2015 (5) TMI 437 - HC - Income Tax

Income from under invoicing in respect of export transactions - unaccounted business and hundi loans - Held that - Official Liquidator has filed written statement along with pursis as Exh. A. The said written statement is prepared by Chartered Accountant assisting the Official Liquidator. The parties do not dispute that income of ₹ 1.71 crore was included in the income of R.B.S.D. Export firm from the Assessment years 1950-51 to 1958-59. As the other assessee is not party before us and addition of amount of ₹ 1,70,90,669/to the income of Export firm and its assessment accordingly is not in dispute. We accordingly answer Question in the affirmative. Double taxation - whether Tribunal was justified in law in sustaining the addition of ₹ 1.71 crores (Rs. One crore Seventy one lacs only) as the income of assessee from under invoicing in respect of export transactions ? - Held that - The amount which has gone to Export firm actually belonged to assessee i.e. Private Limited company. It has concealed that income and clandestinely made it over to export firm. Thus, its ownership over said amount of ₹ 1.71 Crore is not in dispute. The amount really belonged to it and, therefore, it was and is answerable and has to pay tax on it. It cannot be permitted to urge that as Export firm has paid tax on that amount, the same cannot be demanded from it. The mischief of assessee Private Limited company has been detected and it cannot be permitted to take any advantage of it. If this argument of assessee Private Limited company is accepted, it is nothing but allowing it to reap benefit of mischief played by it. If on account of its own mischief, it has sustained any loss, it cannot make a grievance for the same. However, it is settled that it cannot be permitted to take advantage of its own wrong. The revenue has corrected the wrong and has also demanded tax from the assessee Private Limited company to whom that income really belonged. Thus, the Export firm has to pay tax as it has actually utilized that amount as its income while the Private Limited Company (assessee) has to pay tax as it attempted to conceal that income. The income really belongs to it and it was and is answerable to pay tax upon it. In this situation, we find that the concept of double taxation is not attracted in the present matter. Tribunal was justified in sustaining addition of ₹ 1.71 Crore as income of the assessee. - Decided against assessee.

Summary

Issues:
1. Whether the sum of Rs. 1.71 crores was included in the income of a company for assessment years 1950-51 to 1958-59.
2. Whether the Tribunal was justified in sustaining the addition of Rs. 1.71 crores as the income of the assessee from under-invoicing in respect of export transactions.

Issue 1:
The High Court examined whether the sum of Rs. 1.71 crores was rightfully included in the income of the company for the mentioned assessment years. The Official Liquidator did not contest the facts presented in the case statement and acknowledged that the income was indeed included in the company's income. The company argued against being taxed again for the same amount, claiming it amounted to double taxation. The Court noted that the Export firm, where the income was used, was not party to the proceedings, and the facts were undisputed. The Assessing Officer found discrepancies in the export transactions, leading to unaccounted profits and illegal financial activities. The Court upheld the inclusion of the amount in the company's income, ruling in favor of the revenue.

Issue 2:
The Court analyzed whether the Tribunal's decision to sustain the addition of Rs. 1.71 crores as the company's income was justified. The company contended that since the income was already taxed at the hands of the Export firm, it should not be taxed again. Reference was made to Circular No. 157 and a Supreme Court judgment to argue against double taxation. The Court examined the principles of double taxation and previous legal precedents. It emphasized that the company concealed the income, which rightfully belonged to it, and transferred it to the Export firm. Therefore, the Court ruled that the concept of double taxation did not apply in this case. The Tribunal's decision to uphold the addition of Rs. 1.71 crores as the company's income was deemed appropriate, favoring the revenue.

In conclusion, the High Court upheld the inclusion of Rs. 1.71 crores in the company's income for the specified assessment years and ruled in favor of the revenue department on both issues. The Court dismissed the argument of double taxation, emphasizing the company's attempt to conceal income and the rightful tax liability. The reference proceedings were disposed of with no costs awarded.