TMI Blog1981 (9) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... uced in custody on Tuesday, before Mr. H. N. Sen, Chief Presidency Magistrate, Calcutta, after being arrested on the same day by an officer of the Enforcement Directorate, Department of Personnel, Government of India, under section 19B(1) of the Foreign Exchange Regulation Act, 1947, for the alleged contravention of the provisions of section 4(2) and 22 of the Act. The CPM granted him bail of Rs. 10,000 till September 6, pending further investigation. Another accused, Mr. B. L. Purohit, Regional Manager of the United Commercial Bank of 10, Brabourne Road, Calcutta, had also been arrested and produced on Monday on almost similar grounds and was granted bail of Rs. 5,000 till that date, pending further investigation. In producing the accused before the Magistrate, the Enforcement Officer alleged that M/s. Hindustan Motors Ltd. applied to the United Commercial Bank on June 4, 1966, for sale to the company by the bank of pounds 932,617 at the rate of 1 sh. 529/32 d. to the rupee, delivery in six months. It was further alleged that the bank converted the amount payable by the company in respect of the import bills received during the period, July 8, 1966, up to March 3, 1967, cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that they were still in the custody of the Enforcement Directorate. In the meantime, it was learnt that Sri V. K. Anantaraman (Superintendent, Foreign Exchange Department) and Sri N. R. Ghosh (Manager, Calcutta Main Branch) had been examined by the Enforcement Directorate in the course of which their depositions were recorded. The same persons were summoned by me under section 131 when they confirmed the depositions made by them to the Enforcement Directorate. In addition, the grounds of arrest of Sri R. B. Shah and Sri B. L. Purohit u/s. 19B(1) of the Foreign Exchange Regulation Act, 1947, were obtained and perused. On the basis of all these materials it appeared that the working of the devaluation profits as furnished by the assessee was not full and complete inasmuch as the profit relating to the contract for account M/s. Hindustan Motors Limited, which was a manifestly, collusive or colourable transaction, had not been disclosed. Therefore, on 3rd March, 1972, the following letter was issued to the assessee to show cause why undisclosed profit of Rs. 71,53, 178 should not be added back to its income. Please refer to your letter dated 30th October, 1971. It is an undisputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement Directorate against the bank's officials. In any case, with effect from 8th June, 1966, the legal effective rate of exchange became rupees 21 per pound and it would not be permissible to value sales during the post-devaluation period at the pre-devaluation rate of exchange Rs. 13.33 per pound) on the basis of any illegal and, therefore, invalid and unenforceable contract. It has been conceded by the assessee that the closing stock of foreign exchange was revalued in accordance with the new rate. Therefore, sales of pounds 9,32,617 made after 8th June, 1966, to M/s. Hindustan Motors Limited would have also to be revalued in accordance with the legal effective rate. In this view of the matter, I add back the difference of Rs. 71,53,172 (at Rs. 7.67 per pounds on the amount of pounds 9,32,617) to be declared devaluation profits for the year 1966." The assessee being aggrieved by the aforesaid order went up in appeal before the AAC. The AAC discussed the relevant contentions and the facts as set out by the ITO and the arguments and observed, inter alia, as follows : "I have considered the submissions of the appellant and in my opinion, they carry sufficient force. The alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change regulation, the appellant will have to pay the penalty for the same but that could not be made a ground for making the addition as has been done in the assessment order. The simple and unassailable facts of the case are that the appellant has agreed to sell to Hindustan Motors pounds 9,32,617 for the purpose of imports at the pre-devaluation rate and this contract has been fulfilled in the post devaluation period at the pre-devaluation rate as per the terms of the contract. Except the marginal amount arising from the difference between the buying and selling rates, no other income has accrued to the bank. The addition is, therefore, totally unjustified and deleted." In our opinion, the aforesaid findings of the AAC clearly bring out the case. His ultimate conclusion was that even assuming that the transaction in question was in clear violation of the Foreign Exchange Regulation Act, he failed to understand how any income could have accrued to the assessee on the facts of the case. According to him these are undisputed facts which we have set out hereinbefore. Being aggrieved by the aforesaid order of the AAC, the Revenue went up in appeal before the Tribunal. The groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave set out hereinbefore. The Tribunal concluded by observing as follows: " After hearing the arguments of Shri Balai Pal, the learned counsel for the department, and Shri K. Ray, the learned counsel for the assessee, we are convinced that the matter requires further investigation on the part of the departmental authorities. It is evident that at the time when the assessment for the year under consideration was being made by the Income-tax Officer, the assessee could not produce the relevant books, registers, files, correspondence, etc., relating to the foreign exchange contract entered into by the assessee with Hindustan Motors Ltd. It is also a fact that all such books, registers, documents, etc., were in the custody of the Enforcement Directorate which was at that time making investigation into this matter. Thus, the assessee was obliged by force of circumstances not to place before the departmental authorities the relevant facts and evidence. Similarly, the case against the executives and other officials of the assessee-bank regarding the violation of the Foreign Exchange Regulation Act, 1947, was pending before the Chief Presidency Magistrate, Calcutta. Thus, it was not cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Tribunal which is printed at p. 77 onwards is not the correct order of the Tribunal and we have set out the original order, a copy whereof was handed over to the court and which is kept on record. This is not disputed by learned advocate for the Revenue. Thereafter, there was a miscellaneous application which appears at p. 95 which is not necessary to be set out herein. The Tribunal after hearing the parties on that application, inter alia, observed as follows: " We have perused the said misc. application dated 7th March, 1977, and have heard the parties. It appears that the misc. application is directed against certain observations alleged to be observations of the Tribunal in paragraph 5 of the order dated 6th February, 1976. At the very outset we pointed out that paragraph 5 of the said order of the Tribunal does not contain any observations of the Tribunal but incorporates the various submissions made on behalf of the department by Shri B. Pal, the learned counsel. However, with a view to rectify the position, we hereby proceed to rectify the said order of the Tribunal dated 6th February, 1976, as under: " (1) The words 'in his opinion' are hereby inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, on the facts and circumstances of the case the order of remand was not legally valid, and that the appeal preferred to the Appellate Tribunal should be treated as still pending before the Tribunal and should be disposed of by the Tribunal in accordance with law. On behalf of the Revenue it was contended that the I.T. authorities were entitled to gather information from whatsoever source it was available to them even though the assessee did not produce that evidence, provided due opportunity was given to him. Though this is a very well settled proposition and cannot, in our opinion, be disputed, on behalf of the Revenue reliance was placed on the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC). Reliance was placed on behalf of the Revenue on this decision because in that case though the Supreme Court found that the order of the ITO and the order of the Tribunal were arbitrary and not in accordance with law, even then the Supreme Court directed the Tribunal to remand the case to the appropriate authority to find fresh facts. The Supreme Court observed that it was not possible to define with any precision the limitations on the exercise of the discretionary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. 136 of the Constitution from the order of the Tribunal. There, the Supreme Court was really exercising the appellate jurisdiction over the order of the Tribunal. In these circumstances, for the disposal of the matter, the Supreme Court directed the finding of further facts because the Supreme Court felt that the essential facts bad not been found by the lower authority. In this case, firstly, we are not sitting as an appellate authority but as advisory authority. Secondly, quite apart from that while the Tribunal's power of remanding an appropriate case to investigate fresh facts cannot be disputed, it must be borne in mind that the power must be exercised with proper discretion. It should not be exercised if all the basic facts required for a disposal of the matter are already on record and these appear from the order of the ITO and the AAC and if on these facts found by the ITO and the AAC, the conclusion for which the revenue authority was contending cannot be accepted, then in such circumstances, there cannot be any question of remand. On behalf of the Revenue, it was stressed that the assessee was not able to produce the books. That is true. For that the ITO was entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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