Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is justified in confirming the levy of penalty of Rs. 1,39,261 under s. 271 (1)(c) of the IT Act, 1961?

High Court Of Andhra Pradesh

CIT vs. B. Kishanlal Khandsari Sugar Mills

Sections 254, 271(1)(c)

Asst. Year 1970-71

B.P. Jeevan Reddy & Upendralal Waghray, JJ.

Case Referred No. 12 of 1982

25th March, 1987

Counsel Appeared

M. Suryanaraya Murthy & A.V. Krishna Koundinya, for the Revenue : T. Anantha Babu, for the Assessee

B.P. JEEVAN REDDY, J.:

Two questions are referred for our opinion under s. 256(1) of the IT Act, 1961. They are as follows:

“1. Whether, on the facts and in the circumstances of the case, when the attention of the Tribunal was drawn to the order pronounced by the Additional Sessions Judge acquitting the partners of the assessee-firm in respect of the same charge for which the penalty in question was levied prior to the actual passing of the order by the Tribunal, the Tribunal was justified in refusing proper opportunity to the assessee to produce the said judgment of the Additional Sessions Judge in support of its stand that there is no justification for levy of penalty and in refusing to reopen and rehear the appeal ?

2. If question No. 1 is answered in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal is justified in confirming the levy of penalty of Rs. 1,39,261 under s. 271 (1)(c) of the IT Act, 1961?”

The assessee is a registered firm carrying on business in the manufacture and sale of Khandsari sugar. For the asst. yr. 1970- 71, that is, for accounting year ending on 31st Oct., 1969, the assessee filed a return showing certain income. The ITO made a few additions to the income, disbelieving certain entries in the account books maintained by the assessee. He also initiated penalty proceedings under s. 271(1)(c) of the Act and levied a penalty. Against the order levying penalty, the assessee filed an appeal which was dismissed by the AAC. Further appeal to the Tribunal also failed.

The partners were also prosecuted in a Criminal Court for the said concealment of income and for filing a false return. They were convicted by the trial Court and sentenced to imprisonment for six months on 31st March, 1979. They filed an appeal and the appellate Court, viz., the Metropolitan Addl. Sessions Judge, by his judgment and order dt. 20th Aug., 1979, acquitted them.

It may be stated that the order of the AAC in the penalty proceedings is dt. 28th March, 1978, which means that by the date of that order, the order of the Criminal Court, either of the trial Court or the appellate Court, was not available. However, by the date the appeal was heard by the Tribunal, the trial Court order had been pronounced and the appeal was pending. It appears that the arguments in the Tribunal and the arguments in the Court of the Metropolitan Addl. Sessions Judge were heard almost simultaneously. Before the Tribunal, the departmental representative, inter alia, placed reliance upon the judgment of the trial Court convicting the partners while supporting the orders of the AAC. The Tribunal heard the arguments and reserved the matter for judgment. Within three days thereafter, the Metropolitan Addl. Sessions Judge pronounced his judgment and order acquitting the partners. On the same day, it appears, the assessee filed an application before the Tribunal informing it of the said fact and requesting it to give some time to enable the assessee to produce a copy of the said judgment before the Tribunal. The Tribunal however, passed no orders nor did it grant any time for producing the judgment. It proceeded to deliver its judgment on 23rd Aug., 1979.

We have seen the judgment of the Tribunal. It confirmed the levy of penalty on facts, unconnected with and without relying upon the order of the trial Court (Magistrate) in criminal proceedings. Having thus confirmed the levy of penalty, towards the end of its judgment, the Tribunal referred to the contention of the departmental representative that the partners have been prosecuted and convicted by a Criminal Court for the very same offence of concealment/filing of false returns. Though the Tribunal notes the said contention, it does not refer to the contents or the conclusion of the Criminal Court, although a copy of the said judgment appears to have been filed before it. On the other hand, after referring to the argument of the departmental representative, the Tribunal reiterates that on the facts on and circumstances placed before it, the appellant’s case fell within mischief of s. 271 (1) (c) and that there are no reason to differ from the conclusion arrived at by the AAC. After the Tribunal pronounced its judgment, the assessee filed a petition for review being Miscellaneous Petition No. 65 of 1979. In this petition the assessee submitted as to what had happened during the course of the hearing and immediately after the hearing was over the submitted that he has suffered injustice and prejudice by the Tribunals not granting time for producing a copy of the judgment of the Metropolitan Addl. Sessions Judge. The assessee, therefore requested that the judgment of the Tribunal may be set aside and the matter be reheard taking into consideration the judgment of the Metropolitan Addl. Sessions Judge. This petition was dismissed by the Tribunal on 24th June, 1980. The Tribunal was of the opinion that there are no grounds for review. It stated further that it had come to the conclusion that it is a fit case for levy of penalty on an exhaustive consideration of the facts of the case and that it had given three or four reasons for sustaining the levy of penalty and that it did not place any reliance upon the judgment of the Magistrate convicting the partners. It said that the fact of conviction of the partners was brought in only by way of a “side-wind”. It, accordingly, dismissed the petition for review. Thereupon, the assessee, applied for and obtained this reference.

