1976 (3) TMI 3

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.... that this sum comprised of Rs. 40,05,825 which was the profit earned by and paid to M/s. Dalmia Jain & Co. Ltd. (hereinafter referred to as D.J.C. for the sake of brevity) and Rs. 14,30,561 paid to M/s. Dalmia Cement and Paper Marketing Co. Ltd. (hereinafter referred to as D.C.P.M.) being the profit earned by them. The Income-tax Officer rejected the respondent's claim holding that these two sums were really profit that accrued to the respondent. On appeal before the Appellate Assistant Commissioner the respondent did not press its claim in respect of Rs. 40,05,825 and confined its objection to the inclusion of Rs. 14,30,561 in its total income. The Appellate Assistant Commissioner having overruled this objection the respondent preferred a....

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....Patna High Court had excluded Rs. 14,30,561 as being the income of D.C.P.M., the sum of Rs. 40,05,825 should also be held as the income of D.J.C. and not the respondent's. It was further argued that the respondent did not challenge the inclusion of Rs. 40,05,825 before the Appellate Assistant Commissioner in the assessment proceeding as the respondent had the proportionate tax on this amount reimbursed from D.J.C. which was an allied concern. The Appellate Assistant Commissioner was of opinion that any internal arrangement between the respondent and its allied concern was not relevant for deciding whether the sum was the respondent's income and that, as the respondent had not questioned the inclusion of this amount in its total income, the ....

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....quate to support the assessment of the sum in the respondent's hands. Accordingly, the Tribunal set aside the penalty of Rs. 15 lakhs. The Commissioner of Income-tax (Central), Calcutta, thereupon applied under section 66(1) of the Act for reference of the following three questions to the High Court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in placing upon the department the onus to prove by positive evidence that the sum of Rs. 40,05,825 represented concealed, income of the assessee when the assessee itself had conceded that the said sum was its income ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in treating the sum of Rs. 40,05,825 on the same....

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....hat merely because the respondent did not press its objection to the assessment of the sum of Rs. 40,05,825 in its hands, it could not be said that it was admitted that the amount was the concealed income of the respondent. Before the Tribunal the explanation offered by the respondent in respect of the aforesaid sum was : " To avoid protracted appeal proceedings, a compromise was entered into between the assessee company and D.J.C. Ltd., whereby the sum would be assessed in the assessee's hands and omitted from the assessment of Dalmia Jain Company Limited, the latter undertaking to meet the tax liability in respect of such inclusion 'the balance of the profit being retained by the company'. Such an arrangement was possible because D.J. ....