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Nirmala Kapur Vs. Commissioner of Income-tax and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberCriminal Miscellaneous No. 1232(M) of 1978
Judge
Reported in(1979)11CTR(P& H)139; [1980]122ITR473(P& H)
ActsIncome Tax Act, 1961 - Sections 271(1), 277, 279 and 279(1A); Code of Criminal Procedure (CrPC) - Sections 482
AppellantNirmala Kapur
RespondentCommissioner of Income-tax and anr.
Appellant Advocate M.L. Nanda and; I.S. Karewal, Advs.
Respondent Advocate D.N. Awasthy, Adv.
Excerpt:
- sections 80 (2) & 89 & punjab motor vehicles rules, 1989, rules 85 & 80: [t.s. thakur, cj, jasbir singh & surya kant, jj] appeal against orders of state or regional transport authority imitation held, a stipulation regarding the period of limitation available for invoking the remedy shall have to be strictly construed. that is because any provision by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply..........raided by the central excise department and certain documents were seized, one of them being a mundi behi, which disclosed certain transactions which did not find a mention in the account books of the firm. the ito confronted the partners of the said firm with the undisclosed income, as found a mention in the mundi behi, which led the parties to a negotiating table and a firm proposal was given by the partners of the firm which was to the following effect:' as discussed, we agree to an addition of rs. 3,00,000 (as against rs. 2,00,000 offered earlier, vide petition dated january 7, 1974, subject to the following: (a) suitable spread over assessment years 1968-69, 1969-70 and 1970-71. (b) penalty under section 271(1)(c) may be imposed, not exceeding a sum total of rs. 66.826, rs......
Judgment:

D.S. Tewatia, J.

1. The petitioner, Mrs. Nirmala Kapur, partner of firm, M/s. Arun Spinning Mills, Amritsar, has invoked the inherent jurisdiction oi this court under section 482 of the Criminal Procedure Code, 1973, for quashing the criminal prosecution launched against the partners of the said firm which, besides herself, includes her husband, Shri Hem Raj Kapur and her son, Arun Kumar Kapur, by the ITO under an authorisation of the Commissioner, Amritsar, on three grounds, (1) that since the CIT as a result of the settlement between the partners of the firm and the revenue imposed a lesser penalty than the minimum imposable under section 271(1)(c)(iii) of the I.T. Act, the prosecution stands statutorily barred by Section 279 of the Act; (2) that according to the terms of the settlement arrived at between the partners of the said firm and the Commissioner, Amritsar, the question of launching of criminal prosecution had to be considered on merits, that is, after hearing the partners of the firm, including the petitioner; and (3) that the petitioner was merely a sleeping partner and had not signed any document including the return and, therefore, there was no mens reaon her part and that, in any case, she should not be dragged into litigation after a lapse of 10 years. These submissions have to be judged in the background of facts which can be stated thus.

2. The firm in question, to begin with, was constituted on April 24, 1960, with only three partners, namely, Hira Lal Mehra, Hem Raj Kapur (husband of the petitioner) and Krishan Kumar Khanna, for the manufacture and sale of spun woollen yarn under the name and style of M/s. Arun Spinning Mills, Amritsar. Two partners were added to the firm with effect from April 1, 1969, and thus the constitution of the firm underwent a change, vide partnership deed dated April 1, 1969, and the new partnership firm was comprised of 5 members, that is, the existing three members, the petitioner and her son, Arun Kumar Kapur.

3. The premises of the petitioner and her husband, who was the managing partner of the said firm, were raided by the Central Excise Department and certain documents were seized, one of them being a mundi behi, which disclosed certain transactions which did not find a mention in the account books of the firm. The ITO confronted the partners of the said firm with the undisclosed income, as found a mention in the mundi behi, which led the parties to a negotiating table and a firm proposal was given by the partners of the firm which was to the following effect:

' As discussed, we agree to an addition of Rs. 3,00,000 (as against Rs. 2,00,000 offered earlier, vide petition dated January 7, 1974, subject to the following:

(a) suitable spread over assessment years 1968-69, 1969-70 and 1970-71.

