts have been cooked up, an a false facade is created to mislead the Department and cover up the real state of the assessee's business transactions. It strains our sense of credulity too far to accept the applicant's claim that all this was being done only to save its skin from some other departments and its intentions vis-a-vis the Revenue were nothing but honourable. If that be so, how does the assessee in any case explain the inflation by Rs. 10 lakhs of the carried forward balance in 'Kuldip Parkash Imprest Account'. To our minds, the Department has also succeeded in substance in rebutting the assessee's claim of so-called inaccuracies in the Commissioner's report. We do not find any distortion or misconception of facts in the Commissioner's report, nor can we subscrib....
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....t never transported the same to Chandigarh. It is also admitted that the books of account, showing the sale of manufactured goods to various parties are admittedly untrue. The assessee itself has made no distinction as between these three assessment years. Its case is common to all the three assessment years. No distinction is, therefore, permissible as between these three assessment years. The facts and record clearly prove that the assessee refused to produce its account books for the two subsequent assessment years in spite of notices and summons ; they were produced later and were found to be fabricated. The inspection by the Income-tax Officer on February 8, 1980, disclosed no manufacturing activity at the alleged factory premises except some small scale electrop-lating work being done there. The dissenting member further observed : "I do not see any reason why the admission made on behalf of the applicant that there was no manufacturing activity carried on and that the losses claimed as per return are not genuine can be or should be ignored. These admissions have been made in the papers filed along with the application and also in the course of the hearing before us ... I als....
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.... facts stated by the assessee in its application cannot be made the basis for rejecting it. Mr. J. Ramamurthy, learned counsel for the Revenue, on the other hand, assailed the order of the majority in so far as they admitted the assessee's case for the two latter assessment years for settlement. He submitted that in view of the facts and circumstances of the case which have been fully and clearly pointed out by the dissenting member in his opinion, the application of the assessee should have been rejected outright and should not have been admitted for any assessment year. The distinction made between the three assessment years, counsel submitted, is equally untenable. The scheme of Chapter XIX-A has been set out in the earlier decisions of this court including CIT v. B. N. Bhattachargee [1979] 118 ITR 461 and CIT v. E.xpress Newspapers Ltd. [1994] 206 ITR 443 and need not be reiterated here. For the purpose of this case it is sufficient to notice sub-sections (1) and (1A) of section 245D. They read : "245D. (1) On receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials containe....
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.... year 1977-78) is factually incorrect as pointed out hereinabove. The truth is that not only did the assessee not send a copy of its application to the Income-tax Officer but it refused to supply copies thereof in spite of repeated requests by the Income-tax Officer. A copy of the application was communicated by the Commission to the Commissioner only on March 14, 1980, and was received by the Commissioner on April 3, 1980, as would be evident from the statement in the preamble to the objections filed by the Commissioner. The draft assessment order was made on March 19, 1980, and communicated to the assessee along with a covering letter on March 20, 1980. Even by the date of the making of the draft assessment order, the Income-tax Officer had made elaborate inquiries and had discovered that there was no manufacturing activity, that there was no transport of stainless steel sheets to Chandigarh, that they were sold in Delhi, Bombay and Madras, that the alleged sale of manufactured goods to various parties is false and that the account books were totally fabricated. The draft assessment order states all these facts. Mr. Salve could not point out any particular fact or facts which hav....
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.... course of hearing before the Commission do clearly show that the "concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable . . . under this Act, has been established." Now, so far as the assessment year 1977-78 is concerned, the draft order does bear out the aforesaid facts and since the assessee's case and all the material facts are one and the same for all the three assessment years (as set out in its own application filed under section 245C) it must be said that the very same facts also establish the said factors even with respect to the two latter assessment years. In the circumstances, it must be said that the main limb of sub-section (1A) was fully satisfied in this case. No valid or relevant reasons have been assigned by the Commission, within the meaning of the proviso to sub-section (1A) to admit the application for the two latter assessment years. It was a gross case where the assessee brazenly and deliberately perpetrated fraud upon the Revenue with a view to evade the taxes legitimately and lawfully payable by him. The fraud played by him, which was discovered by the I....