1983 (2) TMI 17 - HC - Income Tax

Summary

Issues Involved:

1. Alleged concealment of income through inflated details and false statements.
2. Alleged bogus transactions involving imported dyes and colours.
3. Alleged bogus transactions involving wooltops sales.
4. Credibility of prosecution witnesses and evidence.

Issue-wise Detailed Analysis:

1. Alleged Concealment of Income through Inflated Details and False Statements:

The prosecution alleged that the respondents, partners of M/s. Variety Hosiery Mills, Ludhiana, concealed income for the assessment year 1965-66 by making false statements of accounts, wrong entries in the books of account, and wrong declarations in the income-tax return. The Income-tax Department claimed that the details of colour and chemicals purchased, consumed, and sold were inflated, and the respondents failed to account for imported dyes and colours worth Rs. 4,530. The respondents stated these were used in manufacturing cotton hosiery goods, but the fabricators denied receiving them. The trial court found that the prosecution failed to prove these allegations beyond a reasonable doubt.

2. Alleged Bogus Transactions Involving Imported Dyes and Colours:

The prosecution argued that the respondents sold imported dyes and colours through bogus intermediaries to reduce profits. The respondents showed sales to M/s. Dina Nath and Sons, Amritsar, who allegedly acted as intermediaries, selling the goods to M/s. Ajay Textiles, Amritsar, and then to Dhariwal Mills. However, the trial court observed that key witnesses like Dina Nath and his son Manohar Lal were not produced, and the statement allegedly made by Dina Nath could not be used against the respondents. The court also noted inconsistencies in the testimonies of prosecution witnesses and the absence of crucial documentary evidence, leading to the conclusion that the prosecution did not prove the respondents sold goods to Dhariwal Mills through bogus intermediaries.

3. Alleged Bogus Transactions Involving Wooltops Sales:

The prosecution alleged that the respondents introduced a bogus intermediary, M/s. Asha Wool Trading Co., Panipat, to conceal income from wooltops sales. The respondents showed sales to the Panipat firm at a lower rate than the market rate, which in turn sold the goods to M/s. British India Corporation Ltd., Kanpur. The trial court found that the Panipat firm was a genuine concern with substantial transactions with the Kanpur firm, contradicting the prosecution's claim of it being a bogus intermediary. The court noted that the prosecution's evidence was based on conjectures and surmises rather than concrete proof.

4. Credibility of Prosecution Witnesses and Evidence:

The trial court critically evaluated the testimonies of prosecution witnesses and found several inconsistencies and gaps. For instance, P.W. 1, Shri A.C. Nanda, relied on unverified information, and P.W. 6, Dalip Singh, provided conflicting statements. The court also observed that important witnesses like Manohar Lal and Sat Pal were not produced, and key documents were withheld. The defence provided credible explanations and evidence, including testimonies from Gurcharan Singh (D.W. 1) and Thakar Dass (D.W. 7), supporting the respondents' claims. The court concluded that the prosecution failed to establish the charges beyond a reasonable doubt, and the respondents' explanations were plausible.

Conclusion:

The trial court meticulously analyzed the evidence and found that the prosecution did not prove the allegations of income concealment, bogus transactions, and false statements against the respondents. The court emphasized that even if two views are possible, the view taken by the trial court cannot be upset on appeal against acquittal. Consequently, the appeal was dismissed, and the respondents' acquittal was upheld.