(b) penalty under section 271(1)(c) may be imposed, not exceeding a sum total of Rs. 66.826, Rs. 53,766, Rs. 525 and approximately Rs. 5,000, representing the difference of money charged on sales of goods and money paid on purchase of goods as recorded in the mundi behi.

(c) Registration to be granted.

(d) No separate additions in the trading account and in partner's hands for alleged low withdrawals or cash credits for the assessment year 1970-71 in partner's account.

(e) No separate notice-reopening cash credits amounting to Rs. 1,78,916 in mundi behi and Rs. 25,900 in the original books.

(f) No adverse inference about alleged advance of Rs. 3,61,704 appearing in the mundi behi in the subsequent years.

The item of Rs. 66,826, in respect of which we have agreed to the imposition of penalty, represents the sale of imported wool-tops-licences, the proceeds of which have been recorded in the mundi behi. The item o! Rs. 53,766 represents the particulars of the entries, recorded in the mundi behi pertaining to Messrs. Talwar Spinners, representing inflation in purchases account. This may be read with reference to the settlement petition of January 7, 1974. No penalty may be levied in the hands of partners under section 271(1)(c).'

4. Eventually the settlement arrived at is in the following terms :

' 1. That a sum of Rs, 3 lakhs be taken as undisclosed profit which is to be distributed as follows :

A.T. 1968-69 Rs. 70,0001969-70 Rs. 90,0001970-71 Rs. 1,40,000 2. That a penalty of Rs. 1,26,200 be levied under section 271(1)(c) on the firm.

3. Registration be granted to the firm for all the three years.

4. The tax leviable to be paid as follows : Rs. 50,000, before March 20, 1974. Balance, in 23 equal monthly instalments (with minor adjustments) along with interest due beginning April, 1974.

Adequate security to be given by the assessee to ITO against the taxes/penalty for which instalments have been given.

5. The question of prosecution and other penalties was to be considered on merits.

6. As regards penalty under section 271(1)(a), it is agreed that there was adequate and satisfactory reasons for late filing of the returns. The ITO to consider this at the appropriate time. The assessee and partners have agreed to all these terms. Inform all concerned.

Sd. S. N. Mathur

C.I.T.

28-2-1974

Sd. Hem Raj Kapur

Sd. Nirmala Kapur

Sd. Arun Kumar Kapur

28-2-1974

Sd. D. S. Sandhu

IAC(C), Ludhiana

Sd. M. L. Aggarwal

28-2-1974

Sd. Kulwant Rai

28-2-1974.'

7. Now, coming to the submissions of the learned counsel for the petitioner, he referred to para. 2 of the settlement, which mentions the imposition of penalty of Rs. 1,26,200, and contended that according to the provisions of Section 271(1)(c)(iii), the minimum penalty imposable on the income concealed for the assessment year 1970-71 had to be not less than Rs. 1,40,000 and since the penalty imposed was less than that, as a result of the settlement arrived at in the exercise of powers under section 271(4A) of the Act, no criminal prosecution regarding the concealment of income could be launched in view of the provisions of Section 279 of the Act, which is in the following terms:

'279. (1A) A person shall not be proceeded against for an offence under section 277 in relation to the assessment for an assessment year in respect of which the penalty imposable upon him under clause (iii) of subsection (1) of Section 271 has been reduced or waived by an order under Sub-section (4A) of that section.

(2) The Commissioner may either before or after the institution of proceedings compound any such offence. '

8. In the reply filed on behalf of the revenue, the stand taken is that the settlement arrived at, which included the imposition of penalty, was in the light of various decisions, including that, of the Supreme Court and this court, in which it has been held that during penalty proceedings the revenue authority concerned has to come to a positive conclusion about the income nature of the additions of the assessee and that the entire amount of additions would not automatically be considered as concealed income for the purpose of imposition of penalty and, therefore, for that reason, a sum of Rs. 1,26,200 was imposed as a penalty because only regarding that amount there was incontestable evidence in the mundi behi regarding the assessment year 1970-71, which pertained to the four items of profit that were suppressed from the return of income of the firm. These items are:

(1) an item of Rs. 66,826 which represents the sale of imported wooltops-licences, the proceeds of which had been recorded in the mundi behi;

(2) An item of Rs. 53,766 which represents the particulars of the entries recorded in the mundi behi pertaining to Messrs Talwar Spinners representing inflation in purchase account;

(3) Rs. 5,000

(4) Rs. 525

Both representing thedifference in the money charged on sales and paid on purchases of goods asrecorded in the mundi behi.

