9911796707
TMI Blog1997 (12) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT (Appeals) should have followed the ratio of the decision of the Supreme Court in the case of Gobald Motor Services (P.) Ltd. v. CIT [1966] 60 ITR 417. The decisions relied on by the CIT (Appeals) are not applicable to the facts of the case." The assessee filed the cross-objections mainly supporting the order of the CIT (Appeals) and no separate relief is prayed for. 2. The assessee is a private limited company in which public are not substantially interested. It is engaged in the business of chit fund. The assessee filed its returns of income for the assessment years 1986-87 and 1987-88 on 3-7-1986 and 31-7-1987 respectively and the assessments under section 143(1)(a) were completed on 16-7-1986 for the assessment year 1986-87 and on 14-9-1987 for the assessment year 1987-88. Subsequently the business premises of the assessee were surveyed under section 133A, during the course of which it was found that the assessee had inflated expenditure under two heads viz., canvassing commission and collection data. As stated by the Assessing Officer, the managing director of the assessee-company agreed about the inflation and in consequence filed revised returns of income the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment years under consideration was not justified and cancelled the orders under section 104. It is under these circumstances that the Revenue is now before us. 4. Before considering the arguments of the parties, we may state some more facts which are relevant. The present appeals were filed by the Revenue on 4-6-1990. The assessee filed applications for settlement of its case for assessment years 1986-87 to 1992-93 (including the assessment years under consideration) under section 245C(1) before the Settlement Commission (IT WT) on 29-3-1993. The Settlement Commission passed order under section 245D(4) on 29-7-1994 determining the assessee's total income for the assessment years 1986-87 and 1987-88 at Rs. 1,72,350 and Rs. 2,25,660 respectively. The learned Departmental Representative argued that the assessee itself had filed revised returns of income showing enhanced income conceding the inflation in certain items of expenditure and therefore, the enhanced income shown should be taken to be the real commercial profits of the assessee. The learned D.R. further argued that the decision in the case of Gobald Motor Service (P.) Ltd.'s case relied on by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Tribunal on 4-6-1990. The records of the case were before the Settlement Commission and the Department was represented by the CIT(DR) and the Assessing Officer at the time of hearing before the Settlement Commission but neither the Commissioner or his representatives raised a plea regarding levy of income-tax under section 104. It is therefore, pleaded that it is not now open to the Department to argue for the levy of income-tax under section 104 in the appeals before the Tribunal. Such a plea could have been raised by the Department before the Settlement Commission as the matter pertains to demand by way of tax which was one of the matters before the Settlement Commission. Not having done so the Department cannot invoke the jurisdiction of the Tribunal for the purpose. It is urged that the Department's attempt to pursue the present appeals amounts to resorting to duality of jurisdiction in a matter which was before the Settlement Commission and is contrary to the provisions of the Act. It is therefore, contended that the present departmental appeals are not maintainable and deserve to be dismissed as such. 6. In reply, the learned Departmental Representative, contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny application before the Settlement Commission when the appeals filed before the Tribunal are pending. The arguments of the learned counsel for the assessee have no merit in view of the provisions of Income-tax Act in Chapter XIX-A. We would like to refer to the provisions of section 245C (1) r.w. section 245(A)(b) and sections 245D(4) and 245F(4). Under section 245C(1) the assessee could file an application for settlement only in cases when the proceedings are pending before the Income-tax authorities, as mentioned in section 116 of the Act. Therefore, even the assessee cannot file application for settlement when an appeal is pending before the Tribunal. The relevant provisions of section 245D(4) and section 245F(4) and also section 245-I of the Act are as follows: 245D(4) "... the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in report of the Commissioner under sub-section (1) or sub-section (3)." 