Sri T. Anantha Babu, learned counsel for the assessee, contended that the factum of conviction by the Magistrate was brought to the notice of the Tribunal at the hearing of the appeal by the departmental representative and that fact should have weighted with the Tribunal in confirming the penalty. Though the judgment of the Tribunal does not show that the Tribunal has placed any reliance upon the said fact, it is not possible to predicate or say with any assurance that the said fact has not influenced the decision of the Tribunal. He submitted further that though the assessee brought to the notice of the Tribunal before it delivered the judgment that the Metropolitan Addl. Sessions Judge has allowed the appeal and acquitted the partners the Tribunal in its judgment does not refer to this fact but refers to the argument of the departmental representative which goes to show that the said fact did play a part in forming the opinion which led to the dismissal of the appeal by it. He further says that, in any event, once the fact of acquittal by the Criminal Court was brought to the notice of the Tribunal it was but fair and proper on its part to give reasonable time to the assessee to produce a copy of the judgment and that it did not act fairly in not doing that. We are unable to see any substance in the argument of learned counsel. The penalty was levied by the ITO on the facts and circumstances before him de hors any judgment or opinion of the Magistrate or any other Court. Similarly, the AAC confirmed the penalty on the facts and circumstances before him without any reference to the orders of the Court because as stated above the orders of the Criminal Court that is either of the Magistrate or of the Appellate Court were not even pronounced by the date of the judgment of the AAC.

Now, coming to the Tribunal order the Tribunal also confirmed the levy of penalty on the facts and circumstances of the case, unrelated to and without reference to the judgment of the learned Magistrate. After having come to that conclusion it merely referred to the argument of the departmental representative based upon the judgment and order of the learned Magistrate but it neither referred to the contents of the said order nor to the conclusion of the learned Magistrate but reiterated that it had confirmed the penalty on the facts and circumstances before it and for the reasons already recorded by it. This is what it said when the assessee moved a review petition. It said that it confirmed the penalty for the three or four reasons mentioned by it in its order and that the judgment of the Criminal Court was brought in only by way of a side-wind. It is thus clear that the judgment of the learned Magistrate had played no part in the conclusion that was arrived at by the Tribunal. If so the judgment of acquittal would equally be not relevant. It is not urged before us that the judgment of the Criminal Court has any legal relevance or bearing on the issue in controversy. It is also not considered that because the Criminal Court has acquitted the assessee, the penalty proceeding under the Act should necessarily fail. In such a case, reopening the matter on the grounds alleged and directing rehearing, in our opinion is unnecessary, uncalled for and is a superfluous exercise. In this connection, it may also be noticed that the assessee has not chosen to ask for any reference against the main order of the Tribunal in the penalty proceedings. Only after its review petition has been dismissed, it has chosen to ask for referring several questions, of which the Tribunal has referred only two questions referred to above. We are also of the opinion that question No. 1 is framed in a very technical and involved manner. It relates to the justifiability of the procedure adopted by the Tribunal. Even so, we must say, when the Tribunal is not placing any reliance upon the judgment of the learned Magistrate in the criminal proceedings, it was not bound nor was it necessary for it to adjourn the matter or postpone the delivery of judgment to enable the assessee to produce the judgment of the Criminal Appellate Court acquitting the partners. Accordingly, we answer the first question referred to us in the affirmative, that is in favour of the Revenue and against the assessee.

Once we answer the first question in the affirmative, the second question does not arise for consideration. Accordingly, we decline to answer the second question in view of our answer of question No. 1. Reference ordered accordingly. No costs.

Learned counsel for the assessee makes an oral request for leave to appeal to the Supreme Court under s. 261 of the IT Act. We do not, however, think that this is a fit case for grant of such a certificate. The oral request is, accordingly, rejected.

[Citation : 170 ITR 629]

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