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Issues Involved:
1. Whether the profit of Rs. 2,10,000 made by Raisina Cold Storage and Ice Co. Limited was the assessee's income. 2. Whether the payment of Rs. 41,039.67 made to Surjit Singh, Sham Singh, and Rajinder Singh was the assessee's income. 3. Whether the sum of Rs. 3,78,329 was the income of the assessee liable to tax. 4. Whether the sum of Rs. 3,78,329 was the assessee's income during the relevant year ending on October 31, 1960. 5. Whether the payment of Rs. 10,402 made to A. D. Gupta, Kartar Singh, and S. K. Burman was the assessee's income. 6. Whether the findings of the Tribunal in respect of the amounts referred to in questions Nos. 1, 2, 3, and 5 are otherwise legally justified. 7. Whether the levy of penalty under section 271(1)(c) of the Income-tax Act, 1961, was justified. 8. Whether, while levying penalty, the tax sought to be evaded is to be calculated by including in the income returned the amounts shown in Part F of the return. 9. Whether, for calculation of the penalty, the item of Rs. 3,78,379 has to be disregarded as being income not liable to be returned. 10. Whether, for the purpose of calculation of the penalty, assessed income has to be modified by making suitable adjustment in the value of the closing stock consequent upon disallowance of a portion of the purchase price. Detailed Analysis: Issue 1: Profit of Rs. 2,10,000 The court examined whether the sum of Rs. 2,10,000 received by Raisina Cold Storage and Ice Co. Ltd. from the assignment of the right to purchase three-fourths share in the land could be treated as the assessee's income. The court found that the entire transaction was financed by M/s. Delhi Land and Finance Co. Ltd., not the assessee company. The funds for the purchase came from the Finance Company, and not a penny had passed from the assessee company for the purchase of the land. Therefore, the court concluded that there was no evidence to show that the profit of Rs. 2,10,000 earned by Raisina was the assessee's income. The answer to question No. 1 was in the negative, in favor of the assessee. Issue 2: Payment of Rs. 41,039.67 The court considered whether the payment of Rs. 41,039.67 to Sham Singh, Surjit Singh, and Rajinder Singh was the assessee's income. The court noted that these individuals were necessary intermediaries due to the Punjab Security of Land Tenures Act, 1953, which restricted land purchases. The payments made to these individuals were part of the necessary expenditure for purchasing the land and could not be treated as the assessee's income. The court found no evidence to show that this amount came back to the assessee company. The answer to question No. 2 was in the negative, in favor of the assessee. Issue 3: Sum of Rs. 3,78,329 The court examined whether the sum of Rs. 3,78,329, which was the profit of Raisina from the land it purchased, could be treated as the assessee's income. The court found that the profit was shown in Raisina's balance sheet and not in the assessee's accounts. The expenses for developing the plots were also met by Raisina. Therefore, the court concluded that the profit of Rs. 3,78,329 could not be considered the assessee's income. The answer to question No. 3 was in the negative, in favor of the assessee. Issue 4: Income During Relevant Year Given the court's answer to question No. 3, it was not necessary to answer whether the sum of Rs. 3,78,329 was the assessee's income during the relevant year. However, if it were considered the assessee's income, it would have to be during the year ending on October 31, 1960, as shown in Raisina's books. The answer to question No. 4 was in the affirmative, assuming the income was of the assessee. Issue 5: Payment of Rs. 10,402 The court considered whether the payment of Rs. 10,402 to A. D. Gupta, Kartar Singh, and S. K. Burman was the assessee's income. The court found that this transaction was similar to the one involving Sham Singh, Surjit Singh, and Rajinder Singh. The land was purchased via intermediaries due to legal restrictions, and the extra amount received by these individuals was necessary expenditure for acquiring the land. There was no evidence to show that this amount came back to the assessee company. The answer to question No. 5 was in the negative, in favor of the assessee. Issue 6: Legal Justification of Tribunal's Findings This question only survived if questions Nos. 1, 2, 3, and 5 were answered in the affirmative. Since they were answered in the negative, question No. 6 was not answered. Penalty Issues (7 to 10) The court did not provide a detailed analysis of the penalty issues as they were consequential to the original assessment orders. Given the answers to the primary questions, the court implied that the penalty issues would not survive. Conclusion Questions Nos. 1, 2, 3, and 5 were answered in the negative, in favor of the assessee and against the Department. Question No. 4 was answered in the affirmative, assuming the income was of the assessee. Question No. 6 was not answered as it did not survive. The reference was answered accordingly, with costs awarded to the assessee.
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