245F(4) "For all removal of doubt, it is hereby declared that, in the absence of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Department has not taken this issue before the Settlement Commission and it cannot invoke the jurisdiction of the Appellate Tribunal for this purpose. The Department is not invoking the jurisdiction of the Appellate Tribunal now, because the appeals were filed by the Department on 4-6-1990 much before the date of filing of settlement applications by the assessee under section 245C(1) i.e., 29-3-1993, i.e., more than two years and 9 months prior to the date of filing settlement applications. The assessee does not acquire any right to challenge the jurisdiction of the Appellate Tribunal or the invoking of jurisdiction of the Appellate Tribunal by the Department when the appeals were already filed by the Department on 4-6-1990 before the Tribunal. The Department is not invoking now the jurisdiction of the Tribunal after the decision of the Settlement Commission or after the filing of the settlement applications under section 245C(1), but the Department has already challenged the order of the CIT (Appeals) by filing appeals before the Tribunal on 4-6-1990. Once the appeals are filed by the assessee or by the Department before the Tribunal, then the Tribunal acquires jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the circumstances, we are of the considered opinion that the Appellate Tribunal cannot deprive itself of its statutory duty to decide an appeal pending before it. The issue whether the CIT could or could not have raised the matters relating to additional tax under section 104 are totally irrelevant in these appeals. 10. On merits, it is submitted by the learned counsel for the assessee that the assessee-company is engaged in chit business. In this business substantial funds are required for disbursement to the bidders as and when auctions take place. Recovery of chit subscriptions also possess a grave problem. It is further submitted that the assessee is thus under a perennial obligation to meet the requirements of the chit business and maintain liquidity. The business is founded on trust of the chit subscribers and any default resulting from want of funds can lead to serious detriment to the assessee-company. It is submitted by the assessee's counsel that the following figures will reveal the extent of the assessee-company's financial commitments: As on As on 31-3-1986 31-3-1987 Rs. Rs. Share capital 1,00,000 1,00,000 Subscriber's Collection A/c 92,88,377 1,37,87,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-87 and 1987-88 as under: Asst. year Asst. year 1986-87 1987-88 Rs. Rs. Profits and gains of business (as returned) 89,254 1,20,640 Add 1. Additional income offered in S.O.F. 11,411 15,341 2. Further income offered in the revised offer as per para-7 of the order under section 245D(4) 11,687 29,675 3. Further disallowances (as per revised statement filed) 60,000 60,000 ---------------- ----------------- 1,72,350 2,25,660 ---------------- ----------------- As already stated, during the course of search in the case of the assessee and its managing director, Sri B. Navamani on 29-3-1990 Sri Navamani admitted that the expenditure under various heads as shown in the books of account from year to year have been grossly inflated. The learned counsel for the assessee also squarely conceded before the Settlement Commission that there has been substantial inflation of expenditure as recorded in the accounts. The Settlement Commission also held that there has been substantial inflation of expenses under various heads and that the assessee had received interest income by lending the surplus cash available as a result of inflating the expenses. It is argued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was detected by the Department after the search was conducted in the case of the assessee-company and its managing director Sri B. Navamani on 29-3-1990 after which the assessee filed applications for settlement of cases before the Settlement Commission revealing huge unaccounted income by way of inflation of various expenses. Therefore, the concealed income forms part of the commercial profits of the assessee and has to be considered as distributable income of the company in view of the aforesaid judgments of the Supreme Court in Gobald Motor Service (P.) Ltd.'s case. The Assessing Officer, however, has considered only a part of the income i.e., Rs. 89,250 in the assessment year 1986-87 and Rs. 1,20,640 in the assessment year 1987-88 despite of the fact that the assessee offered income of Rs. 1,72,350 and Rs. 2,25,660 respectively in the asst. years 1986-87 and 1987-88 before the Settlement Commission, as detailed in para-12 of this order, and which figures have been accepted by the Settlement Commission vide its order dated 29-7-1994 passed under section 245D(4). Therefore, there is no merit in the argument of the assessee's counsel. 14. The CIT (Appeals) allowed relief t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
