TMI Blog1996 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the assessment year 1977-78 for settlement, against which the assessee has filed Civil Appeals Nos. 233-235 of 1982 (Civil Appeals Nos. 236-237 of 1982). The Settlement Commission has, however, admitted the case relating to the other two assessment years for settlement, against which the Revenue has preferred Civil Appeals Nos. 238-239 of 1982. During the previous years relevant to the said three assessment years, the assessee received substantial quantities of stainless steel sheets from the M. M. T. C. claiming to be a manufacturer of sterilizers. It filed returns for the said three assessment years disclosing losses in sums of ₹ 1,31,143 (for the assessment year 1977-78), ₹ 39,939 (for the assessment year 1978-79) and a profit of ₹ 7,340 (for the assessment year 1979-80). Certain inquiries were made by the Income-tax Officer in the month of December, 1979. She also impounded the account books of the assessee. On February 13, 1980, the Income-tax Officer visited the premises of the appellant where the assessee was said to be carrying on the manufacturing activity. She found no such activity being carried on there. On February 14, 1980, the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner filed his objections enclosing therewith a copy of the draft assessment order dated March 19, 1980, pertaining to the assessment year 1977-78. After hearing the parties, the Commission unanimously refused to admit the assessee's application for settlement with respect to the assessment year 1977-78. So far as the other two assessment years are concerned, the majority (two out of three members) admitted the case for settlement while one member dissented. The dissenting member was of the opinion that the application for settlement should be rejected for the other two assessment years also. In its application under section 245C, the assessee stated the following facts : the assessee, a partnership firm, is engaged in manufacture and sale of stainless steel utensils, sterilizers and other items in its factory located at Chandigarh. For the two assessment years 1977-78 and 1978-79, it had filed returns disclosing loss in a sum of ₹ 1,31,113.06 and ₹ 39,939, respectively. For the assessment year 1979-80, it returned a profit of ₹ 7,340. It is holding a quota for the purchase of stainless steel sheets from the M. M. T. C. During the accounting years relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that in view of the fraud perpetrated by the assessee having already been established, the assessee's application may be rejected. So far as the assessment year 1977-78 is concerned, all the three members of the Commission unanimously rejected the application on the following reasoning : 23. Viewing the facts of this case against the observations made by us above, it appears to us that for the assessment year 1977-78, the Department has a very strong case to raise objection on the ground that concealment of particulars of income or perpetration of fraud by the applicant has been or is likely to be established -- particularly so in regard to the perpetration of fraud. In so far as this year is concerned, there is clear fabrication of accounts, the balances in the accounts have been fudged ; the sale vouchers and goods receipts have been cooked up, an a false facade is created to mislead the Department and cover up the real state of the assessee's business transactions. It strains our sense of credulity too far to accept the applicant's claim that all this was being done only to save its skin from some other departments and its intentions vis-a-vis the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any manufacturing activity during the previous years relevant to the assessment years 1978-79 and 1979-80. In the course of hearing before the Commission, it was categorically admitted by counsel for the assessee that the losses claimed by it in its returns were not true and that no manufacturing activity was carried on during the relevant years. The assessee has also admitted that it has sold the stainless steel quota at Bombay, Delhi and Madras and that it never transported the same to Chandigarh. It is also admitted that the books of account, showing the sale of manufactured goods to various parties are admittedly untrue. The assessee itself has made no distinction as between these three assessment years. Its case is common to all the three assessment years. No distinction is, therefore, permissible as between these three assessment years. The facts and record clearly prove that the assessee refused to produce its account books for the two subsequent assessment years in spite of notices and summons ; they were produced later and were found to be fabricated. The inspection by the Income-tax Officer on February 8, 1980, disclosed no manufacturing activity at the alleged factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplained that the Income-tax Officer has drawn several facts mentioned in the assessee's application under section 245C and made them the basis of her draft assessment order. This was wholly unfair, said Mr. Salve. Having regard to the candour with which the assessee approached the Commission, the Commission should have admitted the case relating to the assessment year 1977-78 also for settlement. Counsel further submitted that the very statements made and facts stated by the assessee in its application cannot be made the basis for rejecting it. Mr. J. Ramamurthy, learned counsel for the Revenue, on the other hand, assailed the order of the majority in so far as they admitted the assessee's case for the two latter assessment years for settlement. He submitted that in view of the facts and circumstances of the case which have been fully and clearly pointed out by the dissenting member in his opinion, the application of the assessee should have been rejected outright and should not have been admitted for any assessment year. The distinction made between the three assessment years, counsel submitted, is equally untenable. The scheme of Chapter XIX-A has been set out in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he report by the Commissioner under sub-section (1A) of section 245D--and may be, even beyond. The Commission was, therefore, in error in holding to the contrary. The contention of Mr. Salve that the assessee sent a copy of his application filed under section 245C to the Income-tax Officer immediately and that the Income-tax Officer acted unfairly in drawing upon the facts in the said application to make the draft assessment order (relating to the assessment year 1977-78) is factually incorrect as pointed out hereinabove. The truth is that not only did the assessee not send a copy of its application to the Income-tax Officer but it refused to supply copies thereof in spite of repeated requests by the Income-tax Officer. A copy of the application was communicated by the Commission to the Commissioner only on March 14, 1980, and was received by the Commissioner on April 3, 1980, as would be evident from the statement in the preamble to the objections filed by the Commissioner. The draft assessment order was made on March 19, 1980, and communicated to the assessee along with a covering letter on March 20, 1980. Even by the date of the making of the draft assessment order, the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g member that by making such a distinction, the Commission laid itself open to the charge of inconsistency. Indeed, it must be said that the majority of the members of the Commission have tried to make out a new case for the assessee not put forward by it in its application. We are also of the opinion that the facts found, proved and stated in the draft assessment order aforesaid and the facts admitted by the assessee in its application before the Commission and during the course of hearing before the Commission do clearly show that the concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable . . . under this Act, has been established. Now, so far as the assessment year 1977-78 is concerned, the draft order does bear out the aforesaid facts and since the assessee's case and all the material facts are one and the same for all the three assessment years (as set out in its own application filed under section 245C) it must be said that the very same facts also establish the said factors even with respect to the two latter assessment years. In the circumstances, it must be said that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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