9. I find Considerable merit in the stand taken by the department. It was for this very reason, in my opinion, that in Clause (b) of the proposal mooted by the partners it was mentioned that penalty under section 271(1)(c) may be imposed not exceeding a sum total of Rs. 66,826, Rs. 525, Rs. 5,COO and Rs. 53,766.

10. It was, however, argued on behalf of the petitioner that in para. 2 of the settlement, which was finally arrived at between the parties, the penalty that was agreed to be imposed is not related to any given assessment year and, therefore, in fact, that amount should be taken as penalty for the entire concealed income of Rs. 3,00,000.

11. There is no merit in this contention of the learned counsel for the petitioner for the reason that, so far as the firm as it stands constituted, it came into existence during the assessment year 1970-71, and, therefore, imposition of penalty on this firm could not be for the entire amount of Rs. 3,00,000, which stood allocated for the preceding years of 1968-69 and 1969-70. For the assessment year 1970-71, only concealment of Rs. 1,40,000 is allocated and when once it is held that it is the firm on which penalty is imposed, then it has to be taken as relating to the year 1970-71, as already observed, because this firm with five members stood constituted with effect from April 1, 1969, vide partnership deed dated April 1, 1969. So the addition made in the year 1970-71, in the total income of the firm, is Rs. 1,40,000, which represents the suppressed income. Out of this, the positive proof that it was a concealed income of the firm was available regarding only Rs. 1,26,117 which the person representing the firm conceded as much, apart from the proof that was available from the mundi behi regarding the said amount and, therefore, the department imposed a penalty of Rs. 1,26,200 and not more because that was the part of the settlement in Clause (b) of the proposal which the firm had proposed that the penalty should not exceed the aggregate of the said sums. The penalty imposed by the department exceeds that sum only by Rs. 83. Hence, the penalty amount of Rs. 1,26,200, being more than hundred per cent, of the concealed income of Rs. 1,26,117, it is that sum alone which can be considered to be concealed income, as positive proof regarding that was available with the department. (The mundi behi had disclosed all these sums pertaining to the assessment year 1970-71 alone and not for any other year). The provisions of Section 279 of the Act do not stand in the way of the prosecution of the partners of the firm.

12. As regards the second contention advanced on behalf of the petitioner, reference was made to Clause (5) of the final settlement, which may be reproduced again.

'5. The question of prosecution and other penalties was to be considered on merits.'

13. According to the learned counsel for the petitioner, the aforesaid term envisaged that if any prosecution was to be launched that was to be decided after hearing the partners of the firm concerned.

14. Admittedly, before the Commissioner authorised the launching of the proceedings, neither the petitioner nor any other partner had been heard But the question that arises for consideration is : was it necessary The stand taken up by, the department is that it was not necessary. Again, I find merit in the contention advanced on behalf of the revenue. The reason is simple. Clause (5) of the settlement, in fact, reserves the right to the department to launch the prosecution and other penalties if the same was considered necessary and on the merits of the case. The aforesaid term by no means envisaged by any stretch of imagination that the department was to hear the partners again before deciding as to whether any prosecution was to be launched or not.

15. As regards the third contention advanced on behalf of the petitioner, it is a question of fact as to whether the petitioner was a sleeping partner and was or was not knowledgeable as to what was happening. A letter was addressed by all the three partners, including the petitioner herself, to the Commissioner dated February 28, 1974, making an admission that she had been sharing the profits that found a mention in the mundi behi. Prima facie this should give an inkling of the fact that if she was sharing the profits in that manner then she knew as to what was happening, but I express no final opinion in this regard. It is a matter which the court while trying the case would find for itself on the basis of the material adduced before it.

16. As regards the passage of a considerable time between the abetment, if any, and the launching of the proceedings, it is, no doubt, there, but then placed as we are, such matters always take time, more so in these income-tax matters. If on the ground of lapse of time one is to take a lenient view, then every such person would go scot-free and none would be made answerable for his or her illegal acts.

17. For the reasons stated, I find no merit in this petition and dismiss thesame.


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