TaxTMI 
TaxTMI 
2006 (1) TMI 102
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....uring the relevant period, namely, assessment year 1975-76, and the relevant accounting period from Diwali 1973 to Diwali 1974. After this period the firm was dissolved. It was constituted by the partners, namely, (1) Goverdhanlal, (2) Sobhagchand and (3) Kusumchand, applicant No. 2. Return of income of the firm in the assessment year 1975-76 was filed on July 30, 1975, which was verified to be correct by applicant No. 2 which is exhibit P-1 in Part III of the return. Exhibit P-1 an income of Rs. 50,760 was shown as goodwill and it has been stated that the reasons for this income not being taxable is that this income has been found as a result of difference in the balance-sheet credited to the accounts of the partners. Real income of the firm was shown as Rs. 13,908 only. When inquiry was made by the concerned Income-tax Officer from the applicant, then, it was informed that the balance sheet difference was coming from last few years which could only be detected at the time of dissolution of the firm because no balance sheet was prepared earlier. It has been stated that this difference was coming from the assessment years 1971-72 to 1974-75 which was detected in the year 1975-76. U....
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....e the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly." From October 1, 1975, every person who was in charge of or was responsible to the company was made responsible for the offence committed by the company under the provisions of the Income-tax Act. Learned senior advocate further argued that prior to October 1, 1975, only the company was responsible for the criminal acts committed by it as per the existing provisions of the Act. He has drawn attention of this court towards the definition of the word "person" in section 2(31) of the Act. As per definition given this section reads as under: "Section 2(31) 'person' includes- (i) an individual, (ii) an Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses;" Learned senior advocate further contended....
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....onduct of the business of the company meaning thereby that sleeping partners and those persons who were not taking any part in the day-to-day business of the firm were excluded from the liability of being prosecuted and only active partners as well as the company can be prosecuted. As the provisions of section 278B were introduced in the Act for the first time by insertion by the amending Act, therefore, these provisions being penal provisions cannot be construed to be applicable retrospectively. Such penal provisions can always have prospective effect and do not have any retrospective effect and, therefore, the provision of section 278B of the Act can be said to be operative only from the date on which they came into force. Therefore, the view taken by the Delhi High Court in the case of Parmeet Singh Sawney [1988] 169 ITR 5 and the Madras High Court in the case of Manian Transports [1991] 191 ITR 1 appears to be the correct interpretation of law and is being followed in the present case also. Accordingly, it is held that the provisions of section 278B of the Act were not applicable prior to October 1,1975, and as admittedly the return in the present case was filed on Jul....
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....once when such sums have been shown by the applicant in the income-tax return and the amount was not detected by the Income-tax Officer on some secret inquiry or otherwise, then it can very well be said that there was no concealment of any fact by the applicant at the time of filing of their return of income. It can also be safely inferred that as the same was detected at the time of preparation of the balance-sheet of the firm on dissolution of the firm then under a bona fide belief they thought it not an amount which can be included in the sums which can be termed as taxable being not an income of the firm in the relevant accounting year. Whatever may be the case, as the amount has been shown very well by the applicant in the income-tax return and has not been invented by the Income-tax Officer, therefore, it is not a case of concealment of income or tax evasion. The hon'ble Supreme Court in the case of Cement Marketing Co. of India Ltd. v. Asst. CST reported in [1980] 124 ITR 15 while considering the matter pertaining to the Sales Tax Act has observed as under: "A return cannot be 'false' unless there is an element of deliberateness in it. It is possible that even where the i....